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.