Loans, Insurance & credit card information

Many businesses are finding it difficult to secure funding. Most banks are not lending money to businesses that don’t have exceptional credit and large amounts of collateral. There are a few new programs available to business owners that can’t find funding through traditional avenues.

The first program is a Merchant Advance, this is based on your credit card receivables. Generally, you can expect an advance of 125% of your monthly credit card sales. For example, you do $10,000 a month in credit card sales, your advance amount could be up to $12,500. With a $12,500 advance, your total pay back would be around $16,500. The terms vary from six months to one year. You will receive the cash in around 7 business days. You will more than likely have to switch your credit card processors, but most companies will meet or beat your current processing fees. Since this program is based on your previous sales there is no collateral necessary, and bad credit is not an issue. The amount available with this program is $5,000 to $300,000 per location.

The second program is a Fast Cash Business Loan, this program is based upon both your credit card receivables and all sales totals. The Fast Cash Business Loan is based more upon the stability of your business, than just credit card sales alone. This program is difficult to tell you what you might qualify for; it is based more upon your individual business all around, and marginally on your personal credit (minimum of 600 FICO score). You will receive the cash in around 7-10 business days. The amount available with this program is $5,000 to $100,000 per location.

The third program is a Success Business Loan, this program is again based more on your overall sales. The Success Business Loan works much in the same way as the Fast Cash Business Loan. There are two main differences between the Success and Fast Cash Business Loans. The first is the amount available; the Success Business Loan has $100,000 to $2,500,000 available per location. The second is the length of time; the Success Business Loan takes around three weeks to provide funding.

The fourth program is an Invoice Factoring Advance, this program is based on your accounts receivable. You can receive up to 85% of your receivable accounts. This program generally takes about a week to receive funding. Approval for this program is based upon the credit worthiness of the account holder, not the business owner.

With the decline of traditional bank lending, there are a few programs available for businesses that do not have the ability to be approved for a traditional bank loan, or the time to wait for the funds (2-3 months).

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.

Many small businesses are falling apart and are looking for ways to keep it running. Some have considered applying for grants but it is just not reachable for the present economic times. But some banks and other institutions are considering small businesses for loans. There are items a business owner must know before applying for the loan and how to apply.

Before Hand

The owner should like up a business plan and have all financial statements readily available. A normal business plan includes the exact purpose, what is to come revenue and expense wise, and how the business will prosper with the use of the loan. All personal financial records need to be gathered. Even though personal credit and finances are separated from the business the lender needs to be ensured that have people with a good financial status to make payments. The purpose of the loan needs to be clear. A financial institution is not going to give out a loan for nothing. They need to know exactly what the loan will be used for. For most small business loans collateral is a must. Assets such as equipment or land are often used for collateral. The financial institution needs to be sure that if a loan is not paid there will be back to pay it off. Lastly, before applying for a loan the owner should be well aware of the costs and payment plan. The payment needs to fit the budget of the business or it will fall apart.

Instructions

Numerous business owners do not have a clue on how to apply for a small business loan but want to make sure it is done properly. Having the paperwork, such as financial statements, the cover letter with the purpose of the loan, accurate and organized is the first step. Reviewing and prioritizing the stacks of paperwork will show that the business owner is well organized and the financial institution will spend less time shuffling papers. The owner should not meet with only one financial institution. Financial institutions all have different loan rates and upfront costs. Researching several institutions is highly recommended. Once all the paperwork is together and several financial institutions have been selected, filling out the loan application completely should be priority. They do not want to see incomplete work and will just toss aside the application not even considering the business for a loan. Alongside the application, a cover sheet should be attached with all the company’s vital information.  Obtaining a few letters of recommendation could play a huge role in gaining the small business loan. These letters prove how well the owner is knowledgeable in the business and how long they have been involved. Some financial institutions return the loan paperwork and application due to wanting more information. This does not mean the loan was not accepted. The institution just wants verify more before taking on the small business.

Finally

After hours of complying and organizing paperwork, settling on a financial institution and considering costs the extra work was all worth it in the end. It may pose a little difficult but with the right resources and knowledge the process is made easier.

The Internet has opened up several avenues for auto loans and therefore, there are a number of Web sites that are coming up to make the auto loan process easier for people, especially by offering them loans at a low rate of interest. This way more people can opt for these loans. Once all the necessary and correct information is provided in an online auto loan application, an approval is more or less guaranteed. Before venturing into such deals, it is essential that the applicant makes all the required inquiry regarding the loan to avoid any trouble in the future.

When people have time to do so, it is advisable to compare various sites that offer low interest online auto loans to make sure they get the best deal. These websites contain all the necessary information about the auto loan such as its rate of interest, or the terms of the loan. Today, banks have Web sites and departments that are entirely devoted to processing online auto loan applications. Prior to applying for any online auto loan, it is essential to find out if the lending instituition is legal or not.

The rate of interest offered on auto loans depend on the market rates and the individual?s personal credit rating. There are Web sites that have information regarding the auto interest rates that are prevailing in the market. Online auto loans are available to people with various credit standings. Web sites offering auto loans with low interest rates even lend a hand to thousands of people with bad or poor credit record and help them get good online auto loan even after bankruptcy. Even if they have been turned down earlier for credit problems, they can apply for online low interest auto loans since the Internet auto loan programs change almost everyday. However, the likelihood that the loan will be approved at a low rate of interest is most if the individual?s credit record shows timely credit payments, constantly paid bills, and no bankruptcies. The Internet is a very good medium to get auto loans approved fast and at a low rate of interest irrespective of the applicant?s past credit record.

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.