How A Personal Microloan Can Help Your Business

People utilize personal loans for a number of reasons, such as consolidating debts, paying for a medical debt or for costly auto repairs.

But there is something else the average consumer needs to know: a personal loan can be used for your small business.

Despite the label, a personal loan could just be what is needed to maintain your business. The personal microloan can be used for certain expenses such as:

• Inventory

• Equipment (things like printers, tools, copiers, manufacturing equipment, cubicles, etc.)

• Office space (either to purchase or rent)

• Marketing and advertising (digital, promotions, print, etc.)

For any type of business expense, if your business does not have the extra capital but needs cash to grow, then a personal microloan is a feasible option.

Small Business Loan vs. Personal Loan

Most small businesses that require necessary funds in order to grow their business typically search for a small business loan. This makes sense as a small business loan is generally beneficial to the small business owner.

In certain situations, the small business loan assists the business owner to purchase large ticket items, such equipment, inventory, or raw materials. However, just because the small business loan is the industry standard, it does not always make it the correct solution.

The biggest problem with a small business loan is the stringent requirements. Not only does this hold true with the eligibility requirements, but it also comes into play during the application process. Here are some of the biggest challenges:

• Lengthy application process that can eat up hours of valuable time

• Documentation requirements, such as providing a business plan, tax returns, references, and financial data

• It can take a long time to receive the funds (even after you get an approval), as the entire process can take up to 90 days

• There are as many as seven different types of small business loans… choosing the right one for you could take some time

Although it’s common to initially assume that a small business loan is the best choice, you may find that these requirements are difficult to meet or will take longer than you want to get your business moving.

Is a Personal Loan Application Process Any Better?

The short answer is that an application and decision regarding that application can be made by the company offering the personal loan within one day.

With a personal loan, you don’t have to jump through nearly as many hoops. Instead, its’ much easier to acquire a loan in a timely manner (and without the hassles mentioned above).

Some of the primary benefits of a personal loan for business use – especially compared to a small business loan – include:

• Simplified application process that can be started online or over the phone within a matter of minutes

• Fewer documentation requirements

• Same day decision (not always but most of the time)

• Fewer complications, with the main decisions being the repayment schedule and amount to borrow

The simplicity and convenience alone is reason enough to learn more about using a personal loan for your business.

Making a Final Decision

Now that you understand that a personal loan can be utilized for your business, you need to decide if this is the right financial solution for your company at the present time.

As you compare this option to a small business loan, ask and answer the following questions:

• How do you plan on using the funds?

• Do you need the money in the immediate future, or can you afford to wait?

• How much money do you need to borrow at the present time?

• Have you collected all the information you need for the application?

• Which type of loan is most affordable over the long run?

By answering these questions, while also consulting with a lender for each type of loan, you’ll find yourself in a position to make an informed and confident decision.

Despite the name, you can use the funds from a personal loan for a variety of business expenses. There are several lenders out there, but the benefits and convenience of a personal loan make it a sound consideration for any company.

How to Market Your Commercial Real Estate Loan Business

All too often I see small business owners missing the mark with their marketing. Sure, it’s easy to do when you specialize in a specific industry niche and you spend your time engulfed in industry sector jargon. However, it’s best to put yourself in your potential customer’s shoes and think your marketing through from their perspective, addressing their most important questions. Your customers want to be able to trust you, to know you are looking out for their interests and that you don’t just see them with Dollar Signs in your sunglasses.

Below is a sample page, perhaps good for a website, brochure, email, or letter. Why not look this over and consider how you might form your own message. Use your own voice, your own style and remember you are talking to your customer across the table for the first time. You know what questions they will ask. Show that you care, that you are working for them, and will go out of your way to get them the best rates, and great service. Here is the sample:

Commercial Real Estate Loans

Are you looking to purchase an income property such as an apartment building, small office building, or retail center? Would you like to put several rental properties in your real estate portfolio into one commercial mortgage? Wish to find a suitable piece of land and develop that property? Do you need a loan for acquisition and construction?

Do you want to buy a business property with a business on it; a restaurant, carwash, service station, laundry mat, hotel, etc.? Are you looking for a commercially zoned property with a warehouse or industrial building on it? Are you expanding an existing business and/or want to own the property under your business rather than paying the monthly lease?

Are you in the agricultural sector, looking for specifically zoned farming property; land for a vineyard, orchard, or crop such as berries, vegetables, or flowers? We have significant experience to make this happen. Our area in Southern CA has one of the best climates in the world, and incredible top soil for growing almost anything.

We can assist with all types of commercial real estate loans including government-guaranteed loans such as FHA, USDA, and HUD. If you are looking for an SBA 7(a) loan or a CDC/SBA 504 loan for commercial real estate we can get it done.

We can assist you with traditional commercial mortgages, commercial bridge loans, or commercial hard money loans. We also have lines on non-traditional sources for hard money commercial real estate loans, which are custom tailored to you needs for complicated projects outside the normal scope of typical commercial real estate loans and mortgage offerings.

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Why not try something like this? Just because the Federal Reserve has raised rates doesn’t mean you have to let new deals and new clients move to your competitors. I hope you will please consider all this and think on it.

Big Banks Shun Small Business

Any small business owner who recently tried to secure a loan will tell you it isn’t easy. Now data clearly shows the broader effects of this struggle.

The Wall Street Journal recently reported that the 10 biggest banks in the country that issue small loans to businesses lent $27.8 billion less in 2014 than the industry’s 2006 peak, according to the Journal’s analysis of federal regulatory filings. (1) This decline has forced many small business owners to turn to higher-cost funding sources.

The response is similar to that of individuals who are turned away by banks and then resort to expensive and risky alternatives. For businesses, these may be nonbank lenders, often in the form of online companies that require little or no collateral but that charge much higher interest rates than banks. While not all of these lenders are predatory, the space is still largely unregulated. For small amounts, some business owners are turning to nonprofit microlenders or crowdfunding to try to fill gaps, though both have serious limitations.

But many businesses are simply turning to credit cards when they cannot secure traditional small business loans. According to the Journal, small business spending on credit and charge cards will total an estimated $445 billion in 2015, compared to $230 billion back in 2006, when conventional lending was readily available. (1)

It may be more profitable for banks, but this solution is bad, and probably unsustainable, for business owners. As Robb Hilson, a small business executive with Bank of America, told The Wall Street Journal, “If someone wants to buy a forklift, it doesn’t make sense to put it on a credit card.” (1) Yet many small businesses have little other choice for now.

This result is not surprising. Large banks generally find small loans unattractive, partly because of their relatively high costs and partly because of tighter regulatory requirements. A Goldman Sachs analysis earlier this year cited the reduced availability of credit as one of the principal reasons small businesses have faltered in the wake of the financial crisis while large enterprises have largely recovered. (2) As regulators cracked down, it became uneconomical for banks to serve clients other than the most creditworthy. Startups seldom make the cut.

My own experience mirrors others. Even with a 23-year-old business that operates across the country, banks want hard collateral before they will make substantial loans. And when the chief assets of a business consist of loyal customers and really smart employees, the only available collateral is personal real estate. And even real estate was not enough at the first bank I approached; geography came into play too. If banks find our established firm too risky to make unsecured loans, many smaller or newer enterprises do not stand a chance.

With big banks out of reach, small community banks should have been ready to step into the gap, eagerly courting new customers. But that has not happened, largely because the number of such banks continues to decline. This trend predates the Dodd-Frank financial regulations, but the regulations sharply accelerated the community banks’ loss of market share.

This is not to say that all community banks are in immediate danger of going under. To the contrary, recent data from the Federal Deposit Insurance Corp. suggests that those that have held on have expanded their lending and narrowed the profitability gap with larger banks.

While this is good news, it’s not enough to fill the gap in small business lending. And it seems unlikely to do so soon, since new bank establishments have dropped nearly to zero, thus cutting off a supply of lenders who are eager for new customers. According to an FDIC report from April 2014, there were only seven new bank charters total from 2009 to 2013, compared with over 100 annually prior to 2008.

The small banks that have survived have largely done so by being just as risk-averse as the big banks with which they compete. Regulation has simply made it foolish to act otherwise. But this leaves all small businesses except those with established history, sterling credit and substantial collateral without the means to secure the capital they need to make their enterprises grow.

Small businesses are crucial drivers of new jobs and new products for our economy; their credit struggles are probably a significant reason this economic expansion has been sluggish by historical standards. We have made it unattractive for big banks to serve small businesses, and small banks are not ready to fill the gap. We all pay the price.

Sources:

1) The Wall Street Journal, “Big Banks Cut Back on Loans to Small Business”

2) Goldman Sachs, “The Two-Speed Economy”