Business Loan ArticlesFrom time to time, I will look out for articles that will provide information regarding business loans.
Getting A Small Business Loanby: Daryl Des Marais
There are a variety of resources for small business owners. If you have a previous credit history and some invoices or a track record many small banks cater to business loans. If you are looking for a grant there are a great number of resources on the web. If you are creating a new innovation go to http://www.sba.gov/expanding/grants.html You can also find small business loans for minorities and special projects. If you need capital raised to develop your prototype and you have a viable product that people have endorsed they would buy then ckeck out growco.com and maybe you will find an angel investor. For more information on grants and loans go to www.usabuinessgrowth.com and click on grants/capital. If you are going to apply for a business loan make sure you have a business plan and monthly income statements as well as a 2-year cash flow plan. Show them you know how to manage money or get someone to help you with a plan. Continued Success! Daryl Des Marais Business Growth businessgrowth.ca About The Author
Mr. Des Marais has operated small businesses for over 20 years. He has been a consultant and held positions in some of the fastest growing companies in Canada. He has held past management positions in retail, tourism, hospitality and sales for a variety of companies. His expertise is in the area of growth and business development. He has also been involved in developing business chapters in cities across Western Canada.
Typical Rates & Fees Associated with Business Loansby: John Williams When acquiring a business loan, one can expect to pay different rates and fees based upon the years the business has been in operation, the owner’s personal credit history, the business’s credit history, and whether or not the loan is secured or unsecured. If the loans are guaranteed, whether or not they are by the government or some other agency can affect the rates as well. Interest Rates are controlled by usury laws. A lender can safely charge a business up to 10% interest per year and not violate any usury laws. Depending on the type of lender you seek, personal or commercial, this may not always hold true. There are different usury laws governing personal lenders and those that are protected by the Federal Government (commercial banks, credit unions, savings and loans). Typical lenders charge between 6-7%, however, as stated earlier; financial security in the business and the owner play an important role in establishing interest rates. Often times commercial banks offer fixed interest rates, but more often than not, the rates are flexible after a given number of years. Government loans are offered to small businesses that meet certain criteria. These loans are offered at the approximate US Treasury note rate of + 1.7% (fixed rate). Other agencies and specially funded business loans offer rates that are decided by special committees. Usually they are lower because these loans are only available to certain business owners. Fees come in different increments based upon the institution you choose to borrow money from. Typical fees include application fees that can run up to $500, although, some institutions and loan companies do not charge any application fee. Closing Costs which usually run within 1-2% of the original amount borrowed. Common commercial loans that are under $500,000 are usually at least 2%. Loans above $500,000 usually have fees ranging from 1.5-1.75%. Other fees that one might encounter when borrowing money for his or her business are: appraisal fees, attorney fees, and environmental assessments. These fees may or may not be included in the closing costs. If not included, these fees may mount up to several thousand dollars. It’s important to ask your financial institution which fees are included in the final closing costs. Government loans and loans that are offered through agencies that cater to certain small business owners offer fees that are based upon the project size. Most are usually at least 3%, some agencies charge the exact amount of all filing fees and an additional 1-2% of the original loan amount. Many individuals choose to refinance their residence as means for a business loan. Often times these loans can be acquired much easier than a business only loan. Interest rates are often lower and fixed for longer amounts of time, as well. Fees usually range below 2% and can be included in the loan. Having equity in your home may enable business owners to borrow money with lesser interest rates and fees. However, it is a risky plan. If your payments are not made on-time and in full each month, your home may be sold to cover the loan. About The Author
How Your Personal Credit Affects Your Chances of Getting a Business Loanby: John Williams Your business idea first begins with a dream, and then extends to a passion. The passion to do what you love leads you to need financial assistance. Having the means to expand on your passion will bring hope to your livelihood. Does your personal credit affect your chances of getting a loan to begin the business of your dreams? We will explore this question. All lenders, especially local banks, will do a thorough check of your personal credit history. It most likely will affect your chances of receiving or being declined for a business loan. You can increase your chances of receiving approval for a business loan by paying close attention to the following personal credit factors: • Show a steady source of income. Changing jobs prior to or not having employment will decrease your chances. Lenders need to see stability. • Credit card balances should be paid off or carried at low amount. Never cancel a credit card or apply for a new one prior to applying for a business loan. • Obtain credit reports from all credit bureaus to check for accuracy. Almost half of the reports have been found to contain errors. • Determine a manageable down payment amount. It may mean rejection or approval. Lenders want to be assured the person they are loaning funds to is capable of managing personal finances because it will reflect spending habits within a business. Always be honest with lenders about your personal credit history. Anything you cover up can be deemed as fraud and will further you from getting the financial assistance you need. Honesty about past financial failures with explanation is your best investment for getting a business loan. Finally, before you approach a lender concerning your business, financial needs need to be organized with key documents, a business plan, financial statements and a repayment plan. In order to get a business loan, a business owner must think like a bank. If he or she is not prepared, most likely, the loan will be turned down. Business loans are somewhat different than personal loans; in addition to having a good credit standing, usually banks and financial institutions require business owners to supply a well thought out business plan. Banks want to be assured that the business owner will repay the loan, even if the business goes into default. A well-thought out business plan should include the following: • Cover letter or executive summary • Photographs of the business, if possible • A description of you, your business and the history of the business, along with your background regarding the business. • Any collateral or fixed assets to be acquired with the loan and their cost (include appraisals on real estate and recent tax appraisals). • Market or target audience, potential or existing customers; competitors and supplier information • A good marketing plan, which should include advertising and public relations • Financial soundness of the plan, which includes Cash Flow Projections, projected Profit/Loss summaries, any business credit reports, copies of any business tax returns, lease agreements, any contracts with customers, etc. • Business license, Franchise Agreements (if applicable), any other construction contracts, partnership agreements, employment agreements; environmental assessments if necessary, and copies of any other financial paperwork of worthiness • Summary, which lists the benefits from the loan and a brief statement indicating how the loan will be repaid In addition to a well-thought out business plan, a business owner will most likely find that most institutions require personal financial information as well. Be prepared to present the lender with personal financial statements, personal tax returns, an up-to-date credit report, and resumes or letters of recommendation from former partners or proprietors. It is the business owner’s responsibility to ensure the lender that the business is of little risk, because after all, they are in a business for profit as well. About The Author
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