The truth is that many small businesses fail and there are a variety of reasons for this — under-capitalization, lack of planning, or the person who owns the business is really good at one thing but bad another. For example, they may be good at baking cakes but maybe they don’t know how to read financial reports. But after the credit crisis that started in 2008, banks seized up on loans to businesses and individuals and, in general, were lending only to established large businesses that were already highly capitalized. In this climate, SBA-backed loans became all the more important as a lifeline to small businesses and the federal government acted to lower rates and increase the amount of small business loans they would guarantee for banks, from 75 percent to 90 percent in some cases.
Unlike peer-to-peer lenders, which fund loans via individual investors, direct lenders are funding your loan with their own capital, like a traditional bank. That means you may be able to get funds more quickly. The lenders profiled below also work with a wider range of businesses, including very new ones, but APRs can be higher.
In fact, the U.S. Small Business Administration (SBA) now uses the score to pre-screen it’s most popular 7(a) loans. If your score falls below their minimum threshold, you may not qualify for one of the most attractive—lowest interest rates—small business loans available. Starting at the beginning of 2014, all SBA 7(a) loan applications up to $350,000 are required to go through a business credit score pre-screen. To be clear, if you’re applying for an SBA loan, most likely it’s a 7(a).
Grant Olsen is a marketing and technology writer with a B.A. in English from Brigham Young University. He has written for healthcare companies, outdoor gear manufacturers, international airports, and dozens of small businesses. Grant is a contributing writer for KSL 5 TV and Lendio News. He is also the author of the book “Rhino Trouble.”
Spanning long-term financial planning, the CDC/504 Programs provide a platform for the development of the community as a whole. The loan sanctioned under this program provides small businesses with fixed-rate financing. These finances are then utilized to acquire assets which are mainly aimed at modernization, such as commercial mortgages, street-improvement utilities, and so on. Your small business should be operated with a profit-seeking intention, but should not be engaged in the investment of real estate.
For established businesses with annual sales of $150,000 or more, SmartBiz and Funding Circle offer good financing options. You’ll get lower APRs with SmartBiz, which offers SBA loans, but Funding Circle has a less rigorous and shorter application process. Funding Circle also has a higher maximum loan amount of $500,000 compared with SmartBiz’s $350,000.
As part of our commitment to the growth of small businesses nationwide, U.S. Bank is a leading participant in the lending programs of the U.S. Small Business Administration (SBA). Since 1976, we’ve provided more than $6 billion in SBA-guaranteed financing solutions to thousands of small businesses in America.SBA Express LoansLearn More
If you’re targeting specific lenders online, be sure to compare interest rates, terms, and eligibility requirements. Small-business loan calculators found on many lenders’ websites can help you make sure you’re comparing apples to apples.
Because you have strong personal credit, you could qualify for a line of credit through BlueVine or OnDeck that would help you meet daily expenses and maintain inventory. If you’ve been in business at least a year and have at least $100,000 in annual revenue, consider OnDeck, whose maximum APR is lower than BlueVine’s. If your annual revenue starts at $60,000, BlueVine is a better bet. BlueVine also offers invoice factoring, a type of financing that advances you cash based on your unpaid customer invoices.
Small Business Loan Guide With so many options to choose from, how do you decide which loan program is right for your small business? Our simple guide will help you decide which programs will be best for your business needs, just follow these steps to get started:
Hitting up family and friends is the most common way to finance a start-up. But when you turn loved ones into creditors, you’re risking their financial future and jeopardizing important personal relationships. A classic mistake is approaching friends and family before a formal business plan is even in place. To avoid it, you should supply formal financial projections, as well as an evidence-based assessment of when your loved ones will see their money again. This should reduce the likelihood of unpleasant surprises. It also lets your investors know you take their money seriously. You also need to seriously consider how the arrangement will be structured. Are you offering equity? Or will this be a loan? Perhaps most importantly, you need to emphasize the risk involved. Offer up a strong business plan, but remind them there is a good chance their money will be lost. It’s better to mention that upfront to Aunt Gladys rather than over Thanksgiving dinner.
However, if you need money faster, online lenders may be a better fit, as they can provide a streamlined online application process with fewer documentation requirements and faster underwriting. If you have good credit and strong business finances, some online lenders may offer you rates comparable to those for bank loans.
I took a sba loan after hurricane katrina unfortunately it has defaulted. My loan has been turned over to the treasury department. My problem is when I try to find out how much I owe they are giving me a complete goose chase. My tax return has been offset for several years, how do I go about finding out how much is remaining. Also how can I get them to stop offsetting my tax returns?
You may be required to provide additional information related to the specific purpose of the funding you are requesting. For example, if you’re planning to use the loan to buy another business, you need to provide a copy of the purchase contract, the target companies’ financial statements, tax returns, and other details about them.
Whether it is equipment updates, interior or exterior projects or other needs, there may come a time that you’ll need to pay for business restorations. Some of these renovation costs may be pivotal to your business, causing you to be unable to serve your customers without them. Don’t risk this – use your loan for renovations!
After determining that your business meets the qualifications, you need to apply for a commercial loan from a financial company that processes SBA loans since the SBA doesn’t provide loans directly. The bank’s qualifications can be more stringent.
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Builders Line of Credit: SBA line of credit for contractors that build / renovate residential or commercial buildings used for materials, equipment, permitting, labor, and even land associated with a project. Up to $5,000,000.
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You said that “The only requirement that the bank has to get paid by the SBA is that the assets securing the loan be sold. There is no requirement that they sue you, take your house or anything else.” Are you sure they won’t take the house even if it was used as a collateral? I have an SBA loan & used my house as a collateral and now the loan is in default. I have Chapter 7 personal protection but have the lein on my house. I have made an offer in compromise to the lender 5.5 months ago…no and response yet. Will the bank ever act on foreclosing my house? It’s my primary house where I live.
Most borrowers should seek some assistance from a party who has experience in preparing SBA loan packages and is aware of the lenders’ criteria, Anderson says. Help can usually be obtained from SCORE, Small Business Development Centers, Certified Public Accountants (CPAs) and consultants who are available in many communities.
The lack of a credit history, collateral or the inability to secure a loan through a bank doesn’t mean no one will lend to you. One option would be to apply for a microloan, a small business loan ranging from $500 to $35,000. Microloans are often so small that commercial banks can’t be bothered lending the funds. Instead of a bank, you need to turn to a microlender. a non-profit organization that works differently than banks. Microlenders offer smaller loan sizes, usually require less documentation than banks, often apply more flexible underwriting criteria. There are a few hundred microlenders throughout the U.S. and they often charge slightly higher interest rates for loans than banks. “Microloans are really for that startup entrepreneur or an entrepreneur in an existing business facing a capital gap who needs to secure capital for new equipment or to service a contract,” says Connie Evans, president and CEO of AEO, which represents 400 mostly non-profit microlenders and microenterprise organizations.
For-profit lenders are reluctant to issue loans to anyone who does not have a strong credit report and financial history. That is not the case with government small business loans. Obviously, a decent credit report is important, and you will have to follow the guidelines regarding the repayment period and the interest rate set by the government, but usually the interest rates charged by government loans are lower than those you could expect in the private sector.
A small business loan obtained by a startup is often used to buy any necessary property, buildings, equipment, or inventory to put the business owner’s dream into action. It can also be used to give you a little working capital as you strive to get your business up on its feet and running.
SBA loans are – you guessed it – backed by the SBA (Small Business Administration), which reduces the risk for lenders and encourages them to help more small businesses like yours. You can use an SBA loan to buy equipment or real estate, acquire a business, refinance, and much more. Because sometimes it takes a little capital to build your American dream…
Many business owners report feeling stressed when applying for a small business loan. It seems that lenders are asking for more and more documentation with each passing day. In reality, most lenders have a standard discovery list of documents that are required to apply for and process a loan. Knowing which documents will be required and getting that documentation in order before you apply for your business loan can reduce your stress and speed-up approval of your loan.
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