Credit Resources

 

 

INTRODUCTION

Business Loans are more difficult to obtain than personal loans. In most cases, lenders will not consider a business loan for a company that has been in business less than 2 years.

New Businesses

The Small Business Administration (SBA), often has some exceptional programs and rates for new businesses, but most of the time, the SBA requires a great deal of paperwork, a large down payment, very good credit, and it takes months to process. In addition, the SBA takes most of your business and personal assets (such as your home) as collateral.

Other types of small business loans.

There are lenders that will give you a loan at a higher market rate simply based on having a lot of equity in your home. In such a case, it will be easier to just use your home and not involve yourself in all the other complications described above. Many people who are starting businesses don’t want to put up their home as security. This will limit your options. This means you don't want to risk your home but you want a lender to risk their capital on your new business. Often, this outlook not always realistic and won’t work. And surprisingly, the SBA will often take everything your business owns and also take your home as collateral anyway for a small business loan. As a business owner you intend to grow your business and you may need another small business loan for inventory, raw materials, expansion, relocation, partner buyouts, etc. within the next 5 years. If the SBA has all of your business assets and personal assets as collateral, you will be in an almost impossible position the next time your business needs capital.

Another exception when a less than 2 Year old business may be able to get a loan is if the business wants a lower amount of money, say $20,000 or less and the owner has strong personal credit. Some institutions will make such a loan on the basis that if you would have qualified for a personal loan for such an amount, why would they turn you down simply because it’s a business loan request? They will just make you personally guarantee it. It’s really a personal loan set up as a business loan.

Existing Businesses

It is difficult to get a business loan through traditional sources (Brick and Mortar Banks), even if you have a relationship with them.

Traditional sources have approximatley a 92% decline rate for business loan requests and may decline your request for many more reasons than non-traditional sources of capital will. They will request financial statements, Tax Returns, have many questions along the way, and will greatly scrutinize your cash flow, assets and secondary sources of payment. Many business owners pay their Accountant well in order to show that their business is making little or no money. When it's time to request a loan, business owners will be surprised when the bank turns them down when in fact they knowingly have documented via the Business Tax Returns that they didn't have any profit. Show some profit on your Business tax return.

Once the bank has turned you down, all their talk about how much they “value your relationship”, doesn’t do you any good.

What should you do? We can help! Our small business loan options are far more encompassing than traditional banks and our approval rates are much higher.

 

 

 
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