As a general rule of thumb, you need to be in business for at least 2 years. Additionally, you must be able to convince the lender that your business can generate enough monthly cash flow to make loan payments even in bad times. Finally, most lenders also want the loans are secured by assets that they can sell them if you do not repay the loan.
Need some money for your business? Click here to get our free guide .:
How to get a small business loan
If your company has not been in business for at least two years, or you try to get money for a startup to increase, Go here. If your business is for two years in the business, but lack the collateral for a commercial loan, go here. When our leaders over OnDeck and other alternative lenders. For at least one year in business, but no great credit score visits
Where as equity investors are concerned about the company growth potential, lenders are concerned about the worst-case scenario. For this reason, the two most important factors that determine the size of the loan you can get the deal of free cash flow are, and the value and the type of collateral securing the loan.
Free Cash Flow & The Debt Service Ratio
Free cash flow is the money that is left over after you have paid all your monthly expenses. Your debt service ratio is your free cash flow by sharing your monthly loan payment. Lenders are generally your debt service ratio will be 1.25 or higher. In other words, if your company $ 5,000 Free cash flow generated, banks will not be willing normally to give a credit where the monthly payment of more than $ 4000. This means that both the magnitude and duration of the loan are important.
Collateral
Lenders will want guarantees that the full amount of the loan is worth. They also want security to be simple, reliable for sale and their price. In other words, your inventory of 00 pairs of fuzzy socks will be hard to sell to a bank and its price. If you own a building but this is for a bank simply to price and sell.
But if you do not have the funding for an existing business with enough free cash flow collateral then read our guide to SBA loans.
Commercial Loan Concepts
term loans
term loans are what most people think of when they think about loans. You usually pay a lump sum in advance, have fixed interest rates and monthly payments begin immediately. Term loans are generally for large investments, commercial real estate and large acquisitions. Generally, you should try to bind the length of the loan to the life of the equipment they finance.
credit lines
A business line of credit is a pre-approved loan amount that your company has the option of borrowing within a specified period. This gives you capital when you need it, without having to worry about the submission of a new loan application that may be rejected. Credit lines work exactly like a credit card in the sense that you be lent at the time only payments on the amount of money you have (plus a small annual fee). They also have a maximum credit limit. However, a traditional line of credit is different from a credit card that you can use the money only once.
In some cases, you may have access to a "revolving" credit line. In this way you can borrow again if you have repaid the original amount, just like a credit card. Business lines of credit usually carry lower interest rates, which are variable.
Current vs. Long
Short-term loans are less than 3 years normally. Long-term loans generally range from 3 to 20 years. Most small businesses can a loan can not be obtained in the long term, unless the loan is secured by real estate.
Secured against Unsecured & Personal Guarantee
are secured loans by collateral, while unsecured loans do not. Most small businesses will be able not to get an unsecured loan. Besides collateral banks usually require small businesses to personally guarantee the loan. This means that even if the company does not pay in a position, you are personally responsible for the loan to be paid.
Fixed Rate v. Floating Rate
Fixed interest rate ~~ POS = HEADCOMP loans have interest rates that are not over the term of the loan change. Before committing to the loan, you know, the monthly payment and the total will be paid during the term of a loan. Interest rates on fixed-rate loans are lower for longer term loans usually. The floating-rate loans have based rate the interest on the prime rate or another "Index". Since the index rate your interest rate changes vary, which means that your interest rate and monthly payment may go up.
types of commercial loans
term loans:
term loans have a monthly principal and interest payment. As you decrease it back, pay the outstanding principal amount. Term loans are best for the financing of large long-term assets such as real estate or equipment
Current loans :.
Short-term loans are as cash used for liabilities, inventory and working capital needs. They generally require less security and have lower interest rates
operation line / line-of-credit loan .:
line-of-credit loans are loans designed to meet the day-to-day cash flow needs of your business. Your credit limit is based on the size of your debts in the first place. The big advantage is that you can access short-term loans on a as-needed basis without going through a complicated and slow loan application process. How do you borrow, you pay interest on the amount of outstanding debt. These loans can be used to purchase inventory and to pay operating costs, but not designed to revolving for the purchase of real estate or equipment
revolving credit lines .:
lines credit is a time of line-of-credit loan in which the lender the business the same amount can borrow again once it is redeemed
mortgages .:
mortgages are secured on a property a kind of a term loan of a building. Typical payback periods range from 10 to 30 years. In general, the company mortgages are complicated and expensive your personal mortgages, because banks require a complete property valuation, environmental audit and legal fees
business acquisition loan .:
This term loans are designed specifically for the purchase of an existing company
leverage .:
should help these term loan to pay you and consolidate previously held debt. They are usually done through a bank or traditional lender and are usually limited by the personal guarantee of the owner
franchise start-up loans :.
This term loans provide the necessary capital to buy a franchise
microcredit .:
Microcredit is smaller loans of up to $ 35,000, although the average is around $ 13,000. These loans are usually buy equipment, inventory, equipment, materials and used as working capital. You can not use these loans to pay existing liabilities normally. They usually carry a maturity of 6 years or less
Senior loans :.
Professional loans are a type of term loans for certain professional companies like CPA, dentists, doctors and lawyers
Secured working capital loans: ..
These term loans are used for working capital
Unsecured working capital loans :.
Unsecured Working Capital Loan Collateral not required and are for working capital
Start-up loans are used designed:
designed These are to provide term loan capital for new entrepreneurs available
Crowdfunded loans :.
crowdfunding site like Kiva Zip offer unsecured microloans that, no bank will be financed by other people. These loans usually range from $ 2.500 to 10.000 and carry 0% interest. The advantage is that they require no collateral or a long company history. The disadvantage is that there is some uncertainty in whether your loan will be fully funded
SBA loans.
The Small Business Administration offers a wide range of credit products for companies that do not qualify for traditional business loans. Discover our Ultimate Guide to SBA loans for more information
Factoring .:
Factoring is a form of cash advance is supported by your demands. One factor is an independent company or a bank that is buying a company the invoices based on the creditworthiness of the customer. Factors generally your company 75 to 80 percent ahead of demand. Once your client pays the factor, you get the rest of the amount owed. See our How Factoring Works Guide and Reviews of Best factoring company to learn more.
need some money for your business? Click here to get our free guide.
How to get a Small Business Loan
nice blog
ReplyDeletethanks for sharing information.
If you have been making mortgage payments for awhile, chances are excellent that you have equity built up in your home, which you can tap on a home equity line of credit for whatever purpose you choose.
Line of Credit Loans
Best Regards
judy brown
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