How A Business Loan Helps Business People

Overview:

Becoming a self-employed businessman is a great reputation in the society but the problems faced by the entrepreneurs from the day one of their business is enormous. It is a great challenge for a person to overcome all obstacles to become a successful businessman. The numerous problem faced by all is finance. Even great entrepreneurs of various industries have struggled a lot of financial crisis for setting up their business and to run their daily business operations. Thus finance plays a major role in the life of business people. Great ideas require the necessary financial support to bloom into a successful business.

Introduction:

There are various sources for business people to raise capital for their business. The most trusted source is from banks. There are various reasons why people choose banks as the best source for raising capital for their business. Banks provide a lower cost of funds in the form of Business Loans. There are various types of business loans at differential interest rates to facilitate business people to solve their financial crises.

Types of Business Loans:

Businesses are of different types and need finance at different stages of their business operations. The need also being different, banks help them in providing different types of business loans helping various small and medium enterprises to raise capital.

New Project Loan – Banks are interested in funding for new businesses and also for new projects of existing business. There are various criteria for getting new project loan and differs from bank to bank. Project loans are approved against the collateral of the person like residential property, commercial property or empty land.

Top-up on Existing Loans – These loans are issued for expansion, replacement, diversification of an existing business. These loans are approved for short term or long term basis to buy goods, machinery or any fixed assets for the company.

Working Capital Loans -These loans are provided for the business to solve sudden financial crises and repaid within short durations. Banks are more interested in providing working capital loans against their inventories, stocks or receivable bills of the company.

Secured Business Loan – Business loans in which companies raise their capital against any security for the bank. It may include plot, residential or commercial places, gold, shares, bills, insurance as collateral to get funds for their business. The interest rate is preferably less.

Unsecured Business Loan – Every businessman cannot afford to pledge a security in getting the business loan, so bankers help them with loans without any security based on bank transactions and income tax returns. These loans are charged with more interest rates when compared to secured business loans.

Requirements of the Banks:

There are various steps and procedures followed by banks to provide funds. The procedure and documents to be submitted to the banks as follows

Identity and address proof of the company – Address proof and identity proof of partnership or proprietor business.

Statutory legal registration of the company – Whether the company is legally registered under government norms and have followed all procedures legally in setting business.

Financial statement of the company – Every bank is interested in seeing the recent 1-year business transaction of the company.

Income tax returns – ITR helps the bankers to check the business performance, efficiency level, assets and liabilities of the company and also tax that company pays from their current earnings. This also plays a major role in deciding the loan amount for the business people.

Financial Security – It includes the fixed and movable assets of the company which helps the banker to consider providing business loans based on the asset value along with the business transactions. This also safeguards banks from the failure of businessmen that fail to repay the loan amount.

Previous Loan track – This is a very important factor considered by banks which will help them evaluate the financial condition of the business and also to check on past repayments on loans.

Litigation – It will help banks assess the character of businessmen before providing a business loan.

Takeaway:

Though business loans are found to be a great source for raising capital, businessmen undergo challenge in getting timely funds from the banks. In order to help them in availing timely loans, even NBFC is also now prepared to help them with funds at various stages of their business. Banks & NBFC have also made the lending process easy, with all verification done in shorter time-span, doorstep assistance in collecting documents etc. Businesses with good cash flows & credit score can avail timely funds with much ease.

Commercial Loan Retainer Fees

Retainer fees are “standard business practice” for some (but not all) commercial loan situations. It is understandable that a commercial borrower would rather not pay such a fee, so it is important for a commercial borrower to understand when it is more likely to be necessary. In fact a business loan retainer will not be necessary in many business loan scenarios. This is especially true of commercial financing such as business cash advances that takes less time and produces funding within just a few days.

For more time-consuming commercial loan processes, it is increasingly common for a retainer fee to be paid during the preliminary stages. This is especially true when working with business loan consultants that specialize in commercial loans. Most advisors who work with residential mortgage loans (and perform commercial loans as a sideline to their main business activities) will not charge a retainer fee because in many/most instances they are legally prevented from doing so by certain state and federal regulations (in other words, it is likely that they too would charge a retainer fee if not legally prohibited from doing so because of prevailing residential loan compliance issues).

So why wouldn’t a commercial borrower who doesn’t want to pay a retainer fee simply work with someone who doesn’t charge a retainer fee? Many commercial loan situations are too difficult for the average residential loan advisor to handle successfully. Similar to a person seeking a more expensive medical or legal specialist to help them when confronted by a serious medical or legal problem, most commercial borrowers have come to realize that business loan problems are frequently just as serious and complex and deserving of a commercial loan specialist.

It is in these situations when a commercial borrower is working with a business loan specialist that a retainer fee should be viewed as “standard business practice” for more difficult and time-consuming commercial loans. I have stated elsewhere that one of the most important lessons to be learned from a thorough analysis of commercial financing “trade-offs” is that the lowest rate is almost never associated with the best deal for the commercial borrower. A similar observation based on over 25 years of business loan experience: the lowest fees are also rarely associated with the best deal for the commercial borrower.

The fees charged by commercial loan specialists (including retainer fees when appropriate) are almost always higher than loan advisors who do not specialize in business loans. In the end, most of these borrowers still choose to deal with a highly-qualified commercial loan specialist because they ultimately realize that perhaps it is better to use the “best” business loan advisor rather than the “cheapest” business loan advisor.

The most typical range for commercial loan retainer fees is $2500 to $10,000 (obviously a wide range). There are various reasons for a retainer fee and here are three of them: (1) to compensate the advisor for some of the initial loan processing; (2) to serve as a “good faith” deposit toward the overall commercial financing fees; and (3) to focus the borrower on working with one business loan advisor. The third reason might be the most important of all. With difficult commercial loans, it is extremely counterproductive for a commercial borrower to be working with multiple business loan advisors (regarding the same loan). Once a retainer fee has been paid, a commercial borrower is likely to be more comfortable in working solely with the business loan advisor who received the retainer fee, and with difficult commercial loans, this unified approach is likely to be more successful. It is this success that ultimately justifies the retainer fee.

Copyright 2005-2006 AEX Commercial Financing Group, LLC. All Rights Reserved.

Best Business Loan Options Guide: Learn About Several Funding Options for Businesses and Pros & Cons

Considering that there are so many funding options for businesses – including start-ups – these days, you really don’t have to settle with trying to get a bank loan in the traditional way. However, since every business is unique, the best business loan options for you might not be the same as those for your competitors or other businesses in your industry. It depends on your needs, goals, size of business, specific requirements, what kind of business you’re running, credit rating, location, your risk level, and so forth.

One type of financial option to look into is a term loan. This is a common form of financing with which you get a lump sum of money upfront, which you will be required to pay back with interest over a predetermined period. You don’t have to apply through a traditional bank, as there are plenty of small to medium sized online lenders in the 21st century. A great thing about this option is that if you qualify, you’ll get the cash upfront to invest in your business. The downside is you will likely have to put up collateral, and if you are a new business and lack a good credit rating, the interest rate will likely be higher.

SBA loans have always been popular with smaller companies, as they offer some of the lowest rates and long repayment terms. The repayment period depends on how exactly you plan to use the money. If it’s for real estate purchases, you’ll have a longer period of time to pay the loan back. If you need money as soon as possible, then you probably won’t consider SBA to be the best business loan options, since the application process can be long and rigorous and there is no guarantee your application will even be approved.

Don’t forget about lines of credit for business purposes. A business credit card can come with some great rewards as long as you make payments on time. They are usually unsecured as well so you won’t have to put collateral up. Of course, you’ll need to already have a good credit score in order to qualify for good terms. Otherwise, you might end up with additional costs such as draw fees and maintenance fees.

What Are the Best Business Loan Options to Consider

A few other business funding options to consider include:

• Angel investors

• Crowd-funding

• Factoring

• Purchase order funding

• Equipment loans

• Venture capital

Take the time to research everything and consider which options you’ll want to try. Make sure you have all of your financial statements and documents organize and ready to go, as well as a detailed business plan showing what you plan to do with the funds you receive.

You’ll find some of the best business loan options for just about any type of business in all industries with US Business Funding. This organization has helped thousands of businesses nationwide get the funding they need in a fast amount of time.