Is It Fair That Banks Now Require More Initial Capital to Secure New Small Business Loans?

About a year ago, I had assisted someone in preparing a very solid business plan for their company. It was a unique company, offering a new innovation which was very specific to a certain industry. They needed more capital to buy more equipment and machinery, and hire a salesman, a marketing department, and a couple of engineers. They couldn't get the funding back then, but they kept refining their business plan. They called me up the other day and noted that they had been turned down once more time for a commercial loan for their small business.

The entrepreneur and his wife were complaining to me that the small business bank required more additional capital, more collateral, and wanted a higher interest rate to boot. The bank said it couldn't make the loan, or would not underwrite it, as it would be an SBA loan, unless they had more down, a stronger balance sheet, and more secured collateral. They still don't have it, and they cannot take their business to the next step until they get the loan, and they feel as if they're in a Catch-22, as their current cash flow can only sustain the business, and will not allow them to grow.

They suggested to me that it wasn't fair that the bank now requires even more initial capital to secure a new small business loan. Yes, I understand that complaint, however they must also realize that the reason we got into this terrible economic financial crisis is because mortgage brokers and banks were allowing people to buy homes with no money down, no way to repay them, and no proof or verification of a solid income or secured collateral. Right now, banks don't wish to take the risks, even though the SBA guarantees 90% of the loan, and as a taxpayer, I'd don't want the banks to take that risk either.

Many smaller banks are not in a very good position, and they are worried about being put on the watch list by the FDIC, as a possible bank which may be taken over by the government in the future. The last thing they wish to do is make business loans which may default. Hopefully you can understand their situation, and why they are reluctant to loan money even though they are a local small business community bank, or at least their advertising suggests. In any case, I hope you will please consider all this and think on it, and I hope you will also understand.

Car Wash Loans - What Is The Best Type Of Car Wash To Buy Or Build?

If you are looking to buy or build a standalone car wash, here are some things to consider. First of all, 65% of all car wash facilities are at gas stations and convenience stores. Approximately 25% of all petroleum sites have one and most oil companies now will not build a new store without a car wash. The majority of them are the rollover type washes that you either receive a free wash or a reduced price wash after a fill up of your fuel.

When referring to building or buying or refinancing a car wash, for all intents and purposes, we are referring to tunnel washes, whether they are full service or exterior tunnel washes. There are approximately 20,000 tunnel washes in the country. The obvious difference would be the average labor costs at an exterior car wash compared to a full service facility. The average "full service" car wash has 14 employees as opposed to an exterior car wash that averages four employees. The full service usually enjoys higher revenues and obvious higher labor costs. At the full service tunnel washes, you can also have auto detailing that usually has very good profit margins. The average tunnel wash costs $2,000,000 to build (excluding land costs) so you need to be generating good revenues to service the debt on this.

Many of the "rollover" or "In-bay Automatic" auto washes are at gas stations and convenience stores, although you do see isolated standalone rollover car washes. More In-Bay/Rollover car washes exist than tunnel wash and self-serve washes combined

Many of the tunnel washes are being done SBA 504 and SBA 7(a). The reasons for this are obvious. SBA usually offers a higher advance and frequently will finance working capital and inventory that offset the lower origination and lower rate of conventional financing. It is hard to argue with the fixed rates available with a SBA 504 loan. If you add soft costs to your project it makes it difficult to beat.

From a financing point of view, many of the same criteria apply to financing (existing or ground-up construction) of a auto wash facility. If you are well capitalized and have sufficient equity into the transaction, have industry experience, have acceptable credit and the site cash flows or the potential site has a market there, your chances are good that you will obtain financing. As with all loans, PACKAGING IS HALF THE BATTLE. A good business plan with realistic projections and accurate assumptions will go a long way. Underwriters do not like to have to figure things out. They like to have it laid out in a well thought out presentation. The fewer questions an underwriter has, the more likely your deal will be approved.

PO Funding Is the Perfect Financing Alternative to Commercial Loans

What is purchase order funding and why is it a perfect alternative to bank loans? We will discuss that briefly in this article.

When businesses and/or companies have received a large order and is under capitalized or when their cost of goods exceeds their current line of credit, they need a reputable factoring company to fund them. Yes, commercial loans are a famous financing alternative. However, they have too many requirements and take so long to process. Let's compare and weigh the benefits of purchase order funding to that of a bank loan.

Purchase order funding makes closing big sales so easy! In addition, it will be able to finance the large-scale orders of your customers. As for commercial loans, you get no chance to proceed with taking and doing your clients' orders unless you obtain your loan approval. This type of loan is taxing your business by the possibility of losing your clients!

Purchase order funding does not evaluate you through your corporate accomplishment (equity, tax returns, etc.). Even startup and young but promising companies can run to a factoring company when they need immediate cash. In a typical loan set-up, your company will have to accomplish numerous forms so that the lending company could proceed with evaluation. It does not end there; they also turn you down if you're just a small company. They look at your corporate size as a risk. In short, they fear you would not pay!

Purchase order funding can support and financially provide for the demands of your local and/or foreign suppliers. This is because your purchase order is treated as collateral. Hence, the factoring company is certain that everything will fall into place and that your business is worth supporting. Bank loans do not pay your suppliers. If you get your loan application approved, you can pay your suppliers. The question is will the loan approval be as swift as that provided by a factoring company? We don't think so.

The factoring company will help you make sure that your sales will increase because of purchase order funding. They do not bombard you with big interest rates than lending companies do. A factoring company has minimal service fees.

Purchase order funding is swift! If you noticed, the previous paragraphs keep reiterating the tedious paperwork and waiting you go through when you seek loan from a lending investor. Commercial loans take your patience to the core that you now feel unsure of the growth of your business. The process of PO funding will take hours, not days.

End Small Business Loan Frustration: Finance Your Dream Without A Bank

If you are like many people with an idea for a profitable business, you hit a brick wall when you try to get a small business loan from a bank. Perhaps you don't have a great credit score, or you haven't been able to establish any credit record at all. Maybe you don't have a lot of education or a business track record. You may not even have a bank account, much less a personal relationship with a banker.

It is a painful experience to be ignored or rejected, especially when you know you have a good idea and the motivation to make it work. Fortunately there is an alternative to bank lending that has emerged over the past decade in the United States: Microfinancing. Microfinance Institutions (also known as MFI's) provide small loans and other helpful services to businesses and individuals who find it difficult or impossible to get financing through traditional means. Originally limited to developing countries, there are now a number of these lenders in the United States and Mexico--and the trend is growing.

MFI's differ from banks in that they exist to help people who can't get funding through the usual financial institutions. They know that not being able to meet a bank's requirements doesn't mean you can't be successful. In addition to loans they often provide business counseling, advice, and ongoing support to help establish and grow your business. Each MFI operates a little differently and has its own policies regarding eligibility and the timing and method of repaying your loans. While they typically don't insist that you have a bank account, credit record, collateral or someone to guarantee your loan, they may require that you join a small group to receive training and counseling. Loans must be repaid according to agreed terms and schedules. Once your initial loan has been repaid, you may be able to get additional loans to grow your business. Loan amounts differ among MFI's but may range anywhere from $500 to as much as $100,000.

Some of the better known Microfinance Institutions in the United States include Grameen America and ACCION U.S.A., both of which operate nationally. There are also regional organizations such as The Opportunity Fund for those in California, and CASH (the Community Alliance for Self Help) in Seattle.

Another exciting development is the creation of non-profit groups formed to allow individuals to make donations which are pooled together to increase the funding available for micro-lending. One such organization is KIVA in San Francisco. Donors can search through descriptions of actual borrowers and businesses all over the world (including the U.S.) and make loans of as little as $25 to a specific individual. As the loan is repaid, the donor receives credits which can then be reinvested, donated, or cashed out.

Whether you are seeking a small business loan or you would like to support borrowers, there are organizations ready to make your transaction a painless -- and even uplifting -- experience.

Your Bank and Business Financing - Reality Check

Business owners and managers want to compare equipment finance companies to their bank and for a good reason; a bank is a company's first point of reference when borrowing money or financing equipment or an expansion project. A bank is the most obvious place to start and a secure place to store your money and use their multiple services. But what a bank does not do well, both historically because of their structure and the recent tightening of the credit market, is offer business financing for capital assets (equipment). Yet many people get confused when looking for an equipment loan because they are not seeing the whole picture; this is a case where you definitely want to compare apples to apples to get the best results.

Here are a few points to compare; these are not set in stone but based on years of experience, these trends apply a majority of the time.

1) Total Dollars Financed - banks normally require that you keep a balance of 20% or 30% of the equipment loan amount on deposit. This means they are only financing 70% or 80% of your equipment costs because you have to keep a certain amount of YOUR money in a fixed account for the duration of the loan. In contrast, an equipment finance company will cover 100% of the equipment including all "soft" costs and will only request a one or two month prepayment. No fixed deposits required.

2) Soft Costs - banks also will normally not cover "soft" costs like labor, warrantees, consulting and installation which means these costs come out of your pocket. An equipment finance company will cover 100% of the equipment price including "soft" costs and some projects can be financed with 100% "soft" costs which no bank would ever consider.

3) Interest Rates - this is the most popular question in the finance world; what's my rate? If the bank requires 30% deposit in a fixed account then that automatically raises a 5% interest rate to a 20% rate. Now people will argue that you get that deposited money back at the end of the term but that is money which you do not have access to and has an opportunity cost associated with it. Equipment finance companies target their financing rates between 3-5% for cities and 7-9% for commercial financing which is a real fixed rate and not under-stated as the bank rates can be thus independent finance company rates are very competitive with "true" bank rates.

4) Process Speed - banks often take weeks to review and approve a finance request while independent finance companies normally only take a few days and can work much more quickly. Finance underwriters only review business financing while a bank has other types of requests clogging their channel.

Banks also have many more levels of approval and review to pass while independent finance companies normally only have two, underwriting and credit committee. Even with complicated deals, the finance company's process is always faster.

5) Guarantee - banks require, as a standard part of their documentation, a blanket lien on all assets, both personal and business assets are used as guarantee against default on the loan. Your business assets, your home, your car, and your boat can all be on the line when entering into a bank transaction. This may also be the case with an equipment financing company but if your business operation is solvent then only your business will be listed as collateral and not your personal assets; this is known as a "corp only" approval.

6) Monitoring - banks require yearly "re-qualifying" of all their business accounts which means on the anniversary date of your loan each year, you must submit requested financial documents to assure the bank that everything is going well and nothing has affected your business in a negative way. Finance companies do not require anything during the term of the loan or finance as long as the monthly payments are made on time. Nobody will be checking into your business or policing what you do.

When comparing your bank financing to an independent equipment finance company, you have to make sure you are evaluating all the key parameters, not just one. Clearly, the fine print and terms of the transaction are more important than the big numbers. Banks work well within their space but have proven time and again not to be as flexible or solution-oriented as an independent finance company which solely focuses on business lending can be.

Microloan For Business - What Is It, Who Qualifies, and How To Get One

The economy is tough right now, but don't let it stop you from fighting for your dreams. If you're looking for a helping hand in starting your small business, a microloan for business may be the answer you've been looking for. This article explores what a microloan is, who qualifies for microloans and how to get one. Let's get started!

Microloan For Business - What Is It and Who Qualifies?

A microloan is a small loan, usually given to those who are at or below the poverty level and are looking to start a business. Quite often, the people who qualify for and receive a microloan are unable to put up collateral or qualify for a traditional small business loan because they lack a steady employment record and don't have a verifiable credit history.

Microloans started to gain in popularity when organizations popped up to help aspiring entrepreneurs in impoverished countries. These programs work quite well, particularly with female entrepreneurs, and has grown exponentially, spurring what is also known as peer-to-peer lending. Peer-to-peer lending is exactly what it sounds like - organizations collect money from donations and interested contributors, sometimes family and friends, and extends small loans to qualified applicants.

Microloans are available through your local small business association. However, before you apply there are a few things to know.

* Small business loans vary in size. The maximum loan amount is $35,000 and according to the Small Business Association, the average loan is about $13,000.

* You can use a microloan for working capital. You can also use it to buy supplies, furniture and equipment. You cannot use it to pay for debt already incurred, or to buy real estate.

* Interest rates for microloans run between 8 and 13 percent depending on the intermediary and lender costs and other loan terms.

* Loan terms depend largely on the size of the loan and the planned use for it. The maximum term for the loan, the amount of time you have to pay it back, is six years.

* Generally, some sort of collateral is required for microloans. However, this isn't always necessary and depends largely on the loan application.

How To Apply

If you're interested in applying for a microloan, the steps are fairly straightforward. Visit the small business administration online and look up microloans. From that page you'll want to find your local small business microloan intermediary. They're listed by state. Contact your intermediary and begin the application process. Each process will vary slightly but will operate like a standard loan application process.

When it comes to starting a business, if you believe in yourself and in your business idea, nothing should stop you, not even a lack of funds. Find out if you qualify for a microloan today and get started living your dreams.

Car Wash Financing - SBA Does Not Stand For Slow Bank Approval

Some of you that have applied for car wash financing in the past might think that SBA stands for "Slow Bank Approval." While it is true that you might be able to get approval from a local bank sooner, most of the larger SBA lenders have a very good underwriting process. If you approach a local bank that only has a few branches frequently they will be able to approve your loan quicker. That is if they will approve your loan. A lot of your loan approval has to do with the person you are dealing with that is with the lender. If you're dealing with a person that has not been an SBA lender very long and does not have a lot of experience they will typically take longer to package your loan than a seasoned SBA lender. I would probably ask the business development officer how long they been a lender and how long they been with the particular bank. Many times if they are new with the bank they will not be familiar with the underwriting guidelines might not be able to give you accurate information in terms of how long it will take to underwrite your loan. It might even be wise to find a different account representative with the same bank if you are not impressed with their qualifications.

Many SBA lenders have their own forms they insist that you fill out, even though they are all basically the same SBA forms. Many of them will not look at your loan unless you have filled all of these forms out, signed them and dated them. If you're applying to multiple SBA lenders this can be difficult.

The speed of your SBA loan approval will also be directly related to what type of SBA lender they are. If they have preferred lender status or PLP, they frequently will approve your loan faster than someone who is a certified or a CLP lender. In some instances, sometime it will just take longer. For example, if the borrower has an arrest record the loan will have to be submitted through an SBA office instead of just underwritten at the bank. If there is an environmental issue this might also be the case. This will take longer regardless if it is a PLP or a CLP lender. Some banks hardly do any SBA loans all and they frequently take longer than PLP and CLP lenders. When you are talking to your contact at the bank find out if they are a PLP or a CLP lender.

Here are some tips about getting your SBA loan approved faster:

Make sure your file is organized. Nothing turns a lender off more than to get a package of information where there is no organization at all the package. Make sure all your tax returns are put together separately. Put all of your files in numbered sequence. If you have a purchase agreement make sure all pages and schedules are there. Start the file off with an executive summary and state exactly what the loan is for. Make sure that you include the usage of proceeds so people can figure out what the loan is for, including closing costs, working capital, inventory, any seller held seconds and additional soft costs.

Make sure your forms are filled out completely and are signed and dated. Again, many lenders will not process loans and approve them unless the forms are signed.

Make sure your financials are current. If the financials are not correct you probably will not obtain a loan approval. If this is a construction loan make sure you have included your pro forma projections and your feasibility studies that might have been done. Make sure that any pro forma projections that you have done are in line with industry standards. Underwriters will verify that your projections are in line with industry standards. If they are not they will not have confidence that you would be a qualified candidate that understands this business or property.

Make sure that you have valid agreements. If you have a purchase agreement that is not signed or is no longer valid many underwriters will not work on the file at all.

These tips should help you get a faster approval and make it a more pleasant process.

Unsecured Business Loans - Finance Your Business With Low Risk Funding

Business loans are basically of two types - secured and unsecured. Just as the name suggests unsecured loans are those in which the borrowers do not have to pledge any property or asset against the sanction of loan amount. The entire risk is covered by the lender and so the rate of interest is comparatively higher in this type of loan as compared to secured loans. But the main thing is that you do not have to risk your property or asset and if by any reason you fail to repay the installments, you do not have to worry about loosing your property.

Every business owner has a vision and a mission when he starts a business. To achieve this, one needs funding and financial backing. Your business plans might be high along with your vision but lack of fund will all make it useless. You will not be able to use your potential and skills if you do not have enough money. Well, if this is the case with you, do not feel disheartened because there are unsecured business loans that can help you come out of all this. These loans are designed in such a way that business owners can make use of this to expand their existing business or even start a new one with it.

When you have plans to borrow unsecured loan you will have to prepare for the application process. The purpose of acquiring loan differs from one person to another and depends on the size and category of business. Business loans can be used to expand business or to start a new one. Loans are also available if the owner is in need of working capital. So, the purpose should be clear and the borrower must be aware of the earnings and profits in future so that the repayment schedule can be fixed at this stage.

Although it seems at first glance that unsecured business loans have all positive features, they are not free from restrictions or limitations. These loans are available for limited sum of money and usually for a short period of time. The business owner gets the retention of the ownership and he is able to manage the cash flow as well as he also gets the tax advantage in return. No matter what type of loan you select, you will have to pay the rate of interest on it and abide by the repayment schedule agreed at the time of agreement.

Using Credit Cards to Start a Business

Here, we are going to discuss financing your business with credit cards. It should be noted, immediately, that this type of debt financing is extremely expensive. In many instances, the use of credit cards in conjunction with starting a business typically costs upwards of 20% per year in interest. As such, the best candidates for using this type of capital are companies that have very low overhead costs and do not require many tangible assets. The most appropriate types of businesses for using credit cards when establishing a new venture are generally service based.

Most commonly, usage of credit cards are generally used by companies as well e-commerce websites that are able to operate on a local level. You should never take our more debt than you need when using this very expensive form of capital. It should be noted that you are going to have to pay approximately 2% of the total amount of debt on a monthly basis that you take out via the use of this type of receivables financing. However, if your business that is in operation, the usage of alternative financing such as receivables financing may be in your best interest at work to get the money need to expand your venture. Credit card receivables financing is one of the best ways to expand your business have you not qualify for other types of business credit.

As an alternative to using credit cards as your primary financing vehicle, you can always seek to take out a home equity loan or property loan that will allow you to start your business venture with a much lower interest rate form of capital. However, this requires that you provide a significant personal guarantee as to the debts are going to be associated with your business. Of course, and as we were mentioned time and time again, it is imperative for you to discuss these matters with your certified public accountant so that you can have a complete understanding of the risks that are associated with using this type of financing in order to launch your business operations.

Credit card financing for new businesses is a great way for you to start your company have minimal startup costs. However, you should weigh the risks against the benefits as it pertains to undertaking a significant debt obligation in order to launch your business venture. On a side note, you can use this specific type of financing in order to obtain the capital you need in order to launch your business then you should weigh the return on investment as it relates to the overall costs that you'll be spending in regards to both interest payments as well as principal payments. You can easily determine what your monthly payment will be made by taking the total amount of financing that you intend to use and times that number by 0.02. Additionally, it should be noted that you are going to have to have a very good credit score in the work to receive the financing that you may need in order to launch the business use of credit cards. As such, you should check your credit score with all three major credit bureaus prior to seeking the financing that you need. If your credit score is less than par, you can expect that you're going to have a significant amount of interest associated with this type of revolving line financing. As such, before you entertain the fact of using credit cards in order to launch a business you may want to clean up your credit report so that your it will receive the best interest rate possible prior to applying for credit.

Finally, in summation, it is extremely important for you to understand how you intend to finance your business especially if you're using credit cards for this purpose. As such, we strongly recommend that you create a extensive Excel spreadsheet that estimates the amount of money you'll be spending on a monthly basis regarding your loan repayments also focusing on your profit and loss statements, balance sheet, cash flow analysis, as well as you were break even analysis. If you find that it is economically viable to do so then you may want to entertain the idea of using credit card financing in order to start your small business.

Will Commercial Lending Slow, Due to Recent Negative Economic News?

We have seen steady increases in originations in virtually all fronts of commercial lending in the last year. Is all of this momentum and good news about to disappear due to the struggling national and global economy? For example, SBA Loans are up and are about to run out of its allocated capital before their fiscal year end (September 30th 2011), and conventional investment property loans are up over 107% in 2nd quarter 2011 from the same period a year ago (according to the Mortgage Bankers Association).
In addition, as far as our perspective from doing transactions on the "street," we've not only seen an increase in the number of banks competing on individual loan requests, but also by loosening underwriting standards and by improving loan products (such as our 25 year fixed loan), lowering interest rates, etc all designed to win loans from other banks.
No one knows of course, whether we are about to enter another prolonged stall in national commercial real estate lending/small business lending or not. But the commercial mortgage secondary market holds a lot of the answers to this question. The secondary market provides much of the overall liquidity of the market. Currently the demand for government guaranteed loans such as the SBA 7a loans remain incredible high, with premiums (paid to banks that sell their loans) at some of the highest levels ever seen. This is great news and it gives a lot of confidence that we might just roll through this latest batch of bad news.
However, CMBS loans, which are directly tied to the secondary market, have seen several setbacks this year. For example, there's been lower than expected fundings, soft demand and investors have demanded higher margins (higher rates of return) to spur their desire to buy this debt. This slowdown in demand translates into low originations. Also troubling is that the default rates with these types of loans continue to increase.
One of the big issues in this sector, and it's been the same issue since 2007 is that CMBS loans offered higher loan to value financing than commercial bank offered. The problem has been exasperated as property values have declined over the last 4 years. For example, take a $10 million shopping center that received 80% financing in 2006. Now the property is worth $8 million and the max loan to value one can find is usually around 65%...
The CMBS market creates problems for the whole market, even for those banks and borrowers that aren't involved in it. Bottom line, it reduces the overall liquidity and confidence in the market which in turn slows everything down.
The brightest spot remains Government Guaranteed lending such as SBA Loans. Also, at the end of the day, banks can only hold out for so long before they lend. Most community banks do need to lend in order to win deposits with small business borrowers. And getting more deposits is still how small banks grow. Also on a positive side, do we really need the CMBS market? We have survived the last 4 years without it. Maybe it's not as critical as was once thought. One thing is certain, 2011 and 2012 will remain tedious and slightly painful for all involved.

Business Plans for SBA Micro Loans

In many instances, you may be required to submit a small business plan if you are applying for a SBA micro loan. However, it should be noted that this document does not need to be nearly the same length as a standard business plan that would be required for any other of the financing programs that are available through the Small Business Administration.

Typically, a regular business planning document is approximately forty pages to fifty pages in length and provides an overview of the entire business. If you are specifically applying for funding through the aforementioned program then you can drastically reduce the size of this capital request business plan. Most importantly within your truncated document, you will need to provide a breakdown of how you intend to use your micro loan funds, a financial projections overview, and an examination of the products and services that you sell.

In regards to how you will use the loan proceeds, you should create an extensive table that showcases how each dollar of the funding will be allocated. If you intend to make tangible asset purchases with this capital then you may want to include the names of the businesses that you will working with as it pertains to specific acquisitions. In some instances, for purchases over $10,000, the bank or financial institution may request that they disburse the funds directly to the potential vendor.

As it relates to the financial section of the business plan, a properly formatted profit and loss statement coupled with a cash flow analysis are the two most important components. For this Small Business Administration program there is less emphasis placed on the tangible assets that are held by both you and your business. However, it should be noted, you will be required to provide a personal guarantee as it relates to your funding request. If your business is already operational then your bank or financial institution may ask you to submit three years of tax returns for the business. You may also be required to submit your personal tax returns as well. If you are uncertain as to how to properly prepare this type of documentation for a bank then it may be in your best interest to work closely with a certified public accountant or an enrolled agent to assist you with this process. Whenever an individual or business is seeking funding, it is imperative that they have an extremely well organized application.

In conclusion, the SBA micro loan program is an excellent method of obtaining financing for your small business if you do not have large capital needs. As always, it is very important for you to have a complete understanding of the debt obligation you are undertaking, its potential risks, how the funding will improve your business, and what you will do if the business does not work out as planned.

Using a Commercial Loan Broker

Commercial loan brokers can be an invaluable resource to you if you are seeking business funding. However, there are many positives as well as many negatives when working with this type of firm. Foremost, the best benefit that you will receive when working with a loan broker is that you are able to have your funding request reviewed by several hundred different lenders. These firms often maintain expansive databases of banks and financial institutions that are seeking specific types of loans among borrowers that have varying credit qualities. As such, if you have a unique capital need or have had credit trouble in the past then you may want to consult with a business loan broker regarding these issues. These firms also tend to have connections with private investors, and they can potentially give your proposal to third parties if you do not qualify for traditional debt financing.

One of the negatives of using this type of firm to secure capital is that the fees are extremely high. It is very common that a loan broker will charge 3% to 6% of the face value of the loan if they are successful in completing your funding request. In many cases, these very high fees are immediately deducted from the proceeds that are disbursed to you. As such, you should make sure that you can appropriately afford this additional cost when you are entertaining the idea of working with a capital brokerage.

Most importantly, prior to working with any funding broker, you should check all applicable references and licenses that are required by the company that is providing you with these services. There are many unscrupulous firms that are primarily seeking to have you pay large upfront fees without ever delivering on their promise to assist you in securing business capital. The only fees that should be paid to a broker prior to a loan closing are those that relate to document preparation or business plan development. Usually, these fees are approximately $500 to $1,000. Again, the best way to ensure that these upfront costs are being used appropriately is to speak with clients that have worked with this particular business in the past.

Once you have decided to work with a capital brokerage, the company will send you a number of documents that you need to review and sign. We strongly recommend that your attorney review these documents to make sure that they are in line with all applicable state and federal laws as it relates to loan brokering. Additionally, your hired firm is going to need several pieces of financial information from you including your formal capital request, information pertaining to your business, and an overview of your personal financial history. In many cases, this firm will have the ability to immediately review your credit score as it relates to securing business funds.

In closing, by working with a commercial loan broker you are in an excellent position to receive the business debt that you need. However, it is imperative that you complete an extensive amount of due diligence prior to working with any company that acts in this capacity.

Guide to Loans for a Small Business Start Up

The main roadblock in starting any small business or a start-up venture is to get money and invest it into the business. Several great business ideas bite the dust just for the simple reason that the finance for starting it up cannot be arranged in the stipulated time frame. But like all those unsuccessful business plans you don't have to worry about the financing bit as we are here specifically to solve your financing problems with the least possible hassle. Like other loan offering services we understand the importance of financing without any risk to your current assets. There are other loan facilitating services too but they are a bit reluctant to share your risk as they only provide loans to business offering that are fruitful to them. While other good business plans have to cut a sorry figure just because of the lack of finances now it's time you get what your business deserves.

There are online portals where one can expect to get over the worries of seeking for a loan at the least possible risk. Some of them will also provide you with bad credit business loan facilities at comparatively lower interest rates then that of various existing financial organizations or individual lenders. The main point which is to be considered is that most of the online portals don't distribute any confidential or personal information that you provide like email address, name or other vital information which cannot be distributed legally so you can bank on them to get the apt solutions. Not only do these portals or funding organizations will provide business loans for bad credit but also provide you with loans for business start up financing.

Apart from that these companies hires a well experienced staff and with their expertise strives in helping you out in providing you with the various tips and strategies to get your start up business up and running in no time. You can definitely rely on these organizations as they provide you with professional assistance in planning out the implementation methods and small little tips on how to gradually expand your business and make it into something big. The professional assistance you will get is invaluable as the consultants and industry experts provide you with viable solution to your queries honed by years of experience. So look no further to arrive at a quality solution to all your small business related problems and financing issues.

The typical customers who take loans are are new and existing businesses that have some type of storefront or service based business. Restaurants, Retailers, Clothing Stores, Dry Cleaners, Day Spas, Medical Offices, Automotive Shops etc.

Author Darrin is associated with SBLT which offer several different types of small business loans including unsecured 6 month, 12 month and 24 month loans at fixed interest rates and are repaid via daily debits directly to your business bank account. Our small business loan application process is simple and our loan decisions are quick.

Unsecured Lines Of Credit - Be Wary Of Application Fees

A father of three has been laid off and has decided that he is tired of relying on a corporation to provide for his family. He is determined to buy and reopen an old restaurant he once frequented as a child. Having never owned a business or commercial real estate before, his dream of becoming a restaurateur is weakened by brokers, and their many fees and mountains of paperwork. The price of the property is going to rise substantially if he does not take action soon, but this goal is seeming more and more out of reach. If you are a finance broker or consultant this is your opportunity to step in and make this dream a reality. But how do you help the prospective borrowers avoid the pain of being ripped off from unscrupulous brokers that make a living off of application fees.

As of 2011 there are small balance commercial loans available that are designed to help clients purchase or refinance real estate and you should never allow you or your client to pay an application fee.

Loans ranging from $50,000 to $500,000 are available with adjustable rates starting at 8.99% and fixed rates starting at 10.99%. The maximum loan to value is 70%, and clients have the option of using an unsecured line of credit, or ULOC, for the down payment.

The ULOC involves lines of credit of up to $150,000 to purchase a business, buy real estate, or simply expand capital. They are available for clients who may or may not own a business or property, but have a credit score of 700 or higher. There is very little documentation needed, other than a simple, one page application, and business owners can access this capital in as little as two weeks. The payments are interest only, and work similarly to traditional lines of credit.

Business owners are being taken advantage of because they are so desperate to access capital but they must be careful who they are doing business with. The first and most important thing to do is avoid paying application fees. If a banker or broker is not willing to provide you with a term sheet, references and a detailed explanation of where the capital is coming from without you paying an application fee then I would avoid doing business with them all together. Professionals are willing to provide capital and be compensated if and only if you decide to access that capital they are offering.

Michael Moore Says Its a Great Time To Be A Real Lender

Many of you may feel confused, helpless, or frightened by the restrictions and instabilities within the financial markets lately. Michael Moore recently made the argument, during a CNBC interview, that the future Steve Jobs could be out there, with the next idea to advance our society, but the big banks are not lending to small businesses or entrepreneurs, so we may never see it. I am not taking a side with any political affiliation, but he does have a point that the big banks are paralyzed and people are suffering greatly. It is obvious by the Occupy Wall Street movement, which has spread across the country like wildfire, millions of Americans feel victimized by the financial systems in this country. It is time to look through the chaos for the silver-lining: there has never been a better time to help business owners access the capital markets. Warning: Avoid dealing with brokers who charge application fees.

What separates lenders and proven capital markets consultants from the unscrupulous broker who primarily makes their living off of application fees?

Lenders and real analysts will help you grow revenues and reduce expenses and should be able to help you attract the right capital and also help you in regards to restructure existing debt. There are banks and direct capital providers looking to do business, it is just a matter of knowing how to find the right ones.Long term credit can be extremely cheap, if you have the right relationships and know how to present your package properly. Did you know that there are direct lenders out there that will help borrowers buy existing business with 10 to 15% down, including deals that involve commercial real estate. These are businesses that are doing well but have decided it's time to retire or change their entrepreneurial gears and now they want to sell. There are a lot of great investment opportunities out there and you or your clients CAN access the capital markets!

If you are still on the fence a particular lender or broker, or maybe you think that something is too good to be true, just take a look at experience and references. Try and avoid brokers that charge application fees, those who are offering their expertise during this turbulent financial climate ONLY if you pay them an upfront fee. You can learn from successful lenders who are out there reviewing and approving deals today. You need to investigate and read the companies blog posts, view their customer testimonials, and see what projects they are currently working on right now. Lenders are out there and you can attract the right capital and the right expert advice to make your dreams a reality.

Small Business Loans and Bad Credit

Do a search about business loans and bad credit and you will see result after result touting some way or another where you can fool the banks and lenders into giving you a business loan.
Follow those results and for the most part you will only end up poorer (paying those companies or individuals a fee) and still not getting the business loan you want or need.
Banks and lenders use credit histories and credit scores as a time saving measure. You request a loan, they pull your credit. If your credit is bad or below their threshold, they don't waste anymore time on your deal request and can move on to other deals that have a better chance of getting funded.
I deal with entrepreneurs everyday that complain about how their bank or a private lender just won't look at their deal because they have bad credit. I constantly hear the same thing:
"Why won't they just look at the merits of my business and not focus so much on my personal credit as it is my business that will be paying the loan back!"
My answer is always the same:
1) That is how the financial markets work, and
2) If you want to get approved based solely on the merits of your business then find the right business loan that focuses only on the merits of your business.
Sounds simple and it really is.
Yes, there are business loans (and other types of business financing) that either do not look at your credit at all or if they do, do not place much weight on it (great for those credit scores that are borderline).
Let's look at three examples:
1) Accounts Receivable (Invoice) Factoring: Your business writes an invoice for goods already shipped or delivered to your customer but you have to wait 10, 30, 60 days or more to get paid. Then, factor those invoices and get your cash today so that your business can pay its employees, suppliers or to complete that next job.
As your business has already completed the job and shipped the goods and is merely just waiting to get paid, the lender has no reason to even consider your credit history. Instead, they focus on the next cash event - which is your customer paying you. If your customer shows a strong promise to pay as agreed, then your loan request should be approved (without pulling your personal credit history).
2) Purchase Order Financing: Your business has already won over the customer and you have their job order in hand only to realize that your business does not have the cash on hand to purchase the materials and labor to complete that order.
Factor that job (purchase) order for up to 100% of the cash you need to complete it. When the job is done and you collect payment from your customer, you pay back the advance and keep the profits to be plowed back into the next deal.
Again, since your business has already demonstrated that it can win business, the focus of this loan approval is not based on your personal credit or the cash position of your company but in the next cash event - when your customer receives the completed order and pays you.
3) Business cash Advances: If your business accepts credit card payments from its customers, then your company could qualify for a business cash advance; based on your company's ability to continue to get customers to purchase your goods and services.
Based on past results (your business's past results and not your personal credit history), your firm could receive a cash advance to be used as working capital to re-stock inventory, pay employees, generate new business or whatever your business so desires.
And, since repayment of this advance (loan) is based on future cash flow from your credit card paying customers, these lenders are not that concerned with your personal credit scores but more concerned about your business's ability to keep getting those paying customers in the door (which is what you wanted - a business loan based on your business results and future potential and not your past credit mistakes).
Now, while Business Cash Advance lenders place the onus of their loan/advance decision on your future cash flow potential, they may still pull your personal credit. The reason is that should your business shut down tomorrow, they want to be assured that you will still pay them back.
But, if your credit score is border line or just a bit below what a traditional lender requires, then a Business Cash Advance just might be the financing kick start your business needs.
These small business financing options were designed for businesses and business owners just like you - whether it is bad credit or a lack of cash flow or whatever reason a traditional lender states why they declined your loan request.
Thus, if you are one of the many that want a lender to focus their loan approval on your business and not on your credit, then seek the right business loan; a loan that has no reason to focus on your credit (as you and your business have already done the work) but focuses more on the merits and wherewithal of your company's future potential.
So, the ball is in your court. Forget your credit score and get out there and get the business - show these lenders that your business can and has the potential to be something special and then use that potential to get the financing you need.
If bad credit is holding you back from getting the business loan your company needs, maybe it is time to step up to the plate and seek a loan that is more concerned about the abilities of your business and not solely on if you have made a few credit mistakes in the past.
In the end, it really doesn't matter where that capital comes from as it all can be spent the same way - helping you grow your business into the success you know it can be.

Does Invoice Factoring Help Businesses Grow?

Does your company sell goods or services to other companies or government agencies? If the answer is "Yes" chances are that the current economic climate leads to a waiting period of 30, 60 and sometimes even 90 days until you get paid by your clients. Waiting to be paid by your clients can be very challenging - if not detrimental - especially if your business is a start-up. But even if your business has been around for a while getting paid fast - usually within one day - can help provide the capital to expand and the cash flow to pay employees, suppliers, rent, and other expenses.

Because not every business person is familiar with factoring I thought it would be a good idea to elaborate on this forgotten sector in the world of financing. So what is factoring then? Factoring is the selling of a business' accounts receivables in order to secure immediate working capital. Through factoring its invoices a business eliminates the uncertainty of when it will be paid, allowing for better management and planning. For example, let's say ABC Pavement has a contract with the local municipality to re-pave all damaged roads in a specific town. ABC learns that it takes 30 to 60 days for the government agency to pay for the work provided yet employees and other expenses must be paid right away. To streamline the efforts and work more efficiently, ABC then sells its invoices to the factoring company. By doing that ABC is now able to secure advance payment on its invoices usually within a day or two in comparison to 30 or 60 days.

Of course factoring is not limited to businesses providing services to government agencies. Manufacturers, Distributors, and Wholesalers can usually benefit from such transactions. Upfront capital could be used for payment of suppliers, employees, and new orders. More business sectors enjoying such benefits are the Staffing companies, Transportation, Oil Field Service providers and a variety of other service providers.

So one may ask how does factoring work, how long does it take, what are the usual requirements. Let's say Lena's Staffing Agency provides a local employer with qualified temporary employees. Lena normally would have to wait 45 days to get paid by the client (employer) but Lena has expenses that need to be met including the temporary employees' salaries. Instead of waiting 45 days to get paid Lena contracts with a factoring company and every time she invoices the client she gets immediate working capital to run her business. The factoring company will buy Lena's invoices and pay her in two installments. The process goes like this. After she gets approved, Lena invoices her client (the local employer) and sends a copy of the invoice to the factoring company. The factoring company advances the first installment of anywhere between 70% to 90%. Once the client pays the full invoice, the factoring company rebates the remaining 10% to 30% less the factoring fee.

The general criteria for approval is for Lena to contract with clients that have a reasonably good track record of payment and her invoices to be unencumbered (free of liens or judgments). It's all about risk, factoring companies like any financial institution will determine how much risk, if any, are they willing to take. After all, why buy an invoice that has a high likelihood of not being paid? Because the level of risk can vary based on the client, field and/or local economic factors, the advance installments and the monthly rates can vary, as well. And finally, the factoring of invoices comes with a full recourse or non-recourse clause. Full recourse is the plan under which your business is liable for any factored invoices that cannot be collected from your client. In a non-recourse situation your business may not be liable, however it is rather difficult nowadays to find factoring companies that would take that kind of risk. So be prepared to assume this type of responsibility.

Last on my list is evaluating whether factoring is truly an enhancement for your business or not. Because factoring companies do charge a fee to buy your business invoices you'd have to determine whether payment of such fee is justified. This is something that you, as a business owner, would have to analyze. Of course, to determine what fees you'd have to give up to get upfront working capital on your invoices you may want to first speak with a factoring company. Then you'd have to figure out how much (or how little) you'd gain by having access to immediate capital. If you have experience with factoring it would most likely be a fairly easy assessment for you. But if you're new to factoring and still don't know whether it would be a benefit you may decide to do a limited trial period, say anywhere between four to six months. If it turns out that your business becomes more efficient, you found your solution. But if it's not then you can always go back and operate under your original business plan.

The Lending industry is quite chaotic and unpredictable, especially in today's economic environment. Banks will like your deal today and hate it tomorrow. Most commercial loans are originated today as Portfolio Loans. This means the lender keeps the loan in their portfolio for the entire term. So, if they find today they have too many retail centers in their portfolio, they will decide - over night and without a warning - to shift to apartment buildings.

How To Make The Most Of Your Merchant Loan

If you have had a small business for any length of time, you know quite well that there are occasions where having access to an extra five or ten thousand dollars could make a huge difference. Regardless of your specific reasons, those extra funds could keep you from losing sleep, could give you the ability to jump your business to the next level or even give you the leverage you need to skate through the holiday sales season with ease. Standard loans can be problematic for many reasons so getting a `merchant loan may well be the leverage you need to get you over the hump.
Standard bank loans usually take months to process, require some form of collateral and take years to pay off. Even though you'll want this type of loan for initial start-up, major expansion, other capitalization needs and large scale purchases, they're more hassle than they're worth for a short term need. Merchant loans on the other hand usually take a couple of days to get approved, are based on incoming cash and can be paid off in weeks or months instead of years.
For short term cash flow or cash infusion needs, these loans work perfectly in a lot of situations. As an example, if you've got a customer on Net 30 or Net 60 terms that make a major purchase; it may seriously affect your cash flow. Loans like this can help you keep pace or recover if you've got a slow paying client or have one that doesn't pay.
Another purpose that this type of loan can satisfy is seasonal inventory purchases. Many times small businesses need to increase their inventory dramatically in order to satisfy customer demands during the holiday season. Unless a company has a way to temporarily increase their purchasing power, they may well miss out on what could be a very successful endeavor. Being able to take out a merchant loan not only gives them the ability to have the inventory they need but also allows repayment to take place as a part of credit card receipts. This takes a lot of the hassle factor out of repaying the loan as well.
Merchant loans are short term loans designed to help you get through a temporary situation where an infusion of cash can be a real solution. Whether you have a cash flow issue or need to boost inventory for the holidays or to satisfy an order, being able to count on having access to the funds you need, when you need them is a huge comfort.

There are many ways to take your business to the next level and a merchant cash advance is a great way to get started. Advance Funds Network has the business loan information you need to expand your business and the money to do it.

Is Now The Time For You To Purchase Commercial Real Estate?

Many small business owners struggle with the decision to purchase commercial real estate for their business or to continue renting. The current commercial real estate break down has left many with strong reservations. The traditional benefits of owning are numerous and well known. Equity build up, potential appreciation, tax benefits primarily through depreciation and control of owns future are the main reasons to own, and continue to be so.

But is this the right time for you to purchase? Here are a couple of questions to ask yourself.

Do you have enough cash for the down stroke and will your post close liquidity be enough to handle any minor unexpected challenges? Meaning after you acquire the building, will you still have enough cash on hand? Keep in mind that 90% loan to value financing is readily available, if your business will occupy at least 51% of the subject property.

Will your monthly real estate expense decrease? It's common that by owning your cash flow savings will be 10 - 15% less than what you would pay in rent for a comparable property.

Will the building serve your long term needs? If you're a fast growing business it may not be the best route to own as you may need to move to a larger facility. The closing costs/transaction fees are expensive and should be considered.

Do you believe in the local real estate market as far as long term appreciation/demand? Meaning do you believe that in 7 - 10 years that the market will increase in value? Due to the current decline in property value you need to have vision and a little courage but history has taught us that the commercial real estate market is cyclical, and that it should come back strongly in 3 - 5 years.

Likewise, do you believe in the individual building, as far as its potential for appreciation? Could the building serve many potential users? Is it well located for its type of design (i.e. retail, industrial)? If it didn't appreciate at all in the next 3 -5 year would it still make sense?

Would you be interested in renting the facility in the future? Say in 10 years after you've sold your business.

For most small business owners, the opportunity to own commercial real estate maybe their best way to build significant wealth with their business over the long term. For example, how many business owners do you know that owned a service related business that after 20 or 25 years of working hard, they have little to show for it? It happens all the time. They have no assets, and their rent has consistently increased year after year.

Alternative Financing Strategies In A Slow Market

The economy just struggles on. And, it is expected to continue at least until the next Presidential election is over and we set politics aside and get back to the real work.
In the mean time, current financial market conditions will remain unchanged - meaning that small businesses, even those that are growing, will continue to have a hard time accessing capital.
- Credit score requirements will trend higher precluding those without the most stellar score from the credit markets while continued economic setbacks of small business owners will push their scores in the opposite direction.
- Positive cash flow requirements will play an even greater role in credit underwriting even while most small businesses are facing declining revenues.
- And, collateral requirements will continue to trend higher; with values of 100%, 150% and even 200% or more.
All bad news for business owners needing a business loan to stay float or to grow and innovate their companies through this turmoil.
However, not all is lost to these entrepreneurs.
Here are a couple of suggestions of raising money during this unending slow market:
Leveraging Financial Assets:
Most lenders just want to get repaid. Thus, they want to be assured that a future cash event (either ongoing cash flow or a single, future payment event) will materialize that will repay their loan with interest.
Financial assets do just that. Example, if you invoice your customers, allowing then 10, 30 or more days to pay for products already shipped or services already renders, then that delayed payment period creates a future cash event that can be factored today for cash - cash to make payroll, pay suppliers or even to win that next job.
Or, your business has already won that next job yet does not have the capital to purchase needed materials or labor to complete it. But, that order all ready in hand means that your customer will pay you as soon as the goods ship or the service begins. Again, a future cash event that can be factored for cash today - cash to actually complete that job and earn your profit margin.
Trade Credit & Vendor Loans:
If your company is seeking a business loan to just purchase materials or supplies, then turn to your partners (suppliers and vendors) for trade credit.
It is also in their interest to keep your business alive and well (you are their customer after all). Know that if your company's revenue is slow, so is theirs. And, for them to stay in business and grow their organizations, they need all the customers they can keep (that means you).
If you already have trade credit with your supplier, ask for better terms - terms that allow your business time to convert those goods into revenue of your own.
Or, if you don't have terms with your suppliers, now is a great time to ask. Know that during this long-term economic slow period (since 2008) many suppliers have been offering credit terms to their customers as it not only benefits their clients but offers many benefits to them as well - like added revenue, increased sales and a customer base that is not in decline.
The goal is to try and match the credit terms with your suppliers with the terms you offer your own customers. Thus, your business will not owe your suppliers until you have money coming in from your customers to pay those expenses.
Or, if your business is purchasing new equipment or software from vendors, ask those vendors to finance that purchase.
More and more companies are offering these types of services called vendor loans. They know it helps both parties.
Some vendors will provide your company a business loan for the amount you need to purchase their products or services with the only caveat being that you use those funds to buy their offerings.
You get what you need for your business and have to make payments just like you would with any other business loan and they keep you as a loyal customer who continues to buy their products.
Friends and family & Local Investors:
While the news may be trying to demonstrate that most people in this country are struggling day-to-day to make ends meet, it just isn't totally true.
There are many people who still have some savings or disposable income and are looking for ways to earn better returns then banks and other investment options are offering.
This means that your friends and family (or even the friends of your friends and family members) may have the ability to float your company a short-term business loan or even invest in your business for a little up-side potential.
And, this source of capital might not be from just those people you know. There are other professionals right in your local community that may have some additional capital that they want to 1) earn a better return on or 2) want to give back to the community that has helped and supported them all these years.
This means asking. Asking friends and family - they are the ones that know you and your business best. In some cases, they may have even been waiting for you to ask them.
Or, get out in your community and network. Attend local events; join civic organizations or networking groups. Talk to everyone. Sell the merits of your business, sell the merits of your opportunity and sell the merits of your products. Get the word out. Then, ask for an investment or loan. After all, money is still money, no matter where it comes from.
Your business just might be the exact opportunity that a local investor is looking for.
While this slow economy is predicted to continue for some time, it does not mean that your business has to suffer for it.
Put that entrepreneurial hat on and get creative in finding alternative ways to secure a business loan for your business in this sluggish market.
Know that, when it is all said and done, there will be winners and loser. It is up to you to ensure that your business is in the winning column.

Never Give a Lender a Security Interest in Something You Can't Live Without

Lenders often demand far more security than they need when a business borrower seeks a loan. While this may be a prudent and cautious lending strategy for banks, it can prove disastrous for a business borrower or guarantor who pledges personal collateral for the loan.

For example, a lender may ask for a deed of trust or mortgage on the business borrower's personal home in addition to a security interest in the business inventory, receivables or other intangibles of the borrower's business. It may also demand a guarantee by a corporate officer and insist on a deed of trust of the guarantor's house to secure the guarantee. In such situations, both the borrower and guarantor are at risk of losing their homes if the loan defaults.

Guarantors must understand that a guarantee is a legally binding agreement that in effect could make the guarantor just as liable as the borrower for repayment of the loan. While most guarantors believe that the lender will come after them only after failing to get satisfaction from the borrower and the borrower's collateral, that is not so.

Years ago, guarantors had the right to make the lender proceed first against the borrower, but most standard guarantees today include a waiver of that right. This means that the lender may legally go after the guarantor and any collateral posted by the guarantor first before the lender sues the borrower or forecloses on the borrower's collateral.

It doesn't matter whether the lender tells the borrower or guarantor: "Don't worry--we would never foreclose on your home--we just need the security for bookkeeping," or uses some other pretense to induce the borrower or guarantor to put up their home as collateral for a business loan. Be assured that the lender will deny these oral reassurances and insist the lender's written unconditional rights are spelled out in the loan documents. Those documents will often trump any oral statements.

Gone are the days when a business owner could expect to only use business assets as collateral. Borrowers and guarantors should think long and hard before ever agreeing to pledge personal collateral for a business loan or building project. The down side of losing your home or other personal assets to the lender is often too great.

In good market conditions and bad, your relationship with your lender should be treated with caution. When money becomes scarce as it is today, your should be even more vigilant.