Business Loan :
Getting a business loan is a major hurdle facing small businesses, mainly due to tight lending standards by banks. But obtaining outside financing is often necessary to start or grow a business or cover day-to-day expenses, including payroll and inventory. Although finding, applying for and getting approved for small-business loans can be difficult, the more prepared you are, the better. Our Loan Specialist deal with . Hotel / Motel, Apartments building, Commercial buildings, Gas Stations, C Stores and Many others.
Here’s how to get a business loan in five steps:
- Pinpoint why you need the money. Ask yourself how this loan will help your business.
- Find the right loan. Choose a type of business loan based on your needs.
- Compare options based on the cost and terms of each loan.
- See if you have what it takes to qualify. Gather information including your credit score and annual revenue.
- Get your documents ready and apply. Know what documents lenders will need from you ahead of time.
An SBA Loan
is a loan given through the Small Business Association. The SBA is a government agency built solely for the purpose of assisting small businesses acquire the funding they need. Recognizing the incredible importance of small businesses on the American economy (roughly 99% of all small-business-administration-loans American businesses are considered “small”) the SBA was formed to bolster the growth and prosperity of our nation by supporting the small businesses and entrepreneurs who keep the American dream alive and well. In that vein, an SBA loan is one that has been approved by the SBA, and in most cases co-sponsored by a traditional financial institution. The SBA provides some of the loan money, while the financial institution provides the remainder, together meeting the funding needs of the approved loan. Typically the SBA will take on a larger portion of the loan amount and guarantee the loan, leaving the financial institution with less risk. The 3 primary loans from the SBA are SBA 7(a), SBA 504, and SBA Express loans, each of which serve different purposes, with different terms, rates, and loan amount limits. Therefore, which SBA loan product you choose should depend heavily on what specific needs you have for your business?
7(a) Loan Programs
Businesses with special requirements (such as those in exports or those operational in rural areas) are covered under this program. This is considered to be the most flexible choice, and also the most suitable one if you have a start-up in mind.
The 7(a) Program lets you get loan amounts (up to $5 million) to fund startup costs, buy equipment and more. Here’s what else you can do with 7(a) funds:
- Purchase new land (including construction costs)
- Repair existing capital
- Purchase or expand an existing business
- Refinance existing debt
- Purchase machinery, furniture, fixtures, supplies or materials
The SBA 504 Loan program is a powerful economic development loan program that offers small businesses another avenue for business financing, while promoting business growth, and job creation. As of February 15, 2012, the $50 Billion in 504 loans has created over 2 million jobs. This program is a proven success and win-win-win for the small business, the community and participating lenders.
The 504 Loan Program provides approved small businesses with long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization. 504 loans are made available through Certified Development Companies (CDCs), SBA's community based partners for providing 504 Loans.
Generally, any project involving the purchase, construction, or improvement of fixed assets is eligible. Examples include:
- Land and building acquisition
- Construction and renovation
- Purchase of heavy machinery or equipment
- Refinancing real estate and equipment
Conventional loan for Business :
These loans tend to be for larger amounts, and the terms of the loan will be based on a number of factors, including how much you borrow, what you need the money for and the state of your business at the time of the loan request. One positive of business loans is that lenders usually are more willing to negotiate terms and conditions than with a government-backed loan.
Conventional loans are a viable source of capital for companies in need of additional funding. These loan options differ from the programs provided by the U.S. Small Business Administration (SBA), which are made by banks and non-bank lenders and guaranteed by the federal government. While commercial banks provide conventional loans, the funds are not guaranteed by any other entity.
Small businesses and franchises of any development stage can apply for conventional loans. However, since these loans are not guaranteed by the federal government, banks prefer to lend to companies that demonstrate a strong ability to service the debt (Debt Service Coverage) and have significant collateral to cover the loan (Loan To Value or LTV) if the company ultimately cannot pay back the loan. In addition, business owners seeking these loans are usually required to have exceptional FICO scores, a reasonable debt to worth ratio, and be able to show lenders a solid business plan, and projections especially for a speedy approval process.
FF & E Loan :
A. Furniture, fixtures and equipment. This term is used in construction for the items that do not have a permanent connection to the building itself, but are needed to so that the building can operate. FFE can include furniture, chairs, desks, copiers, computers and other similar items. Many times these are not part of the construction cost as provided by the General Contractor, but will be a cost that the Owner will need to account for to complete his project.
There’s no better use for this than the hospitality industry. Hotels and motels need beds, chairs, tables, bureaus and more in order to put up and serve their guests, and traditional business loans may not cover those items in bulk the way you would like them to. With FF&E, you can be sure the program will be tailored to your needs, and you can stock those rooms with new furniture for what we can only hope is a flood of guests.
No matter what industry you’re in, you should consider specialized business loans when you can. For the hotel industry, this is a big time. Get financing that will rise to the occasion.
Business Line of Credit
Every small business owner encounters situations where they need quick access to extra capital. Traditionally, one of the most popular options for handling day-to-day cash flow needs has been a business line of credit.
A business line of credit gives you access to working capital when you need it. You can use your line of credit for most business needs, and you pay interest only on the funds you use. What a fresh way to give your small business a boost.
LOCs are specifically designed to help businesses finance short-term working capital needs, such as:
- Purchasing inventory or repairing equipment
- Financing marketing campaigns
- Making payroll
Business lines of credit help small businesses grow revenues and expand profits. They offer financial flexibility to cover gaps in the normal business cash cycles. They can be used to harness the necessary resources to maintain activity year-round and can fund expenses to develop your vision, build your organization, and amplify success. So look ahead and get before your next busy season – it’s best to have the cushion before you really need it.
Business Qualification Requirements
As part of its due diligence, the bank or lending institution examines your business to determine if it qualifies for a commercial line of credit. The bank looks at your assets, past and current revenues, as well as other items. This process is usually extensive and can take weeks. Here are the most important requirements to qualify for a business line of credit:
1. Time in business
Lenders extend business lines of credit only to companies that have been operating for a minimum of two years. This time in business shows the lender that the company has some longevity and experience. However, lenders can provide a line of credit to a startup if the owner has good personal credit, solid collateral, and personally guarantees the loan
Banks and lending institutions lend only to companies that have collateral to back the loan. Collateral is any type of asset that can be used to repay the loan. Banks often look for accounts receivable, inventory, machinery, real estate, and financial instruments as collateral.
Most lines of credit are secured by collateral. The company pledges specific collateral to back the loan in case it cannot repay. The lender often secures this collateral by filing a UCC Lien, which gives them priority if they need to collect. It’s common for lenders to ask small businesses to pledge all their assets as collateral for a line of credit.
3. Revenues and profits
To qualify for a line of credit, your company must have revenues and must be profitable. Lenders consider your revenues as their principle means of repayment. Therefore, your revenues and profitability must justify the size of the line of credit. Companies that don’t have revenues or are unprofitable are not able to get a line of credit unless they (or their owners) can provide collateral as a guarantee.
4. Financial ratios
As part of their due diligence, lenders examine the financial ratios of your company. This review gives lenders an idea of how your company is performing. Each lender uses its own ratios.
Most business lines of credit require a corporate guarantee, meaning that the company guarantees repayment. If the company is a subsidiary of a larger company, lenders usually require that the parent company provide a guarantee as well.
Lines of credit usually have lending covenants. Covenants are the rules that your company must follow in order to keep the line of credit active. Defaulting on a covenant can result in extra fees and could lead to your line being terminated.