Loans, Insurance & credit card information

Growing a business is a lot like raising a family. Initially all aspects of the children’s lives revolve around the parents, but a gradual separation allows the children to one day stand alone. Business finances are a lot like that.

If you’ve been in business for a little while, you’ve probably already taken out at least one business loan. The initial business loan probably came from family members or friends and was used as seed money. They chose to make the loan because of their relationship with you and their confidence in your plan.

If you haven’t gotten it yet, the next business loan will be startup money, and will likely be your first bank loan. Because your business hasn’t yet created its own credit history, your lender will decide whether to lend you the money based on two things: your business plan and your personal finances.

Starting a new business is exhausting and can swallow up its owner’s personal life. Many areas of life tend to get neglected during startup, but if you plan to get a startup business loan, you can’t afford to neglect your personal finances. Bill must be paid on time. Debts must be paid off. Your personal credit score must be excellent.

Once your business is underway, your next business loan should be a line of credit. By the time you make this application, the bank won’t be as interested in your personal finances as they are your business’ revenue and cash flow. Before you apply for your business line of credit, you need to have completely separated your personal finances from those of your business.

To see what the bank is going to see, you must pull a copy of your business credit report. Check first for errors; a recent study found that 30% of all credit reports contained errors serious enough for a bank to deny a personal or business loan. Correct any errors and if you see any negative entries, make every effort to clear them. This can’t be done overnight, so plan ahead and pull your credit report at least six months before applying for your business loan.

How do I get a business loan if I don’t have the best credit score? This is a question that resides in the heads of various small business owners. There is an abundance of small business owners who need money to finance business endeavors, but have not been able to obtain this money because their credit scores are not as high as lenders would like.

Even though it may seem like one has to have impeccable credit to receive a loan, there is still hope for business owners with not-so-great credit who need business funds. So what is it that these small business owners can do to receive business financing while in the midst of improving their credit scores? It is called a business cash advance and it is a source of business financing that relies on the business’s cash flow for loan repayment.

Instead of looking at your personal credit history, and evaluating your credit score, business cash advance lenders look at your business’s history, reviewing your business’s most recent credit card statements, and finding your business’s average monthly credit card sales.

Business cash advances can be used for whatever your business may need, without restrictions. And unlike traditional business loans, a potential borrower does not need to thoroughly explain to a lender how the loan will be used.

The steps and the time between applying for your business cash advance and having your bank account funded are very few. First, an applicant must complete a short application and provide lenders with documentation of their business’s most recent months’ credit card sales. Then, a funding specialist will review the application and documentation, and determine how much money can be advanced. Once the applicant agrees to accept the deal, the account of his/her choice can be funded in as little as ten business days.

Now, the question is no longer, “Can I get a business loan if my credit isn’t great?” but, “How soon can I get my business cash advance?” Requirements do not need to come in between you and business financing, and the sooner you contact a lender and complete an application, the sooner you can have the money your business needs.

Many people today are looking for an online small business loan to help them get the finances they need to start an online business. Starting an online small business sometimes can take some start up capital, and you will need to acquire some money in order to get started.

Keep this in mind, however: getting an online small business loan can be next to impossible, depending on your past track record. This doesn’t simply include your credit score, it also includes your past business ventures.

If you are a beginning entrepreneur and have never started a business before, you can all but throw out the possibility of getting a loan, because you don’t have a track record to go by. Banks look for people with a proven track record of starting a successful businesses before they will loan you any money for a small business.

Therefore, even if you don’t have any business experience, don’t despair; while obtaining a small business loan might not be possible for you at this time, there are certainly some creative ways you can start getting some money to start an online business.

Keep in mind that starting a business on the Internet is usually not very expensive compared to off-line businesses. In fact, you can usually start an online business for as little as several hundred dollars. Compared to the typical $20-30,000 start up costs you will usually shell out offline, this is really a bargain.

Where’s a good cheap ways to start making money, at least at first? Probably the quickest and easiest way is using an affiliate program.

This is where you simply start marketing some the else’s product, and you don’t even need your own website for this. You can get traffic by posting in forums, blogging, or even just sending out e-mails to friends and including a link at the bottom of it. You may not make a killing with this online business model, but at least it will help you to get some cash flow going which is the most important ingredient in any business. When you have this, now you can start working on some bigger projects.

Hopefully these tips will give you some information to help you start a small business even if you don’t have a lot of money. Why you may not be able to obtain an online small business loan, if you are done a dedicated and persevere, you will start making a lot of money on the Internet, no matter what your current financial situation is.

Repaying the mortgage loans could be the defining moment of life. But unfortunately it may not be the true and the vice-versa happens. People end up with burning their fingers in their investment. Paying off mortgage means that the user lets the bank take advantage of his money. A home loan refinance will save lot of money for the home owners. This will make the home owners to have an extra cash flow or else they have to pay it unnecessarily to the bank Remember that banks do business and they try to extract more interest amount out of every business to be successful. Do not be victimized in this process. This process will make life easier after the process.

It will be quite difficult when all the expenses meet at one season. There can be a junior who needs to go to college. The roof of the home needs to get repaired. The bills are due and demand a greater paycheck. A home loan refinance program may be just the way to find out a solution. This could potentially clear all the bills and having a single loan at the end. If the borrowers wish to stay in the same home for a longer period of time, then it is the best time to opt for a home refinance loan. Rates are being reduced at a rapid rate so as to encourage the borrowers to opt for this kind of loan. The falling price of home and other properties are a rising concern.

It is better to stick on with a fixed rate interest while taking the refinance. The variable rates of interest will force the user to pay more even when the real estate is down with the property values diminishing. Try to extend the period of loan by one or two years. This could bring down the monthly payments marginally. Usually longer period of loan will give more profit to the banks because of the interest amount. So do not stretch back beyond 1 or 2 years.

The property was bought for a minimal amount few years back. The roof with aging wood and other damaged parts have to go to a health care center one day. They need re-shaping and painting and some other cure for a better look and attraction. New loan amount will be able to provide them all with the required amenities and move forward.

WHAT’S IMPORTANT

Your company’s time in business, your personal credit, your business credit, the amount your business is requesting, the type of business, and your collateral all play a major role in obtaining working capital.

Time in Business

In most cases, lenders want you to be in business for two years or more before they will even begin to consider you for a business loan. Some want 3 to 5 years or more in business and 2 Years of profitable tax returns which reflects net income of $50,000 or more. The main reason is that a substantial number of businesses fail within the first 5 years. Another is that if you haven’t been in business for 2 years or more, you won’t have the tax returns or financial statements they need to look at to guage your cash flow. In addition, it takes most companies two years or longer before they begin to show profits that will qualify them for loans.

Personal Credit

The credit reviewed in Business Loan requests is not limited to Business Credit. Your personal credit is reviewed and considered a majority of the time. Minimum credit score requirements will vary over time and based on the type of loan being requested. Currently, most business financing requests require 640 and higher.

Many people believe when they apply for small business loans that because the request is in the name of the business, their personal credit won’t be or shouldn’t be looked at. No so. In most cases, personal credit will be reviewed and the owners(s) of the company will be asked to individually guarantee the loan. The reason is that most companies are small companies and if the owner or president has a personal credit problem, there is a good chance it may or will affect the business, including checking accounts, business loans, etc. The larger a company is, the less likely a personal credit problem an owner is having will affect the company. The size of a company is usually determined by the Annual Sales and the number of employees.

If a company is a Sole Proprietorship or Partnership, the personal credit of the owners will always be reviewed, and the owners will always be required to sign as a guarantor. This is because the owners are not a separate legal entity from the company. They are the company. A corporation is legally a separate entity from the owners. The owners own stock in the corporation, but it can be a small percentage of the stock.

Generally, the only time the personal credit of an owner may not be reviewed and the owner not asked to be a signer on the loan is for corporations that have been incorporated for 3 years or longer with strong business credit. Otherwise, your personal credit will be reviewed as part of the decision.

Business Credit

When a business applies for a loan, the lender often will check to see if the business has a business credit file. The company most often used for this purpose is Dun & Bradstreet, although there are others such as CIT and Experian. The primary things lenders look for in this report is to verify the starting date of the company, the high credit, and look for what is known as a “Paydex” score. This score is an overall risk score and is used similarly to the “bureau” score on the personal credit file.

Approvable Paydex scores begin at around 60, depending on other factors, such as amount of the request, type of request, personal credit, but most lenders like to see a Paydex Score of 70 or higher, preferably 75 or higher. The lender will also consider the high credit reflected on the report and see if there are any current past dues showing in the trade section. Often, the reportings are outdated, so you should check to make sure your listings are current and accurate before you apply. You should first determine if you even have a business credit file.

If you do not have a business credit file, it is an advantage, sometimes critical for a business to have a strong business credit file. If you do not have a business credit file, you can establish one, but will have to pay a few hundred dollars for it. Long term, this is money well spent. The Credit agency will ask you to give them your company’s trade reference and creditor’s basic contact and account information. They will call to verify the information and report it on your file. Normally, this will take up to a month. A faster approach is for you to call your trade references and have them call the Business Credit Bureau(s) to report about the accounts you have with them. This will speed things up greatly. The Business Credit agencies will give you a good idea about what kind of creditors they will list as business credit tradelines. It is sometimes different than personal credit trade lines.

Example:

Acme General Contracting buys concrete periodically from Concrete Central. The most they have ever bought or owed at one time was $30,000. This would be, along with timeliness of payments, the high credit Concrete Central would report to Dun & Bradstreet about Acme General Contracting. Dun & Bradstreet will often even report accounts like Federal Express type in your file. They will mix them in by industry rather than itemizing them and the reviewer of the report will not know specifically who the trade reference is. Contact Dun & Bradstreet and other business credit agencies for details.

Amount Requested

If your business is asking for a relatively small amount, under $50K, then you may be able to apply and receive a decision by completing an application and avoiding providing financial statements, tax returns, personal financial statements. Considering that many companies try very hard to show the lowest net income figure on their company returns, this will be a liability when applying for credit and a reason to avoid submitting financial statements.

If you are a large company with say $10MM in sales per year and you are seeking a $500,000 loan request, then be prepared to provide at least 2 or more years tax returns, accountant audited financial statements and 6 months bank statements for the credit review process. The more you ask for, the more that will be requested, and the more it will be scrutinized.

Type of Business

Some lenders favor certain industries over others. Restaurants, Food Service, Bars, Vending Companies and other retail oriented business are not favored by institutions. They will take your application and will give you the same impression that you are just as likely to get a business loan with them as any other industry, but the reality is different. Many traditional lenders in general prefer Medical or Legal Professionals, large manufacturing companies or non-retail service companies.

Collateral

The type of collateral you have to offer when applying for small business loans is an important factor in determining if you will be approved. You must qualify from a credit and cash flow standpoint before your collateral is considered. When you are at that point, the collateral can be a make or break issue.

Liquid Collateral such as Certificates of Deposit, Corporate Savings Accounts, Money Market Accounts are most preferred by traditonal banks. When banks suggest or ask for this type of collateral, many frustrated applicants state that if they had the amount of their request in cash, they wouldn’t need a business loan. This is true, but many businesses recognize that it can be dangerous for them to use most or all of their existing cash because if something comes up for which their business needs cash fast, their company can run into a problem. This is why some companies apply for loans even if they have the cash on hand. Very large companies commonly do this and use their cash on hand as needed for other things.

Some Banks are so conservative, they may decline your request even if you have a Certificate of Deposit in cash for the amount of your request. Their reasoning is that they want a high comfort level that you will pay the loan back from your cash flow. They do not want to have to cash in your collateral to repay the loan, so they don’t want to make small business loans to companies they feel will have trouble making the payments solely because the company has a certificate of deposit to cover the loan.

Real Estate, especially personal Real Estate such as a home with a lot of equity is one of the most favored types of collateral. Other than a Certificate of Deposit or Savings Account being held as collateral, lenders feel that they will most easily be able to recover their money in the event of a default with a home. A lender can sell a home more quickly and recover a greater percentage of the loan than with a commercial piece of property or other types of assets.

Lenders will take commercial pieces of property as collateral, but want to see more equity in commercial property than in personal property such as homes. Lenders know that it will take them longer to sell commercial property and they will have to offer a much greater discount from the appraised value if they want to sell it fast, which they need to do to recover their money in the event of a default.

Accounts Receivable will be valued as collateral depending on the quality of the companies that owe the money, the time the receivables have aged, and how many companies account for the total Accounts Receivable. The pay history of these accounts will also be looked at. How aggressively your company works to collect the accounts receivable on a timely basis is considered.

Equipment is not considered a primary or significant type of collateral by lenders. Equipment loses it value fairly rapidly and in the event of a default, if the lender decides to collect the collateral, the lender will have to arrange for it to be picked up. It will often be sold by a third party vendor in the secondary market. The lender will recover a small fraction of the outstanding loan and take a significant loss. For this reason, most lenders will over collateralize loans with equipment as by a significant margin, often 200% or more of the wholesale value, though this differs with different lenders.

Blanket Liens are liens that cover all business assets you own. Lenders will often try to take everything your business owns, including personal assets such as your home as collateral for small business loans. As a business owner you intend to grow your business and you may need additional small business loans for things such as marketing expenses, expansion, raw materials, relocation, etc. within the next 5 years. If the lender has all of your business assets and personal assets as collateral, you will be in a very difficult position the next time your business needs a loan. Knowing the key points above which Lenders look at is critical in achieving success obtaining a business loan.