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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. 

How Business Credit Lenders Measure Up Your Small Business

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Business Credit Lenders

 

In the past big used to matter in every aspect of business but as we all know times have certainly changed and as Seth Godin says it best ‘Small is the New Big’.

Whether you run a business from your home or a small office qualifying for corporate credit will require that you have a ‘Big’ business structure in place.

Now I’m not talking about the big office or big staff or even a big elaborate PBX phone system. What you do need is the basic operational components that make your business a real business in the eyes of business credit lenders.

By incorporating your business you are certainly moving in the right direction but that alone doesn’t give you a business credit green pass and open the financing floodgates.

However, with a corporation or LLC your company is treated as a separate legal entity and operates in its own capacity on behalf of the shareholder. It conducts business, generates revenue, hires staff and pays its own taxes.

With that said there’s still many other guidelines that your company will need to conform to in order to qualify for credit. The list below is a sample of some of the basic things you should have in place that will not only help your credit approval rate but also increase sales as well.

Business Phone

Having a dedicated phone line for your business is mandatory. Now you don’t have to go out and hire someone to field calls just be sure the messaging system identifies your company name. You also will need to get your number listed with certain directories which corporate credit lenders use to verify your company information.

Business Address

Whether you have a brick and mortar location or work from home it’s important to have a physical location for your company. Lenders can verify your business address and may even schedule an onsite visit. 

Using a virtual office usually doesn’t work because these services use the same address and suite number for all the companies so your address can never be verified.

Company Web site

An online presence is almost mandatory if you want to be considered a real business. It also provides lenders and creditors a quick snapshot of what your company is about and what products and services you have to offer.

I wouldn’t suggest going with a free web site and free hosting because it shows and the goal here is to create a real business so don’t side step this one but don’t break the bank either. Just create a nice professional looking site and be sure to register a domain name preferably a dot com.

Company Email Address

This is another one of those small items that make a difference both with lenders and potential customers. A dedicated email is another thing that impacts how your business will be portrayed. For example, what sounds more professional to you [email protected] or [email protected]?

Obviously the company email address sounds much more professional and automatically portrays you as a real business compared to just using a free email account.

Business Bank Account

Many of the credit applications will require a bank or bank loan reference and some even require a bank contact name and phone number. Before you open a small business checking account I would suggest identifying the specific loan products that you will need.

Every bank has its niche and specialty loan products and some banks are even more small business friendly than others. Also make sure you have a nice rapport with your banker because a lender may give him a call inquiring about your company’s standing with the bank.

These are just a few of the many corporate conformity guidelines I cover with members. While small is the new big in today’s business environment it makes all the difference in the world to treat your business as if it is a ‘Big’ business.

Are you ready to launch or establish a creditworthy 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 corporate conformity solutions, 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 web based membership helping business owners obtain 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. 

Microfinance Loans Provide Special Benefits for Small Business

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Microfinance Loans

 

While microcredit loans first originated in the Third World as a way to help launch small businesses thousands of American entrepreneurs are finding it as the alternative solution to traditional lending. Microfinance loans

Many of the micro lenders, which are mostly non profits, receive the bulk of its funds from the Small Business Administration. 

In order for these micro lenders (intermediaries) to loan money to micro borrowers there are specific funding and training guidelines set by the SBA.  

One of the reasons why this funding option has become so attractive to entrepreneurs is because it’s less difficult and time intensive to qualify for this small loan which ranges from $500 to as high as $35k compared to the traditional lending route.

This new age of micro loans for small business offers a variety of special benefits that I’ve broken down for you into the following:

Business Training

The SBA requires that intermediary lenders provide business training and technical support to its borrowers. This educational component that micro borrowers will need to complete before the application is accepted is a step in the right direction.

By adding sound business training and planning more start ups can avoid making costly mistakes resulting in successful loan repayments and building a solid credit history in the process.

Flexible Requirements

Another area that makes these microcredit loans so attractive is the flexible guidelines for loan approvals. While many lenders are unwilling to approve a loan unless you have pristine credit, business history and sufficient collateral micro lenders take other factors into consideration.

This may include personal collateral and a personal guarantee but what truly separates micro lenders from traditional lenders is the personal character component. Micro lenders take a more hands on approach with their borrowers and go so far as to even contact personal references.

Building Credit

Microfinance loans also provide a way for small business owners to build or rebuild personal credit history and raise credit scores. Many applicants have little to no credit history and do not have the collateral that typical businesses use to secure a loan like commercial real estate, accounts receivables or inventory.

As you make payments on your small loan the micro lender reports its payment experience with you to the credit bureaus. This builds positive credit history and increases your level of creditworthiness in the eyes of lenders.

Once a micro loan is paid in full then most micro borrowers are able to qualify for greater amounts of financing through traditional sources if they prefer.

Time

Time is of the essence especially if you are in need of funds for working capital. Waiting for a traditional loan backed by the SBA can take months where microfinance loans can take as little as 14 days to fund.

Keep in mind that each micro lender has its own lending requirements and it handles its own approvals at a local level. You can find more information on SBA’s Guaranteed Loan Programs and a list of approved micro lenders nearest you at the SBA web site.

Some additional micro lenders you may want to consider reviewing are Accion, Kiva, Prosper, Zopa and Lending Club. Each of these lenders has its own requirements, lending limits and interest rates so take the times to review which one best fits your needs and comfort level.

The recent economic crisis created a huge demand for this new age of finance called micro lending. With the SBA stepping up to the plate and allocating $50 million in funding for its micro loan program it’s no surprise that this financing option is going mainstream.

Whether you’re just beginning your first business venture or need the working capital for an existing business, this small loan may just be the solution you’ve been looking for.

Looking for more funding sources to launch or grow your business? Become a member of the 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. 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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