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Small Business Loans

Posted by admin on December 23, 2011 at 7:00 am in Finance
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The conventional structure of a woman fixes her to a stereotype, whereby she is attributed to a defined set of duties that she is supposed to perform. According to traditional society, a woman is a home maker and is capable of merely influencing the actions of men in the corporate world. However, thanks to the concept of ‘female liberation, things have changed today and people have become more accustomed to the idea of a woman running a business.

Although the hard fact still remains that the business world is dominated by men, contemporary women are doing a good job in managing their business with the assistance of Small Business Loans. Some of these loans have been especially designed for women and involve several procedures before they are approved.

If you are a woman planning to start your own venture or want to expand your existing business, a small business loan can turn out to be a great strategy. However, before signing up, there are certain things you need to know about these loans.

Who Do These Loans Help?

Small business loans for women are normally geared in the direction of women who are seeking to work from home, or who need to establish their own business. Consequently, specific stipulations are cited on the grant to ensure you are eligible. Hence, be certain to interpret the fine print each time you apply for a grant and check that you are qualified so that you can utilize your time intelligently.

Types Of Small Business Loans

These loans come in various shapes and sizes. For instance, there are Unsecured Business Loans, loans for women who belong to minority category and the like.

If you are a minority woman, you must ensure that you are ready for registering for a business loan for women. For example, you must know how many females in your region are looking to begin similar ventures. Likewise you must gather info on the quantity of such endeavors, the fraction of their achievement and so on. This statistical data will be of immense help for your own project. Your probability of getting business loans for women will increase if you are aware of the rivalry, and have come up with speculation strategies and plans to go further ahead in your project once it is recognized.

The other form an unsecured small business loan for women is a cash advance that is handed out and backed only by the loan taker’s creditworthiness, rather than by collateral. Normally, you must have a good credit score to obtain an Unsecured Small Business Loans.

Writing A Proposal Letter For Small Business Loans

When you are writing your application letter, you should let the loan giver know your strategy and business goals for future. Write in detail about how you intend to prolong the success of the business, in spite of potential monetary challenges. You must also emphasize on the fact that you are a self-sufficient and autonomous thinker, and are prepared to take risks. You should have sound opinion when it comes to managing your business correctly. As a woman, you should let the prospective lender know that you are ready and well equipped to make business-savvy choices when it comes to your firm, and that you will be geared to ask for assistance when required.

By: Rapha Urora

Small Business Loans – Secured or Unsecured?

Posted by admin on December 18, 2011 at 2:21 am in Finance
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Working capital is a very important factor for the development of any business organization. The lack of this resource may have you face extreme difficulties, like not being able to meet your daily expenses or simply not reaching your expectations or increasing your level of productivity. More importantly, if you just started your business, you will need a strong financial support to be able to properly execute your business plans and projects that are the very essential component for making your firm a successful business company in the market. This financial help can be easily achieved through unsecured sources, like a business cash advance, which is the best alternative to the banks small business loans. Getting a business cash advance means that you will be getting the money you need from your future credit card sales. Even if you have a poor credit history, you can still easily apply for it.

Applying for a small business loan is probably the best financial support for your business. But with a business cash advance you can use the money in any way your business may need it. Achieving your fund needs for starting your own business firm, to manage your daily business financial needs like: paying due bills, buying equipment, office accessories, payroll, etc, all these can be easily accomplished through the help of small business loan. If you want to apply for these types of loans, what defines the amount loaned is your personal credit history and not how successful your business may be, that’s why knowing about business cash advances come in handy. In fact, it is your own personal financial status that will be considered for the approval of the small business loan, instead a business cash advance will be given to your business and its proven track record, so you may even qualify for a cash advance even with a bad credit history. These cash advances are easily accessible through several lending companies and banks.

Small business loans are available in both secured and unsecured forms of loans, also known as business cash advances. You will end up making your decision depending on many factors like, amount needed and whether you want to risk your personal assent or not . Any small, big and medium size businesses will, at one point, need ways of securing working capital. For instance when taking a secured business loan, you’ll have to pay a security or any other valuable asset. Most business owners that choose secured business loans, it’s because it offers higher loan amount and lower rate of interest as in comparison to that of business cash advance. On the other hand merchant who have chosen business cash advances know that they have its own number of advantages. With a cash advance, the merchant is free from offering any sort of collateral. And the payback comes out of future credit card sales, with no fixed payments. Unsecured business loans make a great option for those looking for fast and easy loans.

All businesses have their own set of financial problems. But when you start a new company, the difficulties appear to be much bigger because the merchant lacks of practical experience of handling such situations as well as having limited financial resources. That’s why applying for business cash advances is acknowledged as very suitable option for most types of businesses.

By: Gaston Castro

Small Business Loans – Do You Have Funding?

Posted by admin on December 17, 2011 at 9:52 pm in Finance
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It leaves me queasy thinking about spending money that I don’t have. But in today’s world the amount of risks that someone is willing to take on a new business is getting slimmer by the day. The risk factor is what causes banks and other loan officers to sway one way or the other concerning small business loans. One way to build a relationship with one of these companies is a practice called business factoring.

Business factoring is a way for small businesses who can’t afford to pursue someone who hasn’t paid them for services rendered, and still get a portion of the money back. You would sell your receipts to a collection agency who in turn has the resources and manpower to collect the original transaction. This enables you to cover your end, though profit is scarce in this term of practice. This will however get your foot in the door and start building relationships with the people you need to in order to get a loan.

As people we are cautious and always worry whether we can live up to our obligations. Taking out a loan can be hard for ones ego, but you must be sure that even if things go sour with your business, you will still be able to pay it off. A lot of planning before opening your business venture needs to take place. You can’t be jaded by the illumination of the dream. For a dream to become reality we must nurture and perfect it so that we don’t need to compromise it. When your business takes off, the need for these kinds of loans begins to diminish as you start to make profit. But this does not make you impervious to the ups and downs of the economy. At one moment you will be doing great business and making a lot of money. Then the market can change and you realize you’re scraping for money. Small business loan offices will always be there as long as we have an economy fit enough to support them. We are here to help each other out in our successes and dreams. Don’t get discouraged if your business isn’t doing well. It will pick up, but you need to be able to plan ahead. Research the market before hand and realize when these slumps will occur.

In the realm of small business, one wrong decision can be the downfall of the company when it starts to gain ground. If you’re ready to give up after one or two bad years then I suggest you find another dream. There’s always going to be good and bad years. You just need to be able to stick out the bad ones and save enough money to be able to compensate for them.

By: Jason Ausmus

Small Business Lenders

Posted by admin on December 13, 2011 at 9:44 pm in Business
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Small Business Lenders are certified by the U.S. Small Business Administration to provide guaranteed funding to small business owners. Due to the diversity of applicants and the different business types, the SBA partners with their lending partners to make it easier for small businesses to obtain funding for new start-ups. Their involvement has allowed small business owners to obtain loans for a longer term and thus reduce the monthly repayments incurred. This provides businesses with a longer period of time to mature and stabilize without having to bear the heavy burden of a large loan repayment amount.

With this, the SBA has appointed a list of a few thousand lending partners in every state to extend this facility to the general public. Of course, borrowers are still required to submit full-fledge loan application proposals to the lender with the difference being that the SBA is the guarantor for such loans. This typically means that if the borrower defaults than the risk of non-repayment will fall upon the SBA, as they will then be responsible for repaying the loan.

Additionally, the criteria set forth for small business loans make 90% of all businesses qualified applicants for these loans. Apart from that, businesses are not burdened with balloon payments and high interest rates, which would otherwise be offered by any other commercial lender. Furthermore, fixed rate loans and variable loans are available to business owners. Therefore, business owners have more options in deciding the type of loan that would be suited for their business.

The purposes of acquiring a small business loan are varied according to the situation of the business. Small business owners may obtain loans to purchase real estate for business expansion purposes, to provide cash flow to support a large project, to lease machinery to operate a business, to utilize as working capital or to purchase inventory. Whatever the reason may be, business loans are evaluated an approved by these micro lenders after thorough evaluation of the business background, viability and purpose. The only difference is that through the support of the SBA, they are more willing to give out loans, as their risk is minimal with repayments guaranteed by a government agency.

By: Matt Bacak

Small Business Loans and Independent Lenders

Posted by admin on December 12, 2011 at 10:39 am in Finance
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Within the last decade, the amount of small businesses around the world has increased greatly. Many people have started their own small businesses due to the lack of work and jobs in some areas and some people have started their own businesses because it has always been their dream.

For whatever reason a person has to start their own business, they will likely need a small business loan at some point to help them with various costs that are associated with running a personal business.

Traditionally, people sought after larger financial institutions for their small business loan needs, but these days the larger banks are not doing as well as they once were. Independent lenders are now the preferred option of many small business owners when they need a small business loan.

In all reality, there is virtually no person that has not been effected by the banking crisis in some way. Whether you use banks or not, you will be effected. Since this crisis has began, the value of the pound in the UK has been declining, even more so than the American dollar and Japanese Yen.

However, the American dollar and the Japanese Yen have both dropped in value as well as many other currencies. Peoples’ net worth and savings have been in decline also since the banks have been in trouble. Larger banks and financial institutions have stopped lending to one another and to many people.

The banks have not trust amongst each other now and are approving as many loans as they once were. In fact, many of the larger banks have become so strict with their loan policies that they will not approve loans to people that do not have the best credit ratings. Banks have quickly become risk averse.

Before the crisis, the banks were handing out loans to pretty much anyone who applied. Now that the banks are in serious trouble, they are forcing people to accept higher interest rates than ever before, even for those who have great credit.

It seems that anyone who needs a small business loan or many other types of loans should greatly consider independent lenders over the larger banks and financial institutions. Independent lenders are now the leaders for the best loan option.

These lenders are not troubled with this crisis in the same way that the banks are and can give loans out to people with fair interest rates, even to those people who do not have the best credit. There are many different independent lenders to choose from and many of them can be accessed online.

By: Ken Barnes

Applying For Small Business Loans

Posted by admin on December 2, 2011 at 10:09 am in Finance
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Everyone knows how tough it can be to obtain small business loans! Hell, my Uncle Frank is a well established small business owner and he wanted to branch off into the restaurant business, but he just couldn’t secure a loan for it! Pretty gruesome huh? But he learned from his experience and he’s taught me a thing or two about applying for small business loans.

Tips For Small Business Owners

Here are some tips you can use in order to secure your small business loan.

• Be very clear about the reason for your loan. You need to show a very good, very legitimate reason why you want someone else’s money, otherwise they won’t part with it. Also, be logical about your demand, your lender will consider the scale and expertise of your business area before they grant you the loan amount.

• The next thing to keep in mind is that everyone who is lending you money is doing so because they want to make money off you, so you must concentrate on a detailed account of how you plan on returning the loan money. Eg, specify that you will use your profit money to repay the loan.

• Put in your business plan as well and make sure that it is a logical one which is darn good. The business plan will give your lender an idea about your abilities as a businessman and will also give your lender an idea about the management and any other pertinent information.

• Reassuring the lender is very important, especially for small business loans. So do give a detailed account of the security you will be able to provide to your lender. Think about it, if you can’t offer them some security, then why should they?

• Include your financial statements of the past three years too. These must be clean and the information provided by you should be accurate and legitimate. Also get your tax advisor to put his signature on it, or, if that’s not possible, your account can do the needful too.

• In order to boost the security aspect of things, you can put in your principal financial statements, this will definitely help.

• Reports of creditors and debtors.

• You should also put in the latest set of management accounts. Keep in mind that your business should be like an open book. It might seem intrusive at times, but remember, you’re the one in need of money!

A Word Of Advice

Before you approach your lender, think about all the shortcomings in your business proposal that your lender might come across. Try and get into the head of your lender. A good idea would be to pretend that you are your money lender. Think about whether you would give your money to someone with your business plan. If not, why so? Try and eliminate all the glitches in this manner. Small business loans are not the difficult to handle, one must know the right technique, that’s all!

By: Vincent Irwin

Small Business Loans – The Ideal Credit Option

Posted by admin on November 26, 2011 at 12:44 pm in Finance
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Just like individuals, businesses are also in need of finance. In fact, it could be said that businesses need finance more than individuals to run the show. There are times when the business meets financial bottleneck or may need extra finance to start or alter some area of the business. In such times, loan options are always looked at. For small and medium businesses it is always better to go for unsecure small business loans to solve the problem.

How To Get A Small Business Loan

Unsecure small business loans are available for individuals and businesses. The steps to apply for them are quite different when it comes to business loans when compared to personal loans. The main difference from personal loans is that for business loans the credit score of the business is usually considered. If the credit score is high then the chance of getting it is higher. Different of them providers require different credit score for providing the loan. It always helps to ask regarding this and get a clear picture of what is required.

A check on the business’s credit score can then be done to see if there is eligibility. It always helps to check the eligibility criteria and weigh the company’s options before applying for it. This is because once one or two loan providers check the credit score and rejects the loan there is always the risk that other of them providers will follow suit. So one should always apply for the loan where there is the best chance of getting approval. In case of these loans there is absolutely no need to give any security or divulge social security number. Once the loan application is filled up getting the loan is easy and some loans are approved within a short period of 24 hours. The repaying of these loans can usually be done within six months to 80 months.

The Advantages Of Small Business Loans

Unlike huge secure financial loans, small loans and unsecured loans have many advantages.

They require minimum paper work. They do not require any collateral. They are approved within a period of 24 hours in usual circumstances. There is usually no restriction on the business types who can apply for the loan. Most of the loan providers allow unrestricted use of the funds. The loans are usually available at great rates and are easy to repay compared to other loans. In many cases there is no annual fee charge. Guidance and support from the service provider with regard to repayment of the loan. Finally the application process is simple and easy.

For small and medium businesses financing small business loans are ideal. They are easy to obtain and payback. They are the most economical option that is available and can be used for any genre of business. These loans can also be used for startup companies as well as established companies who are facing financial cringe.

By: Bessemer Jones

Small Business Loan Proposal

Posted by admin on October 30, 2011 at 9:07 am in Finance
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Applying for a small business loan can be exciting and yet stressful at the same time. For the best results and to heighten your level of confidence, be prepared when you visit the lender you’ve chosen for your business loan interview. After you have your business plan prepared, start preparing for the loan by writing a loan proposal to present to the lender.

The loan proposal should state some crucial information, and many details, about both yourself and your business or business idea. It should state who you are, how much money you need and where the money will be spent, how you intend to repay the loan, and what you plan on doing in the even that you cannot repay the loan.

The following are key elements to include in your loan proposal.

1. Summary.

This should be listed first in your proposal, but will be written last. It should contain clear, concise, accurate, inviting information about your business or your business ideas. It should summarize how the proposed loan will be used, how it will be repaid, and how it will benefit your business. Remember your competition in the summary of your loan proposal, and point out features of your business that are different from your competitors.

2. Management Profiles.

The management profile section of the loan proposal should explain, most importantly, who you are. Be prepared to reveal everything about yourself and your experience. Have a current resumZ included as part of the loan proposal, as well as a summary of your skills, qualifications, and other credentials for yourself, as well as for all other owners and key members of your management team.

3. Business Description.

It’s not necessary to state the same information mentioned in your business plan as in your loan proposal. However, you do need to present a solid description of the business. Include a brief history of the business in your loan proposal, and detail the current activities. If it’s a new business, explain the details of the business that will be developed. Your goal will to be to clearly demonstrate that you fully understand your markets, your competitors, and the industry, including current trends or risks and how you plan to overcome those potential dilemmas. If the loan is for an existing business, include literature that details your products or services, such as current sales sheets, brochures, or catalogs. Include attachments to your loan proposal for this section, such as letters from suppliers, customers, or other business references. Demonstrate through these letters that you provide excellent customer service, and that you pay back your creditors.

4. Business Projections.

Create at least two years’ worth of projected income statements and cash flow statements. Your projections should be clearly stated and, most importantly, realistic in nature. Generally, you probably won’t need to present the “worst case” or “best case” scenario unless the lender asks for you to write the projections that way. You should, however, be prepared to answer questions pertaining to what you’ll do if some of your projections don’t work out as planned. For example, if you anticipate obtaining a large, new contract or customer based on improvements made with the business loan, and that contract never goes through, it could change your loan proposal projections drastically.

5. Financial Statements.

Your loan proposal should include both business and personal financial statements. Be aware that the lender will fully analyze the history of your financial statements, calculating all ratios. Be prepared to point out any significant trends you’ve shown in an introductory paragraph.

6. Loan Purpose.

One of the most important parts of your loan proposal is a detailed description of how you will use the loan proceeds. Have a good understanding of the type of loan that you need, and remember to include the proceeds of the loan in your cash flow projections, as well as the interest in your projected income statement.

7. Repayment Plans.

Repayment plans should also be stated in your financial projections section of the loan proposal, but details of repayment plans should be detailed separately. Propose the terms you want, and prepare for negotiations with the financial institution. The lender will consider a number of factors as they review the overall risk of lending you the money. Understandably, this will impact the repayment terms that they are willing to offer for your business.

Especially if your credit is good, and even if your credit is not so good, remember that in your loan proposal, you are offering the bank a deal that will make them money. Don’t go in asking the lender for an “allowance.” Instead, enter the interview with your loan proposal objective in mind; namely, focusing on how much money you’ll need, and remove the idea of going into the meeting wondering how much they’re willing to lend. Never go into a meeting asking for a loan, wondering whether or not they’ll lend to you. If this first lender won’t approve your loan proposal, have confidence that a different will.

By: Rebecca Hubbard Game

Small Business Loan Update – Stimulus Bill Helps Bailout Businesses If They Cannot Pay Loans

Posted by admin on October 29, 2011 at 2:42 pm in Finance
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As we continue to sift dutifully through the over 1,000 pages of the stimulus bill (American Recovery and Reinvestment Act of 2009), there is one provision that is not getting much attention, but could be very helpful to small businesses. If you are a small business and have received an SBA loan from your local banker, but are having trouble making payments, you can get a “stabilization loan”. That’s right; finally some bailout money goes into the hands of the small business owner, instead of going down the proverbial deep hole of the stock market or large banks. But don’t get too excited. It is limited to very specific instances and is not available for vast majority of business owners.

There are some news articles that boldly claim the SBA will now provide relief if you have an existing business loan and are having trouble making the payments. This is not a true statement and needs to be clarified. As seen in more detail in this article, this is wrong because it applies to troubled loans made in the future, not existing ones.

Here is how it works. Assume you were one of the lucky few that find a bank to make a SBA loan. You proceed on your merry way but run into tough economic times and find it hard to repay. Remember these are not conventional loans but loans from an SBA licensed lender that are guaranteed for default by the U.S. government through the SBA (depending upon the loan, between 50% and 90%). Under the new stimulus bill, the SBA might come to your rescue. You will be able to get a new loan which will pay-off the existing balance on extremely favorable terms, buying more time to revitalize your business and get back in the saddle. Sound too good to be true? Well, you be the judge. Here are some of the features:

1. Does not apply to SBA loans taken out before the stimulus bill. As to non-SBA loans, they can be before or after the bill’s enactment.

2. Does it apply to SBA guaranteed loans or non-SBA conventional loans as well? We don’t know for sure. This statute simply says it applies to a “small business concern that meets the eligibility standards and section 7(a) of the Small Business Act” (Section 506 (c) of the new Act). That contains pages and pages of requirements which could apply to both types of loans. Based on some of the preliminary reports from the SBA, it appears it applies to both SBA and non-SBA loans.

3. These monies are subject to availability in the funding of Congress. Some think the way we are going with our Federal bailout, we are going be out of money before the economy we are trying to save.

4. You don’t get these monies unless you are a viable business. Boy, you can drive a truck through that phrase. Our friends at the SBA will determine if you are “viable” (imagine how inferior you will be when you have to tell your friends your business was determined by the Federal government to be “non-viable” and on life support).

5. You have to be suffering “immediate financial hardship”. So much for holding out making payments because you’d rather use the money for other expansion needs. How many months you have to be delinquent, or how close your foot is to the banana peel of complete business failure, is anyone’s guess.

6. It is not certain, and commentators disagree, as to whether the Federal government through the SBA will make the loan from taxpayers’ dollars or by private SBA licensed banks. In my opinion it is the latter. It carries a 100% SBA guarantee and I would make no sense if the government itself was making the loan.

7. The loan cannot exceed $35,000. Presumably the new loan will be “taking out” or refinancing the entire balance on the old one. So if you had a $100,000 loan that you have been paying on time for several years but now have a balance of $35,000 and are in trouble, boy do we have a program for you. Or you might have a smaller $15,000 loan and after a short time need help. The law does not say you have to wait any particular period of time so I guess you could be in default after the first couple of months.

8. You can use it to make up no more than six months of monthly delinquencies.

9. The loan will be for a maximum term of five years.

10. The borrower will pay absolutely no interest for the duration of the loan. Interest can be charged, but it will be subsidized by the Federal government.

11. Here’s the great part. If you get one of these loans, you don’t have to make any payments for the first year.

12. There are absolutely no upfront fees allowed. Getting such a loan is 100% free (of course you have to pay principal and interest after the one year moratorium).

13. The SBA will decide whether or not collateral is required. In other words, if you have to put liens on your property or residence. My guess is they will lax as to this requirement.

14. You can get these loans until September 30, 2010.

15. Because this is emergency legislation, within 15 days after signing the bill, the SBA has to come up with regulations.

Here is a summary of the actual legislative language if you are having trouble getting to sleep:

SEC. 506. BUSINESS STABILIZATION PROGRAM. (a) IN GENERAL- Subject to the availability of appropriations, the Administrator of the Small Business Administration shall carry out a program to provide loans on a deferred basis to viable (as such term is determined pursuant to regulation by the Administrator of the Small Business Administration) small business concerns that have a qualifying small business loan and are experiencing immediate financial hardship.

(b) ELIGIBLE BORROWER- A small business concern as defined under section 3 of the Small Business Act (15 U.S.C. 632).

(c) QUALIFYING SMALL BUSINESS LOAN- A loan made to a small business concern that meets the eligibility standards in section 7(a) of the Small Business Act (15 U.S.C. 636(a)) but shall not include loans guarantees (or loan guarantee commitments made) by the Administrator prior to the date of enactment of this Act.

(d) LOAN SIZE- Loans guaranteed under this section may not exceed $35,000.

(e) PURPOSE- Loans guaranteed under this program shall be used to make periodic payment of principal and interest, either in full or in part, on an existing qualifying small business loan for a period of time not to exceed 6 months.

(f) LOAN TERMS- Loans made under this section shall:

(1) carry a 100 percent guaranty; and

(2) have interest fully subsidized for the period of repayment.

(g) REPAYMENT- Repayment for loans made under this section shall–

(1) be amortized over a period of time not to exceed 5 years; and

(2) not begin until 12 months after the final disbursement of funds is made.

(h) COLLATERAL- The Administrator of the Small Business Administration may accept any available collateral, including subordinated liens, to secure loans made under this section.

(i) FEES- The Administrator of the Small Business Administration is prohibited from charging any processing fees, origination fees, application fees, points, brokerage fees, bonus points, prepayment penalties, and other fees that could be charged to a loan applicant for loans under this section.

(j) SUNSET- The Administrator of the Small Business Administration shall not issue loan guarantees under this section after September 30, 2010.

(k) EMERGENCY RULEMAKING AUTHORITY- The Administrator of the Small Business Administration shall issue regulations under this section within 15 days after the date of enactment of this section. The notice requirements of section 553(b) of title 5, United States Code shall not apply to the promulgation of such regulations.

The real question is whether a private bank will loan under this program. Unfortunately, few will do so because the statute very clearly states that no fees whatsoever can be charged, and how can a bank make any money if they loan under those circumstances. Sure, they might make money in the secondary market, but that is dried up, so they basically are asked to make a loan out of the goodness of their heart. On a other hand, it carries a first ever 100% government guarantee so the bank’s know they will be receiving interest and will have no possibility of losing a single dime. Maybe this will work after all.

But there is something else that would be of interest to a bank. In a way, this is a form of Federal bailout going directly to small community banks. They have on their books loans that are in default and they could easily jump at the chance of being able to bail them out with this program. Especially if they had not been the recipients of the first TARP monies. Contrary to public sentiment, most of them did not receive any money. But again, this might not apply to that community bank. Since they typically package and sell their loans within three to six months, it probably wouldn’t even be in default at that point. It would be in the hands of the secondary market investor.

So is this good or bad for small businesses? Frankly, it’s good to see that some bailout money is working its way toward small businesses, but most of them would rather have a loan in the first place, as opposed help when in default. Unfortunately, this will have a limited application.

Wouldn’t it be better if we simply expanded our small business programs so more businesses could get loans? How about the SBA creating a secondary market for small business loans? I have a novel idea: for the moment forget about defaults, and concentrate on making business loans available to start-ups or existing businesses wanting to expand.

How about having a program that can pay off high interest credit card balances? There is hardly a business out there that has not been financing themselves lately through credit cards, simply because banks are not making loans. It is not unusual for people to have $50,000 plus on their credit cards, just to stay afloat. Talk about saving high interest. You can imagine how much cash flow this would give a small business.

We should applaud Congress for doing their best under short notice to come up with this plan. Sure this is a form of welcome bailout for small businesses, but I believe it misses the mark as to the majority of the 27 million business owners that are simply looking for a loan they can repay, as opposed to a handout.

By: Sue B. Malone

Small Business Loan Review – Is Anyone Making Small Business Loans in This Bailout Market? Part 2

Posted by admin on October 28, 2011 at 10:33 am in Finance
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As our economy continues to weaken and credit markets freeze up, stories abound in the media about bank’s holding back on their small business loans. But let me tell you what it is like in the trenches: Most banks are not lending at all. In fact, they are closing the door even to existing loans and lines of credit. Pretty bad, right? I am not going to sugarcoat it. Frankly, you have heard too much of that lately in Washington. This article will give you some suggestions as to where your search should begin in finding a small business loan.

So forget about buying a ticket to Washington and asking for your own private bailout. Let us start with an actual example. ABC Company has been in business for five years selling fire protection and extinguisher products to apartment units and office buildings. Although the profits have ebbed last year a bit, it has seen increased gross income each year and in fact had to hirer five additional employees. Because of material costs, a $150,000 home equity line was taken out for business purposes. The owner, Mr. X, has a credit score of 760. Unlike many Americans, there is very little personal debt and his credit cards are well below the 25% available limits. Because of profitability, the credit line was down to a mere $15,000. Suddenly, without any advance notice, he was informed the credit line has now been cut to $50,000.00. Having relied on this credit line, two large contracts were recently signed which required the purchase of a substantial amount of inventory. Now it is problematical whether he will be able to complete one of the contracts. Does this sound pretty close to home?

Mr. X then called his banker and politely asked for an explanation. He didn’t get much, except there was some talk of reducing his “loan to value” percentage from 90% to 50%. But there was no indication his home has decreased in value or his credit has slipped. He offered to furnish an updated financial statement, but this was rejected. Perplexed, he walked away without any real answers. It was like trying to get a real answer from a politician.

I am a business loan provider and small business advocate with 25,000 funded loans under my belt. I have the scars to prove it. And I don’t work for any bank. So let me give you the skinny: Big banks are not loaning to businesses, period. What bankers discuss in the back room they don’t tell you. Many of them are taking the position that if housing prices go up 100%, maybe in ten years, they might consider loaning to the next generation. Gee, thanks. In the meantime, they are all too happy to receive as much bailout money as possible to simply increase their balance sheets and give them the leverage to buy smaller banks. Traditionally a bank made its decision based upon asset value, cash flow, updated financial information (business and personal–which they can require pursuant to their loan agreements and personal guarantees), or credit underwriting standards. Now it is simply done arbitrarily out of fear. The answer is: there is no legitimate answer.

Enter the Federal government’s TARP 700 billion bailout. On September 26, 2008 former President Bush indicated: “It will help take pressure off the balance sheets of banks and other financial institutions. That will allow them to resume lending and get our financial systems moving again.” Right. Many industry spokespersons were skeptical and now we know for sure that it has done nothing as far as filtering down to small businesses. Filtering is really the wrong word here since it has been absorbed anonymously somewhere into the vagaries of their balance sheets.

So who do you go to? Use Small community banks in your area or small SBA lenders who specialize in helping small businesses. The emphasis is on “small” institutions. The answer comes from simple economics 101. While the large banks are jumping on their corporate jets and getting out of that business for the indefinite future, the smaller ones are picking up the slack and seizing the market. And many of the smaller banks had more conservative underwriting practices. I was speaking with a senior vice-president of a small community bank in the south the other day and expected the answer of not making loans. He looked at me strangely and said no, they were still making loans. They were not affected by the sub-prime meltdown, namely not having a large number of toxic mortgages on the books. In fact, he was looking for more business.

Does that mean that all small community banks are opening the floodgates to small business loans?. Of course not. But my suggestion is to contact at least five of them in your area in person and get to know the credit managers. C’mon now, remain positive. You’ll be surprised at the results. In the next article I will discuss the pointers of how to successfully present yourself to a banker.

By: Sue B. Malone

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