Archive for the ‘Commercial Loans’ Category
Is It Really Difficult to Get Start-Up Business Loans?
The difficulty or ease with which you get start-up business loans depends on your assets and liabilities. Banks and other financial institutions are hesitant to lend new entrepreneurs start-up business loans because of their naivete with respect to building a business. Now what makes getting a loan easy or difficult? Checking your financial status and surveying the assets at hand will determine whether you would get the start-up loan or not. Banking and non-banking institutions are more interested in what they can get from you than the start-up business loans they will give you. Usually, the start-up business loan amount si computed with the total amount of assets that the bank can seize, in case you cannot pay back your business loans. That is why it is good to seek professional help, in order to reduce the stress of computing your assets in comparison with the amount you are borrowing.
Most financial advisers advise their clients not to get business loans that are higher than their assets, so that it will be easy to get out of trouble. It is not easy to give your entire house and other assets just because you have incurred a bad loan. That is why many financial experts advice that you get small start-up business loans because the less start-up business loans you get, the less loans obligations you are going to pay.
Nevertheless, improving your income can ensure you get the loan you want. Your ability to create personal financial opportunities (which means that you would have a good financial status until the year ends) will give the financial institutions an assurance that once they give you the money, they can have their investments returned. Remember, lending is a business too, and the primary goal of a lending institution is to earn profits in order to allow expansion of the business, thus creating more financial opportunities for others.
Business Financing: Spot Factoring
Accounts receivable factoring (or invoice financing) has been around for centuries as a means for small and large businesses to obtain needed working capital while they wait for their customers to pay invoices.
If your ship goods or render services to your business customers but have to wait 30, 60, 90 days or more to get paid (as most invoices offers these trade terms) and your business could use additional capital today to complete other jobs, meet payroll or go out and win new business, then your company could benefit from accounts receivable factoring or financing.
However, in recent years, not all invoice financing has remained the same.
Most accounts receivable factoring companies (like most banks) realize that it costs them the same to underwrite a $1,000 factoring agreement as it does a $1,000,000 agreement. Thus, they tend to migrate to larger deals (getting more bang for their buck so to speak).
Thus, many invoice financing companies have begun to add restrictions that just were not there a few years ago.
Some of these restrictions include:
Minimum Factoring Amounts: In fact, many accounts receivable financing companies require a minimum $50,000; which is OK for larger companies who have those larger amounts to factor. But, smaller firms, just wanting to factor an invoice or two, again get left out.
Long-Term Commitments: As underwriting accounts receivable financing can get expensive on the lender’s part; we have begun to see long-term commitment requirements crop up in factoring agreements. These usually require that the borrowing company not only factor a minimum amount of their invoice (see the point above) but factor those amounts over an extended time period, say one year or more (which could mean factoring many cycles of invoices).
Obtaining a Business Line of Credit
When you are deciding whether or not your company needs a business line of credit, the first thing you should determine is how much your business can safely borrow. In order to do this, you should review your cash flow analysis to see the amount of principal that can be repaid on an ongoing basis if it is required by your lending institution. In some cases, a principal repayment does not need to be made on a monthly basis as it relates to your business line of credit. Instead, at the end of the credit facility, the outstanding principal balance is converted into a loan and regular payments of interest are made. However, this methodology is becoming somewhat antiquated as banks are taking fewer risks when it comes to the extension of credit. Now, you will most likely be required to immediately repay any outstanding balance once the term of the credit line is complete.
When you are obtaining a business line of credit, you are going to need to have a business plan that showcases to the financial institution that your company can handle a specific amount of debt. Your banker is going to be most interested in your balance sheet as well as your cash flow analysis. Prior to visiting a financial institution, you should work with your certified public accountant to determine the metrics that will be used by the bank when they are considering your business line of credit request. Additionally, your accountant and business adviser can assist you in putting together the credit request application that you will need when you are discussing your capital needs. One of the most important things that you should discuss in your credit application and your business plan is how you intend to use these funds. This is one of the most crucial factors as the bank is going to want to see that a good portion of your line of credit it for tangible asset purchases. A smaller portion of the facility can be geared towards working capital purposes or for ongoing inventory needs.
Huge Positive Changes To The SBA 504 Refinance Program
Good news from the SBA. They have announced the elimination of most of the restrictions to the SBA 504 refinance program, which made it virtually impossible for borrowers to qualify. This announcement was made on 10/19/2011. Borrowers that applied or considered applying for an SBA 504 refinance and were declined/or discouraged from applying, should seriously consider re applying. Virtually all of the restrictions have been removed, and the benefits are substantial.
The demand for the program is expected to be huge, for the 11 months that are remaining on it (expires September 27, 2012). Borrowers can expect 90% loan to value financing, and with low, long term fixed rates. There are no other loan programs available in the market, at this high of leverage, that come close to this. For example, most conventional commercial mortgages are currently capped at 65% loan to value. The only other high leverage alternative is another the SBA 7a loan that typically goes up to 80% – 85% loan to value.
But, virtually all banks structure the SBA 7a loan as a quarterly adjusting loan, tied to Prime. Whereas on the SBA 504 loan, fixed rates range from 3, 5, 10, 20 and even 25 years. And the interest rates are low. As of this writing, the blended rate on the 25 year fixed is in the upper 5%’s… And lower on the 5 year fixed. While on the SBA 7a loan the quarterly adjusting rate is currently at 5.75% to 6%…
And of course, most borrowers, in this economy are worried about inflation, and where rates may end up in a few years. Having a quarterly adjusting rate is unsettling, to say the least.
As far as the removed restrictions they include:
Unsecured Business Loans For All Your Business Needs
It is absolutely true that when it comes to the business expansion then you are required to do significant amount of investment from time to time. If you only remain dependent on the commercial bank loans then chances are high that you fail to attain several fiscal needs of the business.
Here, for the consistent growth of the business it is significant to explore some of the better options related to unsecured business loans. It is a kind of advances that are meant for those who are unable to place security in order to serve their purposes. There are certain major advantages associated with the unsecured business cash advance. One major advantage associated with it is that rate of interest provided on it is quite low when made comparison with conventional bank advances. This is one of the critical reasons why it is now consistently becoming popular among the masses.
One more crucial reason why you can give preference to it on the genuine bank loans is that the money that you will receive from unsecured loans can be invested on different elements related to the business. You will not have confined number of options along with strict regulations when it comes to the unsecured business loans. These problems are quite common when it is about the formal procedure followed by the banks while issuing the traditional loan to the public. Banks offer a strict formal procedure in which you can make the investment of loan amount only in the limited number of areas of your business.
It is significant to note that a businessman can attain the desired credit facility without mortgaging the precious belongings in one way or the other. There will be no harsh terms and the repayment of the loan can be done according to your own convenience. Due to excessive competition in the market, some of the business cash advance providers also come with lucrative offers to allure more clients and deals.