July 30th, 2009 at 11:53pm
Under Commercial Loan
There were both positive and negative developments for business loans during 2007. These will have an immediate impact on business financing strategies for borrowers.
When reviewing commercial loan developments that occurred during the past 12-18 months, there are mixed results when looking at the best and worst trends. Many of the working capital changes that emerged last year have important ramifications for borrowers refinancing or seeking new financing.
A major commercial property investment trend has been some increasing activity due to the current decline in viable residential investing options. This seems to be particularly true for business opportunity situations which do not have a real estate component, an aspect of increasing importance to investors who want to avoid property ownership at this time.
For business cash advance and credit card processing services, the past 12 months have been characterized by significant changes. There were many providers both entering and exiting these business activities. It is of course good news that some ineffective providers were forced to leave this specialized working capital management service area. But the bad news is that there are still many new and inexperienced companies attempting to operate in this complex field.
A similar trend involving inexperience can be seen in viewing the large number of residential financing brokers now attempting to transition into business financing. Since by some estimates well over 100,000 residential financing employees lost their jobs during 2007, there is a real possibility that thousands of unqualified brokers will be entering the business finance field during 2008 or have already started the process.
A general business loan trend impacting refinancing is the reduction in loan-to-value ratios, especially when borrowers are attempting to get some of their equity out of the business in cash. For purchase situations including special purpose properties such as church financing, slightly larger down payment requirements are increasingly more common.
During 2007 there was also noticeable attrition in SBA loan providers. This is primarily a positive development, since the field has long been overpopulated with inadequate business lenders.
Likewise many local and regional banks visibly reduced or eliminated their business financing activities during the past 12 months. The bad news about this trend is that very few former commercial lenders provided their borrowers with adequate notification of their intent to exit the business. If there is a positive aspect to this development it is probably that many borrowers confronted with the need to suddenly find alternative commercial financing sources have often ended up with much better terms by dealing with a new lender that specializes in commercial real estate financing and working capital management.
Although the general decrease in interest rates during the past year is a positive development, there will probably be some confusion among commercial borrowers who have adjustable rate terms when they do not see their rates reduced. In all likelihood, this will be due to a common clause applied to most commercial loan contracts that stipulate that the minimum rate for such agreements will never be less than the initial rate. With such a floor rate provision, this means that if a borrower starts with an adjustable rate set at 10% and then rates fall, the effective loan rate will remain at the initial rate.
By Credit Info
July 20th, 2009 at 05:50am
Under Credit Line
Unsecured Lines of Credit are available for individuals that own businesses and have credit scores of 680 and above. Business owners who have been in business for more than two years are eligible for lines of credit up to $1 million with full documentation of personal and business taxes and financials. Applications without additional documentation (No Doc Applications) can also be approved for as much as $350,000. These lines of credit essentially function like Home Equity Lines of Credit because interest is paid only on the outstanding balance.
Unsecured Lines of Credit can be obtained in roughly 4 to 6 weeks but should never be applied for directly by the borrowers themselves. Being qualified does not mean that these borrowers are capable of simply walking into a bank or other lending institution and being approved. Companies that specialize in unsecured lines of credit are available and should be contacted to assist with the substantial preparation that is necessary. Professional business finance consulting firms maintain contacts and affiliations with lending institutions that offer unsecured lines of credit. It is extremely important that the business owner work with one of these firms instead of approaching the bank directly. The application process is somewhat complicated and documentation must be properly formatted and compiled to avoid unnecessary rejections.
Business owners can no longer rely on the equity in their real estate holdings to finance their business expansions and growth. Despite the fact that they paid high fees for the availability of home equity lines of credit, even business owners with excellent credit scores and excess equity in their properties are finding it impossible to access their credit lines. The main reason is that banks have virtually stopped providing homeowners access to the equity in their properties as lines of credit. Home Equity Lines of Credit have been frozen by most major lenders because declining property values have made these cutbacks necessary. IndyMac, Washington Mutual and other major mortgage lenders have made decisions to rescind these credit lines, according to the terms of their contracts with borrowers.
These recent eliminations of access to funds for their businesses have hit business owners especially hard. Many of them have used home equity lines for working capital during slow periods or as sources for cash during periods of expansion. The net result is that expected funds for business uses are not available, although they are still very necessary. The lack of time to make other arrangements because of this sudden policy change can severely impact a business owner’s ability to survive a shortage of funds. Many business owners routinely paid back their lines of credit so that those funds are available for them to use at some pre-determined time in the future. That option is no longer available, leaving them without their usual funds.
In summary, Unsecured Business Lines of Credit are methods of financing that are still available to qualified borrowers who are also business owners. Firms that specialize in acquiring unsecured lines of credit should always be involved in this application process. The applicant will need assistance in properly preparing and organizing his documentation for submission to lenders. By adhering to the current credit, submission and underwriting guidelines of each individual bank, a firm that specializes in this type of financing will be able to present the borrower as the “perfect applicant”. This very important initial step in the process will greatly enhance the business owner’s potential to be successfully approved for an unsecured line of credit.
Milton Franklin is a Founder and Managing Partner of Nationwide Equipment Leasing LLC. His company offers Unsecured Lines of Credit and other unique financial solutions to business owners. He can be reached at 800-395-4908. His free Special Report, “The Solution: Unsecured Line of Credit”, can be downloaded from his website by selecting Unsecured Line of Credit Information at
http://www.neleasing.com/application.form.cfm
By Credit Info
July 19th, 2009 at 05:51am
Under Commercial Loan
It was truly a good news mixed with bad news situation when reviewing business finance developments that occurred during 2007. Many of the commercial loan trends that emerged last year have significant implications for commercial borrowers seeking either new financing or refinancing in the coming months.
For business cash advance and credit card processing services, the past 12 months have been characterized by significant changes. There were many providers both entering and exiting these business activities. The fact that many poor providers have been forced to stop their role in these complex working capital services is positive news for business owners. But the bad news is that there are still many new and inexperienced companies attempting to operate in this complex field.
A similar trend involving inexperience can be seen in viewing the large number of residential financing brokers now attempting to transition into business financing. Since by some estimates approximately 100,000 residential financing employees lost their jobs during 2007, there is a real possibility that thousands of unqualified brokers will be entering the business finance field during 2008 or have already started the process.
During 2007 there was also noticeable attrition in SBA loan providers. This is primarily a positive development, since the field has long been overpopulated with inadequate business lenders.
During the past 12 months a large number of regional and local banks eliminated or reduced their business financing services. Perhaps the most negative aspect of this development is that most borrowers received very little advance notice from their previous lenders and therefore had to scramble to arrange new financing. If there is a positive aspect to this development it is probably that many borrowers confronted with the need to suddenly find alternative commercial financing sources have often ended up with much better terms by dealing with a new lender that specializes in commercial real estate financing and working capital management.
A general business loan trend impacting refinancing is the reduction in loan-to-value ratios, especially when borrowers are attempting to get some of their equity out of the business in cash. Increased down payments are increasingly necessary to purchase special purpose properties such as churches and funeral homes.
Although the general decrease in interest rates during the past year is a positive development, there will probably be some confusion among commercial borrowers who have adjustable rate terms when they do not see their rates reduced. In all likelihood, this will be due to a common clause applied to most commercial loan contracts that stipulate that the minimum rate for such agreements will never be less than the initial rate. With such a floor rate provision, this means that if a borrower starts with an adjustable rate set at 10% and then rates fall, the effective loan rate will remain at the initial rate.
A major commercial property investment trend has been some increasing activity due to the current decline in viable residential investing options. Due to many investors who would rather avoid property ownership, the lack of real estate in business opportunity investing is an attractive aspect.
By Credit Info
July 7th, 2009 at 11:50am
Under Credit Line
Working capital tends to be in short supply for new or growing businesses, and that is why many entrepreneurs and business managers devote lots of time and stress into coming up with capital for their business. The good news is that locating capital for a business isn’t as difficult as one may think. Using account receivables or invoices a business can obtain instant capital by selling them off to a “factor” for a small discount. This process is known as an account receivable credit line because most of the time the “factor” will give the business a type of “credit line”.
Account receivable credit line financing works great because most of the time startup and growth companies, in particular, simply can’t afford to wait for customers to pay on invoices, or they get in a bind if the customer pays late. It is much easier to get approved for this sort of financing than for a standard business loan from a bank. The flexibility of account receivable credit line financing is attractive to businesses in need of capital.
Your business could choose to factor only a few invoices or all invoices. You are by no means required to factor all account receivables. Since you are actually selling the invoice to the factor you have the freedom to choose which company to sell the account receivables to, and you of course control when you sell them. You would sell the account receivables for a discount to the factor.
The company you sell your invoices to would then be in charge of collecting payments from your clients, processing the payments, and also generating reports. This is another positive for businesses that decide to factor invoices. Your client would be notified of the billing address change.
There are some requirements laid out by the factors who offer an account receivable credit line. Since they are taking on a risk for your clients they will want to make sure that your client is creditworthy. Your businesses credit won’t need to be established to qualify, but your client will need good credit and references as to their payment history. Many new businesses don’t have business credit scores established, so an account receivable credit line allows younger businesses to get capital without long application processes.
This is also the only form of capital that grows as your business grows. As your sales grow, so does the amount that you can factor, or the amount of capital your business has access to for faster growth. Your business could take advantage of supplier specials or other special deals to save money, or the money could be used to pay your bills early to receive an early payment discount with some suppliers. The list of benefits goes on and on.
It is important to know your business capital options.
By Credit Info