When you are looking for finance for a business project, resorting to secured loans is definitely the smartest way to go. And though you can always resort to regular secured loans based on real estate and equity, there are other alternative methods of securing a loan that are perfect for running businesses especially when the purpose is to solve a temporary lack of cash problem that may recur.
There are alternative secured loans for businesses that the financial industry has created keeping in mind the needs of the small business niche. These loans instead of using real estate to secure a business loan (which usually small businesses do not have as they often rent their offices), just use certain assets that are within the reach of almost all small businesses.
Alternative Form Of Security
It is possible for businesses that work with credit cards to reach an agreement with certain payment processing institutions that are also financial institutions. These agreements consist on a loan that can be awarded to the businesses for which the institution acts as payment intermediary which is secured with the company’s future credit card sells.
Basically, the lender knows exactly what the company’s income flow is (at least the credit card part of it) and thus can easily provide financing knowing the business payment capacity. Moreover, the amount of the loan’s monthly installments is directly debited from the business’ account since the lender processes the company’s client payments too.
Advantages Of Using This Method Of Financing
This method of financing provides the necessary funds for any business expansion or growing plans without the hassles of applying for other forms of financing that require more bureaucratic paperwork and presenting backing up documentation in order to prove an acceptable income to afford the monthly payments.
These loans instead, are easy to qualify for because the lender already knows the account movements of the borrower and can be sure to be repaid because he just needs to retain a fraction of the funds that arrive with each client payment made using a credit card. Since the lender grants the money but at the same time processes the company client’s payments, it has nothing to worry about and thus can provide very advantageous terms on the loan.
Also, not using equity when you have this other alternative is a smart choice as it remains as an option whenever an emergency situation arises and you do not have other sources of financing that can provide high loan amounts and affordable payments too. It is a way for the borrower to be assured that if anything unexpected happens he will still be able to obtain further financing.
This collateral alternative is becoming increasingly popular as it provides fair amounts of money and competitive interest rates without much paperwork or long credit verification processes. Thus, whenever you need funds for your business and if your business has payments made by clients with the use of credit cards, you can check with the financial institution that provides the payment processor services whether they provide this kind of loans.
Alternative Secured Loans For Businesses
Obama's Small Business Stimulus Loans--Are They Coming Our Way?
As Americans we have experienced the full gamut of emotions after hearing TARP I handed 350 billion to big banks, but no money filtered through to small businesses in the form of loans. In fact, the spicket was turned off completely after receipt of the bailout money. But putting down the front page of our local newspaper for a moment, what is it like in the trenches? Are the banks really denying capital to businesses across the nation? And how are they treating them in this crisis. You'll be saddened to hear it is every bit as foreboding as you have heard, or even worse.
Mrs. Smith is the classic poster child of female entrepreneurial success. Starting as an everyday real estate agent, over the last 24 years, she has built an amazing corporate edifice consisting of several real estate sales branch offices and now employs 170 people. Her thriving business came as the result of untold hours of toil in which she describes herself as a "serial workaholic". As a result, she is considered one of most productive real estate offices in the state. Over the years, she had a strong relationship with a big bank and took out eight loans and lines of credit. All had been payback and were never late a single day. Her credit score is excellent and reports no negatives. Needless to say, as most businesses, she relies upon the line of credit to put her over the hump during times of lower cash flow. What happened next could not have been conjured up in your worst nightmare.
One afternoon on January 30, 2009, she received a call from her bank. In the past, she looked forward to receiving these calls because they were so energized and cooperative. They made her feel special. Her credit rating was so good, that twice she merely called up the bank manager, speaking to him by his first name, and was able to extend the line of credit by a simple verbal request. In those days, the conversations were something like: "Hello Mrs. Smith. I trust everything has been good with your business and family. How is your son John enjoying the college life? Sure--we'll be delighted to extend your credit line again and I will have one of my associates prepare the paperwork and get it over to you as soon as possible. Look to speaking with you soon." Today was different. Her CPA was in the office that afternoon picking up profit and loss sheets when the call came in. It was not the manager. It was someone at the bank she had never met.
"Is this Mrs. Smith? I am Frank Thompson with ABC Bank." He began with a twang that could only be described as consummate arrogance.
"Well hello. How are you today?" Mrs. Smith said cheerfully.
"Fine. Mrs. Smith, I assume you're busy so let me come right to the point. We have reviewed your loan accounts and effective immediately I am notifying you that they are being called and are now due and payable." It came to her in words that were abrupt and stinging. Although her heart skipped a beat, her first reaction was they must be calling the wrong person. She immediately motioned her CPA to get on the line.
"Hi. This is Mr. Evans, Mr. Smith's CPA. Would you be so kind as to repeat what you just told Mrs. Smith?"
Mr. Thompson was clearly agitated in having to repeat himself: "I'm really not accustomed to having to repeat myself, but I will tell you again. Mrs. Smith's $200,000 line of credit is canceled effective immediately and all sums are due and payable. Do I make myself clear?
"I'm sorry, we don't understand. Is there a problem with the account? To my knowledge Mrs. Smith has always paid her monthly installments on time and his current as we speak."
To say Mr. Thompson was rude was an understatement. Now he became even more bothered by the conversation: "It's clear you don't understand. I would suggest that you read the clear language of the loan agreement that gives us the option of doing so at any time with two weeks notice. I am giving you this notice now. Having said this in very simple language, I assume you have the basic intelligence to understand what I just said."
"Sorry, but we're just trying to be able to digest this news. This is very serious. We can't just pull out our checkbooks and a make a full payment on one day's notice . You don't have to be rude to us." Although still in shock, Mrs. Smith tried your best to soften the conversation.
Mr. Thompson was now eager to end the conversation. "Let me make it even clearer. Based on what I just told you, our bank no longer has a business relationship with you. You would be well advised to take steps to pay this account so that legal action is not necessary."
"Please understand that we need some time to think this through . . . I should . . . I mean I need to get a hold of the manager first," she pleaded.
"I'm handling the account now. You are not to talk to anyone else but me." The tone of of his voice was unmistakable and threatening.
At that point the conversation went steadily downhill. She and her CPA spent the rest of the day going over the books and speaking with their attorney.
Sound like something that cannot happen in America to a successful small business? Well, think again. These are exact quotes of the conversation. The big bank is simply stomping out big small businesses to improve their balance sheets. The lifesaver that has thrown to the big banks in the hopes they would pass it to small businesses on Main Street has simply not happened. It is at least understandable if a large bank decides not to make a new loan in this challenge economy. But it's another thing altogether to cancel existing loans with good customers.
Is this an isolated occurrence? Not all. Here is another example. Robert Picou is the President of the California manufacturing company known as California Ribbon and Carbon Co., Inc., with a plant located in Los Angeles. Robert is the epitome of the seasoned business owner, knowledgeable, practical, optimistic, and understandably proud of his company's heritage. After talking to him, you get the uncontrolled urge to get in the car and drive out to his plant. You get the image of a certain industrial vibrancy which is missing in America.
He should be proud. It is a story right out of the movies. In 1939, his father started selling old fashioned manual typewriter ribbons door to door to business owners in the Los Angeles area. But unlike Willy Loman in "Death of a Salesman", he made it into a real success. 70 years later this closely held family corporation has continued to thrive. To manage the ruts along the way, twenty years ago he took out a business credit card with a well known company and secured a large credit line. Needless to say, he has paid it on time ever since. But then he got a sudden and unexpected surprise in the mail. The credit card company unilaterally cut his credit line and froze up this access to working capital.
He wasn't especially daunted by this news because after all, he had a longstanding relationship with his large bank. All we needed to do was call them up and ask for an extension of his line of credit. His bank did get $150,000,000 in TARP money to presumably free up the money. Ten years ago he owed them as much as $1.4 million, but because of the success of his business, was able to pay it down to $88,000. A perfect candidate to receive some of the bailout monies and create an even more positive cash flow for him and the neighboring economy. No problem, right? Wrong again.
With no explanation, his bank turned him down flat. Asking why, he has yet to receive a credible answer. With orders piling in, his company is now on the unenviable position of not being able to fund all the orders received. Not to mention the rippling effect it has on his suppliers and employees, all of which have a tangible stake in our troubled economy. It is apparent that large banks have no intention whatsoever of using bailout monies for the benefit of small businesses.
Now the good news. Smaller community banks are interested in your business through the vehicle know as an SBA guaranteed loan. These institutions are using the incentives given by the SBA guarantee to cut their risk of loss and build up a better portfolio to be sold on the secondary market. You just have to find the right bank. At least someone realizes the foundational strength small businesses give to the overall economy.
Small Business Startup Loans - The Charge Placed on Business Loans
There is no form of loan in which rates of interests are not charged on it. However, the rate which you pay on the loan will vary with the type of loan and the lender providing the loan. Every business owner should be principally concerned about the rates charged on the loan. That is why it is always advisable to go in for loans which the interest can easily be handled or those that will not call for fines. The rate of interest will however be determined by the amount of interest over the sum borrowed. This is what will normally be used to settle on the rate of interests that you will have to pay.
Apart from the above method of settling on the amount of interest, there are also many aspects that will have an effect on what you will finally pay as interests. These will take into account the total sum which you need from the lender, the financial record of your business, the security to guarantee payment of the loan, how you intend to pay pack the loan and your credit score.
How Will These Have A Bearing On The Rates You Pay As Interests?
The principal that you have to borrow:
Every reasonable business owner must know that the total sum which he or she wants to borrow will determine what he or she has to pay as interest on that loan. It is normal that a loan with a high sum will also call for a higher interest rate. This will however depend on the credit score of the borrower or if there has been a favorable financial relationship between the lender and the borrower. In some cases, the lender will also determine your rate of interest by the type of security which you present. If the current or future market situation may pose difficulties in trading off the security in case of failure to repay the loan, the rate of interest will also be high.
What you provide as security and how you are going to repay the loan:
In almost every case, what you provide a guarantee to secure the loan will be used to determine that rate you are liable to pay as interest. You can either take out a secured or an unsecured loan. If you opt for an unsecured loan, you must know that the rates which you will be liable to pay as interest will be higher that that for a secured loan. Remember that it is the duty of care of the lender to take reasonable steps to ensure that the loan is paid back in full. Also remember that the loan can be fixed or variable and this will all depend on the reason for the loan.
The manner in which you propose to pay back the loan will also determine that amount of interest you are going to pay. You should watch out on the manner in which you are going to pay back the loan. In some cases, you may be given just a period to complete the initial sum plus the interests. In another cases, you will be required to make periodic payments. These will all depend on what you intend to use the loan for and how that loan is being managed. Remember that improper management of the loan may cause you to pay fines on the loan.
The credit score of the business will also determine your access to getting the loan and the rate you are going to pay as interest. If you have a positive score in borrowing, handling and paying back on time, you stand a higher chance of getting a loan. Keep in mind that lenders often work in connection with each other and your credit rating will be made available to all of them.
What Customers Should Know About Chase Bank Home Loan Modification
Are you finding it harder and harder each month to make your mortgage payments? Are you worried about losing your house through foreclosure? There is an answer, your loan insurance company in conjunction with you lender determine when and if you can begin to seek a loan modification. A Chase Bank Home Loan Modification may be just what you need.
Before starting any process, you must find out who insures your loan. Lots of homeowners don't know who this is, since they have never needed to know this. You can simply call Chase Bank to find out. If your insurer is Fannie Mae or Freddie Mac, you probably qualify for a government initiative, the President's $75 Million Homeowner Stability Initiative. This program, which works with borrowers and lenders, will reduce your mortgage payment to just 31% of your monthly before tax income.
There are, of course, some conditions:
* You must be an owner-occupant
* Your debt must be no higher than $729,750
* Your mortgage must be initiated prior to 2009
* You have to be paying more than 31% of your gross income
* Your loan cannot have been modified before
If you need some help getting back on your feet financially and you think you might be eligible, consult with a financial counsellor. This President's plan was initiated to help both borrowers and lenders get financial relief. These loan modifications will give borrowers a better rate than the one they are getting through their bank.
If you loan is not insured through Fannie Mae or Freddie Mac, you still have alternatives. Chase Bank offers its own loan modifications. Before accepting foreclosure, investigate this option. Again there are conditions similar to the government program. The only difference is there is no cap on the debt left on your mortgage and your payments may be has high as 40% of your gross income. The monthly payments will be higher since there is no government financing. If you qualify, Chase will request you send a complete application package that includes your tax returns, pay stubs, bank statement and a financial statement along with a hardship letter.
Either way, through the government program or through Chase bank, a loan modification is a much better alternative than a foreclosure since you will be able to keep your house and not damage your credit rating.
Should you be struggling to pay your mortgage, see if you are eligible for the government or Chase Bank home loan modification program.
Home Loan Modification Hardship Assistance - Early Advice is the Key to Home Loan Modifications
Loan modifications are nothing new; they have been available to borrowers for a long time. Recently they have increased in popularity due to the implementation of President Obama's Making Home Affordable Act which outlines the process of streamlining these renegotiations. That is why we hear so much about them these days. If you are interested in investigating a loan modification, read about your options and what can be done to help you.
If you are finding it hard to pay your mortgage bill each month, don't just sit back and wait until you finally default on the loan and foreclosure takes place. Take matters into your own hands and make an appointment with a financial counselor to discuss what you can do about your own unique situation. You can find people who will help you for free and there are some who charge a fee. HUD-approved charity groups offer free counseling. However, given the demand of such services, many loan modification companies have been developed.
However you proceed is your choice, both paid and unpaid advisors have pros and cons. You will also find that some organizations have lawyers with whom they consult and other do not. It is better to pick an organization that has an attorney associated with it so someone is available to work with you to get a loan modification.
When you consult with a for-profit company, be careful. Just like there are many people desperate for financial help these days, there are greedy people willing to use tragic circumstances to line their own pockets. Pick a company with a good reputation, good customer service and good credentials. Check with the Better Business Bureau and only use a company that is in good standing with them.
The first thing you need to do is meet with a counselor. Take with you all necessary financial documents and be ready for a consultation. The counselor will assess your situation and offer you some advice depending on your circumstance.
If the counselor decides that a loan modification is a good option for you, then s/he will help you compose your hardship letter. In this letter you will explain to the lender why a loan modification is needed. Reasons could be layoffs, natural disasters, a death in the family, divorce, or a medical condition. Be concise. Your counselor will assist you in writing this letter and attach the required documentation. It is important that you have an experienced organization working for you and advocating on your behalf since this is a very confusing and detailed process.
If you have lost control of your mortgage, request loan modification hardship assistance. You can get some free advice about selecting and applying for a loan modification company from many sources.
Home Loan Modification Financial Hardship Assistance - Advice For Those in Need
Loan modifications have always been a possible solution for financial problems, but they have become more popular recently due to the passage of President Obama's Making Home Affordable Act. Along with this Act, the process has be simplified and it has become easier to be approved. It is worth the time taken the time to investigate this plan.
If you are experiencing financial problems, don't put off this investigation. Take control of your situation and discuss your circumstances while you still have some options. You can get advice free from a non-profit organization or you can employ an agency. Free service is proved by HUD-approved organizations. Recently many businesses focusing on helping people access a loan modification have been formed in the last while as this option has become more popular.
Both free and for-pay services have pros and cons. Some include legal services and if possible, pick one of these since you may need legal help to get a loan modification.
Remember when you are using a for-pay service, there is the chance you will fall victim to unscrupulous people who are willing to take advantage of people in their lowest hour. Research the company and pick one that has a good reputation and is in good standing with the Better Business Bureau.
Start by making an appointment with a counselor. Bring any important financial documents. The counselor will look at your present circumstances and discuss your options with you, highlighting your best choices.
If a loan modification is the best choice, the counselor will instruct you on writing a loan modification hardship letter. This letter tells your lender why a loan modification is necessary in your circumstances. Some credible reasons for having difficulty are unemployment, natural disasters, death, illness, divorce or other unforeseen negative events. Your letter should be concise and accurate. Your counselor will help you write it, send it along with any other necessary documentation to the lender and advocate on your behalf as well as work you through the process.
If you are finding paying your mortgage bill each month is a source of stress and is taking all the joy out of life, seek Home Loan Modification Hardship Assistance. You can learn more for free here as well as find out how to work with a loan modification service.
Basic Facts on Small Business Loans
Basically, you need to a lot of resources to effectively manage your business. Your main purpose may start from a new idea for a business project or even an old product or service with a new method of introduction. Either way, you must realize that a business calls for a lot of requirements and necessities, most especially in the financial aspect.
Business loans are widely available which can range from government sponsored loans to private loans designed to assist new businesses. Actually there are many other options but it will depend on your preferences. If you want your interest rate to be low, then opt for loans coming from government grants.
If you do not want to venture in this type of loans, you can choose from those that are available in the open market. But these types of loans have a few conditions because these are provided by lenders. Typically, there are two types of loans; the secured and unsecured loans. For the initial process, you are required to come up with a well-drafted business plan or proposal along with your loan application form.
A clear, comprehensive and well-drafted plan will usually make it easier for you to obtain your loan. Usually, a concise assessment is done by lenders to scrutinize if your business plan does deserve a loan approval. This will not take too much time because lenders primarily understand your business needs so they try to minimize the time spent in loan processing.
In the case of secured loans, these kinds of loans will usually require collateral. They are easily available and are also appealing to a lot of people because of its low interest rate. Government loans are secured loans that are given to the business owner who can prove that the business is beneficial to the whole community. In general, the approval of loan from the government is based on the credibility of the applicant.
On the other hand, the unsecured loans do not require collateral and involves a comparatively high interest rate. In choosing between these two types of loans, you should first weigh the advantages and disadvantages of each type before finalizing your decision. In this way, you ca be ensured you are making the better deal.
Business loans are typically processed in all major banks. Rest assured that you will not have a problem with the banks assisting you with the whole process because these institutions are interested in your business as much as you are interested in your loans. You can also have the option of applying for the loan online; however it is advisable to apply for it in person. This is for the reason that your questions about the loan will be readily answered by a bank representative. In this rate, you will be able to minimize the chances of making a mistake and will enable the bank to determine your exact needs for the loan.
So, before you commit to any business venture or pursue your business loan, make sure you have done your advance research to avoid any unwanted circumstances. Once you have prepared enough, your loan transaction will surely be stress-free and a rewarding experience.
Credit Card Services and Business Loans for the Small Business
To achieve financial independence, experts encourage even currently employed individuals to consider entrepreneurship. Setting up your own business, no matter how small, is touted as one of the best ways toward building the foundation for wealth. Those who are concerned about having a safety net need not take the plunge recklessly. One can start setting up a small business even while employed.
Of crucial use to small businesses are credit card services and small business loans. The entrepreneur needs to know how to avail of these tools and how to effectively wield them for maximum business growth.
Credit Card Services
A small business would do well to get reputable credit card services in order to prosper in the current business climate. Availing of credit card services will enable it to accept both credit card and debit card payments. This is true either for brick-and-mortar businesses or internet based online businesses. After all, most consumers nowadays routinely use credit cards or debit cards for payment purposes. It only makes good business sense to be well-equipped for the needs of credit card users and debit card users as well as for the needs of customers who pay in cash.
Merchant services provide credit card services covering a wide range of solutions for the processing of credit cards and debit cards as payment options. These credit card services include traditional terminal equipment at point of sale, where credit cards or debit cards are swiped. It also includes software and high speed IP solutions for both traditional commerce and e-commerce. Credit card and debit card payments can, therefore, be accepted in person or through the internet, by phone or by fax.
Small Business Loans
Any business – whether a small start-up business, a medium-scaled one or a big business company – will be needing an infusion of additional capital sooner or later. Additional capital is always needed for expansion, additional inventory, additional manpower, new systems, new equipment or a new physical layout.
Capital is not always easy to come by, though. The original investors’ personal coffers may have been emptied by the earlier outlays. Prospective investors may not be keen on shelling out funds in times of crisis. Businesses, therefore, have no choice but to seek business loans.
Getting business loans is a difficult process. Even small business loans are not readily approved. Be prepared to present a lot of documentation and paperwork. For small business loans, the proprietor’s personal credit history is taken into account and related references need to be submitted. Of course, the company’s financial statements are just as important in proving the feasibility of the business and its capacity to repay its business loans. Having a detailed business plan will show your business strategies and projections, demonstrating your business acumen.
Unfortunately, even with all the requirements completed, applications for business loans – including small business loans – are, more often than not, disapproved.
Solutions
Some merchant services provide a comprehensive solution for the needs of small businesses in relation to credit card services and small business loans. The set up is elegantly simple. A small business need only avail of the company’s credit card services to be eligible for merchant cash advances. These cash advances are actually small business loans, except that there is no need to go through the complicated application process for business loans. Repayment is made very easy and worry-free, too. A certain small percentage is built into the credit card processing rates to take care of the advances. This way, repayment is actually done automatically in a very affordable manner and according to income flow.
Small business owners would, indeed, be wise to look into these timely business solutions.
Business Loans that Need Guaranty
Businesses will need to borrow a loan during certain periods for its life span, such as to purchase new equipments, expand the operation, to repay another loan, or to acquire another business. To acquire a loan, you usually will go to a bank or loan company for your capital needs. There are a few things you will need to consider like we discuss in this article.
Typically, bankers require a personal guaranty when you are securing a commercial loan, especially if you cannot offer collateral owned by your business. The personal guaranty provides that if your corporation defaults on the note signed by the business, you are personally responsible for the debt. You are right that one of the main advantages of incorporating is to protect your personal assets from the debts of your business. But the personal guaranty could impact this advantage.
Lenders are reluctant and take great caution when lending money to try to protect themselves. They typically require both a primary and a secondary source of repayment to ensure they can collect on a loan. The primary source could be the firm revenue flow and the secondary source the sale of collateral. Seldom will they lend money in the hopes of collecting on the collateral if you default. They want their money back with interest payments, not your property or business.
Also, most bankers will insist on your signing a personal guaranty to make certain that you and your management team have maximum motivation to pay off the loan. They explain that they are testing management faith in the business, and ensuring that you and your managers devote all your efforts to operating the business profitably. There are many useful financial tips at http://www.fidetips.com/finance for you to read.
If you fail to pay, lenders want to ensure that the borrower can repay the debt with secured collateral. If your business is without collateral, the banker will look to the owners. Lenders always will like a form of compensation for their money that they lend to you.
If there are multiple owners, the bank will ask that all of them guaranty the loan, and each will be jointly and severally liable. This means that the owners will be liable for the entire amount. If your co-owners are not as solvent as you, then you will be liable for the entire amount. There for you will need to study and decide how you will like to apply for a loan, especially a loan that will need personal guaranty.
