Loans, Insurance & credit card information

Getting a car loan with bad credit does not have to mean a hassle or incredibly high monthly payments. You do not have to search for one of those high priced buy here, pay here lots. Even with bad credit you can get an affordable car loan. For a lot of people having a car is very important.

It is the only way they can to get where they need to go. When a borrower has bad credit, it can really put a strain on getting a car loan. It helps to know some pointers for securing a car loan with a bank that wont cost an outrageous amount.

The first thing to do when trying to secure a car loan when you have bad credit is to be honest. It is very important to tell dealers up front that you have bad credit. Also make it clear that you do want multiple credit inquires. When companies access your credit report it causes a drop in your credit score.

By having too many requests your credit could be damaged further, making it harder for you to get a car loan. If you are honest with dealers up front this should avoid too many inquires as they will only go through lenders that are open to bad credit lending.

The next thing you should do is have all your documentation ready. It is likely the bank will want all financial information from you about your income sources. You should have tax returns for the previous year, especially if you are self employed.

You should have two months worth of pay stubs. Try to have as much documentation as possible since this will show the bank you can afford the loan.

You also have to be reasonable. If you are wanting to buy a car with bad credit then it is highly unlikely you will be able to get anything brand new. You should look at something at least five years old. This way the cost will be cheaper and the loan smaller, so the bank will be more likely to approve the loan.

It helps to shop around, but as mentioned, do not let your credit report get checked too many times. Shop around and talk with dealers about whether they can help someone with bad credit.

This helps to know your credit score so you can be upfront and tell them exactly how bad your credit is. This way they should be able to say whether they can help or not. Additionally, shopping around helps because you will have more options in vehicles and prices.

Be prepared with a good down payment. If you have a trade in that helps, but you should also have a nice chunk of money to put down as well. Banks like to see borrowers put up some of their own cash towards the purchase.

Getting a car loan with bad credit is not going to be easy. You have to work a little harder then someone who has good credit. In the end, though, you should be able to find a loan.

You may not be able to get the car you wanted and you may have to settle for what you can get, but once you finish paying the loan you will have improved your credit and be very likely to be able to secure a different car loan with your good credit.

There are numerous types of SBA loans available and many of them are designed to be quite useful and helpful however deciding upon exactly what you need and how to get it is sometimes. While there are numerous programs that are designed to work for small business owners it is very important to ensure that you know what you need to have in order to really improve your businesses chance of securing a SBA loan.

First, you must be turned down for a loan from a private financial institution in order to be eligible to apply for a SBA loan. Once you have a formal denial from a private lender you are able to apply with the SBA for a loan.

Second, you need to have a well written business plan. This does not mean you simply toss together a few pages of material. You need to ensure that you have information in the business plan about the purpose of the business, the business structure, how long it has been in operation, and any information that is relevant to the type of business you have.

Third, you need to have some financial information for both the business and all people who own at least a 20% share of the business. You need tax statements for at least the last 3 years for the business, and you also need to include P&L statements for the next two years based on realistic sales from the previous 3 years. For personal financial records, you need to include tax returns and any other relevant financial documents.

Fourth, you need to include information about why you are requesting the loan, how much you need the loan to be for, proposed repayment information and information on what will be used as collateral for the loan. This is very important and needs to be kept in line with figures that are realistic to be paid back based on the current performance of the business.

Lastly, you are going to need to have a complete detailed resume for anyone who will be in a management position in the business. You do not want to just have an application for each management person, but rather a very detailed resume that covers all of their relevant experience so that you know the SBA loan officer will agree the business is in knowledgeable hands.

As you can imagine being approved for a loan is not always an easy task, however ensuring that you are prepared before attempting the process is a sure way to ensure that it goes as smoothly as possible with the fewest complications. Your business needs your help and determination to ensure that it is successful. Spending the time to prepare the proper documents will ensure that your business has a much better chance of having the loan improved to handle all of your needs quickly and easily.

Pre-approved bad credit home loans are home loans sanctioned to poor credit holders, on the basis of pre-approval. Getting pre-approved gives you an actual picture of the financial situation you are in and what your borrowing limit is. You can also form a clear idea of how much you’d have to pay every month if you borrowed as much as you want. This enables you to decide how much you can safely borrow and stay out of debt.

Pre-approval involves the process of submitting your financial information to your money lender before purchasing a home. Pre-approved bad credit home loans make the home buying procedure easy, saving money and time.

To obtain a pre-approved bad credit home loan, you should first submit a loan application to the lender mentioning your personal and financial needs. You also present copies of documents such as purchase agreement, tax returns, housing expenses, reason for poor credit, bankruptcy papers, and copies of credit reports. The lender verifies the application on the basis of your employment information, financial status, credit history, liabilities, and assets. After completing the application process, you will get a written document showing the amount, interest rate, and down payment according to the terms of the lender.

There are many lenders who specialize in pre-approved bad credit home loans. Depending on the lender, you are required to pay an up-front fee for processing, closing costs, and appraisal. Closing costs include title searches for deeds, processing documents, and legal fees.

Pre-approved bad credit home loans have numerous benefits. Once you are pre-approved, it gives you strong negotiating powers. The required time period for the pre-approval process varies from sixty to ninety days.

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.