Saturday, May 16, 2020

Business Loans - 7 Reasons Not To Use A Bank

So you're a small business owner and you need a business loan to further the objectives of your company. Where do you turn?

When it comes to a business loan or commercial real estate loan, there are many good reasons NOT to turn to a traditional bank. Here are some of the most important reasons. Many small business owners, will find most of these points directly applicable to them.

"THE BANK TURNED ME DOWN"

Of course the biggest reason most small businesses go looking for alternative sources of commercial real estate loans is because they have been declined by the banks. Small businesses are often forced to look for other sources of funding because the banks will not provide it. This is not even listed below, since there are many positive reasons to prefer non-bank funding, EVEN IF YOU CAN get an approval from a bank.

REASON 1 - The minimum loan amount available from banks is too high

In many cases banks will not offer a commercial real estate loan for less than $250,000. So if you only need $100,000 you will be pushed to borrow more than you actually need. Or if your property will not support a $250,000 loan you are out of luck with the banks.

The solution is to look for an alternative funding source that can provide a lower minimum amount. Some commercial financing services will go as low as $100,000, and will often give you better terms and much better service than the traditional banks.

REASON 2 - Many traditional banks will charge you an up-front "commitment fee" just to examine and process your application

Banks usually think they are doing you a favor by processing your application, so they will often make YOU pay for their attempts to win your business.

The solution is to find other established and credible lenders who are eager to offer you better service without charging you a fee for processing your application.

REASON 3 - Most traditional banks will severely limit the amount of cash you can get from a commercial real estate loan.

Banks usually have very narrow rules about where you can use the cash derived from a commercial real estate loan. If you need a cash injection for your business, or want to use the proceeds from a commercial mortgage as a down payment for another property, most banks will not be interested in that type of loan.

Look for a lender who does not restrict your use of the cash derived from commercial real estate loans. Some services, (see links below) can provide commercial loans that give you up to $1 million in cash to use however you want.

REASON 4 - Most traditional banks require detailed business plans before approving a commercial real estate loan.

Many small businesses have business plans, but they are usually not sufficiently detailed to satisfy the banks. As a result, applying for a commercial real estate loan from a bank can turn into a very time consuming and expensive process. Creating the type of business plan that is adequate for the banks will usually cost thousands of dollars.

Find a lender who does not require business plans as part of their underwriting process for a commercial loan.

REASON 5 - Many traditional banks require tax returns for a commercial real estate loan.

If you are either unable or unwilling to provide tax returns for your business, many banks will not give you a commercial real estate loan. Even some of those banks that do not request tax returns will ask borrowers to sign IRS Form 4506, which authorizes the lender to obtain tax returns directly from the IRS.

When looking for alternative sources of funding make sure they do not require either of these conditions (tax returns or access to your IRS records).

REASON 6 - Most banks will require cross collateralization of personal property.

Even though there is sufficient collateral in your business property to secure a commercial real estate loan, many banks will require you to provide additional security by putting up personal assets. Business people have become so used to banks doing this that they just assume it is a necessity.

But the truth is, over-collateralization like this can restrict your personal freedom to dispose of your personal assets as you see fit. And fortunately, there are non-traditional lenders who do not require cross collateralization at all.

REASON 7 - Most banks require income verification.

Many small business people and self-employed borrowers have incomes that are erratic and difficult to document. There are many legitimate reasons for this, but traditional banks generally do not care. Very few of them will provide commercial real estate loans without complete income verification.

An alternative used by some non-traditional lending sources is to use the "Stated Income" approach. Look for a lender who uses the Stated Income approach and does not require income verification.

What You Need To Know About Business Loans

A business loan is a way to help get your business started or to help it along to grow and develop. Many business owners seek out a business loan at one point or another. Luckily there are many different business loan options to help them.

When it comes to a business loan the main thing to consider is if the business has established credit. If the business is new or fairly new, it is unlucky that the business has any credit of its own and therefore the business owners credit will be used to determine the worthiness for a loan.

Established businesses may have their own line of credit separate from the business owner. If at all possible, the business owner should try to establish the business credit separate form their own credit as this will be helpful down the road.

The type of business loan really depends upon the credit rating and the need. One popular loan is the SBA business loan. This loan comes from a regular lender but is backed by the Small Business Administration.

Commercial real estate loans are like a residential real estate loan. There are also special start up loans to help a business get started, which provide more opportunity for businesses that typical lenders see as high risk.

Businesses have some additional options over an individual trying to get a loan. A business loan can be secured with accounts receivable. The accounts receivable can be used to secure the loan.

They may also be able to get a merchant account cash advance. This is a loan on what the business typical receives through credit card sales. The credit company extends a loan for the amount of the average credit sales the business usually has.

Additionally, if the business needs a loan to buy supplies or other merchandise for the business they may be able to get a line of credit through a vendor.

As a last resort, if a business credit is not established separate form personal credit of the owner, the business owner could get a home equity line of credit through their home mortgage to cover the loan amount they need.

This, however, should be a last resort. Businesses that are starting up with no credit of their own are considered very high risk. A business owner should understand completely what they are risking before putting their home in jeopardy.

Business loans are usually given a lot of consideration. That is because in the United States there is a lot of assistance for people trying to start or maintain a business. The goal is to allow people to follow their dreams and make it as easy as possible for these businesses to succeed.

Business Loans: Finding The Right One

Business loans are not very difficult to come by these days as might be thinking. What with so many governmental and private financial lenders vying with each other for a share of the business loan market, there are brighter chances for businessmen and women to get one provided they have their credit ratings and documents right in place.

Small Business Loans


Small business persons feel the need for loans when they are short of investment at the time of start-up or when they find their business can do better if financed. Small businesses can approach US Small Business Administration (SBA) for loans tailored for different needs of businesses.

Critical Analysis of Business Loan Needs


When it is time, you know you can’t proceed without financing either the expansion or augmentation of your business. But many conditions and issues need addressed critically at this stage.

1. If yours is a start-up, it’s an uphill task as it is generally deemed that your credit history is still to develop. So much so, lenders perceive you as a risk. Financing most part of it through friends and relatives plus own resources augers well initially by lowered interest burden.

2. If the loan is for working capital, chances are better for you on following counts. You have credit history, credit score, possible assets for collateralization and business experience plus ready market/orders.

3. Business expansion loans are based on your projected growth in turnover and profit margins.

4. Loan processing times play crucial roles in choosing loans and lenders. Choosing lenders that take longer may harm your business.

5. A line of credit can suffice working capital needs some times. Here the rate of interest will not burden much as you pay only for the used portion.

6. Nature of the need more or less decides the type and tenure of the loan. For example. Working capital requirement may be taken care off by line of credit; equipment or real estate purchase requires a long term loans (Basic 7 (a) loan guarantee) etc.

7. Also playing critically here is where you hunt for loans. Grants, SBA guaranteed loans have different interest rates, documentations and processing than private institutions which process faster but have stringent terms and conditions.

Loans benefit by retiring old debts at new, relaxed payment terms because of consolidation. If this is your intention, highlighting the different payables contrasted against each other stands a better chance. Lenders are quick to catch this point as the accrued benefits are in an unambiguous state.

Rather than anything, it is your innovativeness which opens avenues for loans. Rationalizing may even reduce the need from the original loan estimate.

Business loans - Finance your dreams

We all have dreams. If you have dreamed of owning a group of companies or taking your business to new heights thus becoming a successful businessperson but it is the money that's hindering your way. You need not worry because now you have business loans that can help you finance your dreams.

Business loans are provided to those who are looking forward to start up a new business or expand the existing one. These loans provide the entrepreneurs with enough financial assistance.

There are several types of business loans available in the market. Start up business loans help to start a new business. These are given to those who have a strong desire of starting up a business but are unable to do so because of some financial crisis. If you want to start with a small business and require relatively less amount, then a small business loan is the best option for you. With large business loans you can make large capital investments, start a new business and even expand the existing one.

One can avail a business loans in either of the two forms –secured or unsecured. Secured business loans can be availed only if you have something like a property or home to place as collateral. They are given at a low interest rate provided you have a good credit score and the collateral holds a higher value.

If you do not want to put a property as collateral for the fear of getting it repossessed by the lender, you can opt for unsecured business loans. These are generally given at a higher rate of interest. It takes into consideration your present business volume and credit score.

Sanction of a business loan depends on factors such as the business plan, loan purpose, credit score and the collateral placed. The loan amount can be drawn according to one’s requirements and financial condition. Normally, with a business loan you can extract money ranging from £5,000 to £100,000. The repayment period is between 3-25 years. Keeping all these things in mind the lender decides the loan amount, interest rate and monthly installments of the borrower.

Benefits of business loans are:
  • Fastest way of raising money for business.
  • Flexible repayment options.
  • Ownership of your company is retained.
  • Tax-free interest rate.
  • An effective tool for debt consolidation.
  • Can be used for expanding or renovating premises.
The loan procedure involves lot of paper work, which is quite chaotic. An alternative to this is the provision of various online loan-providing organizations existing on different websites that keep you away from all hassles. Just a little effort is required to fill in the loan application form. You need to give all the relevant details required and the lender will serve you service with the best possible deal.

Hence, now put all your worries under the pillow and make a fresh opening of your business plans. If you make a judicious use of the loan, you can go a long way expanding your business thus making your dreams come true.

Why Are Business Loans Important?

If you are running your own business, then you probably know that it can sometimes be hard to find the funding you need to make your business work. If this is the case, then you might have thought about taking out a business loan. Although some people think that taking out a business loan is risky, if you want your business to have good cash flow and to become a success, then they can really help. To help you to learn more about business loans and their importance, here are some useful hints and tips.

Importance of a business loan


Business loans are extremely important; because they allow you to have the cash you need in your business whilst still paying for expenses. Although many businesses have enough money to pay for their equipment and expenses, many businesses are ruined by their lack of cash flow. If you spend all your money on expenses and something unexpected happens, you don’t have the capital to make changes. However, if you take out a loan, you still have your own capital left to deal with the unexpected, and your company will be better off for it. Although you are technically in debt, you are giving your business the ability to adapt and improve.

Getting a business loan


Getting a business loan is slightly more complicated than getting a personal loan, as it requires the construction of a business plan. Just as a personal loan looks at the risks of lending to you as a person, a business loan needs to assess whether or not your business is stable enough to loan money to. In order to get a business loan, there are a number of steps you need to take to be successful.

Write a good covering letter


It is important to get off on the right foot with potential lenders, so writing a good covering letter explaining your reasons for applying, as this will be the first impression of you and your company that the lender sees. A good covering letter will give a favourable impression and make them take you more seriously.

A good business plan is key


The biggest factor in securing a great deal on a business loan is to construct a solid and accurate business plan. If you can show the lender your company is sold and has definite financial plans for the next few years, then you are much more likely to get a business loan at favorable rates. If you keep the plan focused and show your organization’s ability to repay the loan, then you should get the terms you need.
What are the costs of a business loan?
The costs of a business loan can vary depending on what you are looking for, but they are generally charged at a higher rate of interest than personal loans. There is also the potential to borrow a larger amount of money over a longer amount of time, depending on your business viability and size. If you have a business or are looking to start a business, using a business loan for funding is an excellent way of giving your business the flexibility and cash flow that it needs to be successful.