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Loans for Small Business

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Loans for Small Business

 

If you’re looking for a loan to expand your business, purchase equipment, buy inventory or simply increase working capital than this post will provide some helpful information.

First, before you begin searching for a loan it’s worth the time to fully understand the types of loans for small business that are available to you. Each type has its pros and cons and it really depends on your particular situation.

Here is a breakdown of the most common loan types for small business:

Term Loans

This is a loan that pretty much speaks for itself. You’ll repay the loan over a set term and the interest rate is usually fixed. You can also obtain a short term loan where it’s paid in full at the end of the term (usually 12 months or less) instead of dealing with monthly payments.   

Secured Loans

This is one of the easiest ways to qualify for a loan because you are putting up collateral like commercial real estate, receivables or inventory to secure the loan. Your rates are usually lower and you have a greater chance of negotiating as well.

Now I wouldn’t suggest putting up your home or car for collateral because if you are unable to pay off your loan your personal assets that you pledge can be seized.

Unsecured Loans

A complete opposite of the secured loan is the unsecured loan which requires no collateral. Because these loans carry much more risk lenders place greater underwriting guidelines so strong business credit scores and other factors will come into play so be prepared.

Lines of Credit

This is a popular source of capital because of its ability to obtain large sum of cash, what I call cash on demand. Typically, it works like a revolving credit card but the major difference is that it has a much lower interest rate and higher credit limits than a revolving credit card.

You have payment flexibility and some banks provide special features that require monthly interest only payments which keep payments small when you tap into your credit line.

Merchant Cash Advance

By borrowing against future credit card sales you can receive cash rather quickly with this type of loan. It doesn’t matter if you have bad credit or no collateral because the loan is based strictly on credit card transactions and best of all you pay back the loan in small amounts with your credit card sales so no need to track payments or worry about defaulting.

Factoring

Also known as receivables financing you’re basically selling your invoices to another company instead of waiting for your customers to pay you. The factoring company pays you usually 80% of the funds immediately with a small fee taken out. Once the customer pays then you get the remaining funds.

Equipment Financing

Qualifying for this type of financing is easier compared to others because the equipment serves as the collateral. You not only benefit from tax deductible lease payments but you also can get a buy-out option as well.

Keep in mind it’s always tougher to get a loans for small business when you need it the most. So plan ahead and prepare to provide a well written plan to support your request. It helps to have skin in the game so if you have already committed funds of your own for your startup then make sure you provide this information to the lender if it will help close the deal.

While some of these loans don’t require so much due diligence it’s always smart business to know what options are available.

Are you ready to access a step-by-step business credit funding engine? A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Become a member of my Business Credit Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

About the Author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A corporate credit builder system providing business owners no personal guarantee business credit. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Business Credit

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Business Credit

 

Business Credit is borrowed money that your company can use to purchase products or services it needs and repay the funds at an agreed upon date or time frame.  It can also refer to the amount of capital your business can secure without the use of personal assets.

The good news for you is that businesses of all sizes and entity types have the ability to create its own corporate credit identity completely separate from that of its owners.

Unfortunately most entrepreneurs are not aware of this and operate as a sole proprietorship which is a form of business structure in which the individual takes on all aspects of funding, starting and operating the business.

As a sole proprietor you keep all the net profits but you’re also taxed on them too. This is why entrepreneurs often rely on the strength of their personal credit reports to determine the amount of financing they are able to obtain for their business.

Unless you incorporate the IRS will automatically default your business as a sole proprietorship leaving you personally liable for all debts and actions made by the company.

By incorporating your business it now gets to be treated as a separate legal entity like a human being created through a legal process.

Similar to a social security number which is tied to your consumer credit files your business can obtain a Federal Tax Identification Number and establish its own business credit report.

Once you begin building business credit you can obtain everything from equipment, office furniture, supplies, and inventory or even lease automobiles through corporate fleet programs.

You should limit the use of your personal credit or guarantee by applying for vendor credit and if you apply for other sources of financing like a business line of credit then you will also need to maintain a solid bank rating too.

Business credit cards are another source of credit that your company can obtain with each card containing its own approval criteria and terms and conditions. Some cards may not be a good fit especially the ones who base its approval and payment reporting on the owner’s personal credit and not the business.

Your company can also apply for business loans which are either secured or unsecured and are traditionally funded by banks.

Each of these sources of business credit can provide the short or long term capital your business needs while protecting your personal credit and personal liability.

While it does take time to build a creditworthy company you can expect to save more money and obtain much greater financing than you would ever personally.

Are you ready to start building business credit for your company? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system? A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

About the Author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit building system for small business owners. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

How Social Loans Offer a Lifeline to Small Business

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Social Loans

 

With entrepreneurism on the rise more and more small business owners are discovering that social lending is the funding lifeline their new business needs. 

Rather than dealing with all the red tape that traditional lenders require for a loan, social lending provides individuals an opportunity to borrow and lend money to each other. This whole process removes boundaries and empowers entrepreneurs from all walks of life to borrow or invest in each other. Social Loans

While social loans itself is not a new concept it’s fairly new here in the U.S. and only a handful of companies are becoming market leaders. After initial SEC concerns were put to rest social lending companies like Prosper and Lending Club have clearly taken the lead with a combined worth of originated loans exceeding $300 million.

For the first time ever entrepreneurs have the ability to obtain funding for their business ventures through a network of people on the web in a simple step-by-step process.

Applying for a small business loan has never been so easy or readily accessible despite the current economic times. While banks are saying ‘no’ social lenders are saying ‘yes’ and more importantly they are saying yes with a low interest rate!

However, these low rates are not available for just anyone looking for a loan. Companies like Lending Club have a minimum credit score requirement of 660 plus requires a debt-to-income ratio of less than 30 percent.

Prosper has a minimum score requirement of 640 but does not have a debt-to-income ratio requirement like Lending Club.

If you have credit problems you can easily raise your credit score or repair your credit so don’t let that hold you back from obtaining the loan you need for your new business venture.

Entrepreneurs will find these requirements a lot less demanding compared to what banks require for a business loan. Typically you would need to provide profit and loss statements, financials and tax returns.

Another aspect to these social lending sites that provides entrepreneurs the safety net they need is the ease of access to capital when the minimum requirements are met.

Prosper uses a bidding system where entrepreneurs create a profile, share their story and advertise their listing. The loan amount must range from $1,000 to $25k and must include the maximum interest rate they are willing to accept.

Next, lenders decide whether or not to offer a bid during the auction period and the lowest rate has the opportunity to fund the loan.

Within a matter of days a small business loan can be funded which is nearly impossible when going the conventional route for business financing.

Lending Club works a little differently because it matches borrowers with lenders depending on certain matching criteria like geography, work, education and friends.

Entrepreneurs are limited to three year or five year terms and rates are determined by the credit score of the borrower not bids from participating lenders.

Other social lenders like Virgin Money, Lending Karma and Lend Friend take on a different approach by providing small business owners the opportunity to structure formal loans with the people they know.

These P2P lending companies provide web based tools that create loan agreements, calculate payments, track and record payments and generate packaged proposals that can be sent to friends, family or potential lenders in social circles.

As you can see social loans can be the lifeline that small business owners have been searching for. Getting a small business loan has never been so easy, convenient, fast and cost effective.

Looking to obtain financing without using your personal credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Become a member of my Business Credit Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

About the Author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A web based system for building business credit with no personal guarantee. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Dun and Bradstreet Joins Forces with Transunion

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Dun and Bradstreet Joins Forces with Transunion

 

In a press release today Dun and Bradstreet announced that it joined forces with Transunion to blend consumer and business credit information in order to improve the overall risk assessment of small and micro businesses.

This is a major announcement that impacts both lenders and small businesses on a national scale.

Over the past couple of years the economic downturn has given the word “risk assessment” a whole new meaning. It was only a matter of time when a new dimension of analytics would begin to take shape and this is just the beginning.

As you know there are millions of pieces of data that are collected on consumers from consumer reporting agencies like Transunion (500 million to be exact) and millions of business records are compiled from business credit bureaus like Dun and Bradstreet (150 million to be exact).

With all this information is it any wonder that one day we would see the merging of credit data from two leading companies.

According to Byron Vielehr, president of D&B Global Risk and Analytics, “Small businesses’ credit-worthiness can be correlated to consumer credit history.”

I would have to disagree simply from the fact that there are certainly other events or circumstances that may cause a business owner to incur personal credit challenges while the financial responsibilities of the business remain intact.

If a business owner truly separates his personal credit from his business credit then there should not be a correlation between the two but unfortunately the majority of owners continue to co mingle personal and business expenses to this day.

In August of this year D&B plans to launch its new Commercial Credit Score 8.0 which incorporates consumer credit data from Transunion with D&B’s business records giving its customers a newly enhanced scoring system.

It will be interesting to see the impact this will have on small businesses and its ability to obtain financing with little to no trade credit with D&B.

If merging consumer credit data from Transunion has a positive impact on its commercial credit score it may just be the answer some small businesses have been waiting for.

However, what type of impact will this have on the businesses with strong D&B ratings but little to no consumer credit? What about the business with a strong paydex score with financial stability but the owner has a dismal consumer credit file with Transunion?

I’ll keep you posted on new developments as they become available.

Read the full press release ‘D&B Announces Services for Customers to Better Predict Small Business Credit Risk’

Looking to access a proven step by step business credit building system? A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus? Become a member of my Business Credit Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

About the Author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit builder membership helping business owners establish business credit. He is a business credit blogger for All Business.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

How to Structure P2P Loans with People You Know

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P2P Loans

 

Whether you are in search of capital to launch a business, purchase equipment or inventory or simply looking to expand your operations obtaining the funds you need may be a difficult task if you are relying on traditional sources like banks.

Many small business owners have adapted to these new challenges and have found creative funding alternatives like microfinance loans, peer to peer loans and factoring.

For the longest time entrepreneurs sought out the help from friends and family for startup capital. With some of the new tools and technology available today there’s now a better way to structure these types of personal loans and present a nice packaged proposal.

Now the good news is all the required steps are available in a step-by-step web based system making it simple to formalize a loan agreement, calculate payments, track and record payments, and have automatic payment reminders sent.

The first step is deciding whether you are looking for secured or unsecured personal loans.

Secondly, you will need to define the terms of the loan including the schedule of payments and interest rate.

The interest rate you propose will be much lower than you will ever get from a bank loan but it must be high enough that it offers an equal or greater return than what you would get with a regular savings account.

Last but not least is submitting your proposal to your friends, family or potential lenders in your social circle.

P2P lending companies like Lending Karma offer a loan payment tracker that helps lenders and borrowers track and view payments which makes the whole process much easier and less intimidating.

Another company that has a unique approach is Lend Friend which offers a free loan management tool where you can build a loan proposal, schedule a repayment schedule and make payments through PayPal.  The system will also send email reminders to you when your payment is due and this is all maintained online absolutely free.

Keep in mind these types of peer to peer loans are agreements between friends and family so it’s important to understand that you’ll need to find the right loan partner to submit your proposal to.

I suggest you contact a family member or friend with the same type of professional approach as you would with a lender or bank. It’s also important for them to hear about your plans and enthusiasm for your business.

It also helps if you have sample products or a business plan so they can see how serious and well planned you are for your new business venture.

Once your chosen loan partner receives all the details of your loan proposal, they have the option to make counter proposals if they want to adjust the loan terms.

After both you and your lender agree with the proposal then there are a few tasks that must be completed before the loan is finalized and can be activated.

While there are many p2p lending companies that offer innovative tools to formalize the loan process between friends and family nothing can replace the value of a personal relationship.

Looking to obtain other sources of capital? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system? A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

About the Author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. An online membership helping business owners build small business credit. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

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