SBA 504 Loans

Business owners planning to renovate their commercial space can apply for an SBA 504 loan if they have a good credit score of above 650 and own the real estate property. The business funding can be used to modernize, remodel, or make additions to the building space as required.

Usually, an SBA 504 loan comes in three parts – 50% of the loan is offered by a lending institution like a bank, 40% of the amount is funded by an SBA-approved Certified Development Company, and the rest 10% is taken as a down payment by the borrower. SBA 504 loans generally come with a small 5% interest rate, and they can have a term of 10 to 20 years. What’s more, borrowers can also include soft costs of commercial remodeling, such as the fees of the general contractor, into the loan amount.

Bank Loans

Traditional bank loans are the next best option to SBA 504 loans. Business owners having a good credit score and a significant amount of equity in their business can apply for the loan and get it approved for competitive rates. Usually, the borrower would also be required to make a down payment of 20% to 30% to secure a traditional bank loan for commercial remodeling.

An equity loan or line of credit by a bank works quite similar to home equity loans and personal lines of credit. However, the difference here is that the loan would tap into the equity that the borrower has in the business. Entrepreneurs can also apply for secured lines of credit for commercial remodeling. Yet the terms and conditions might differ in this case depending upon the lending party.

SBA 7(a) Loans

An SBA 7(a) loan would be the most rewarding option for businesses that do not qualify for traditional bank loans. This is especially the case when a business owner is planning to renovate an office or industrial unit that is leased. SBA 7(a) loans are usually considered as general purpose working capital loans, but the funds can be used for renovation and remodeling of the business space as well.

Although most of the lending institutions hesitate to offer a commercial remodeling loan for a leased property, they would be more comfortable to approve the funding when it is guaranteed by the SBA. However, the borrower should have a good credit score and the ability to put at least a 10% down payment in order to qualify for the loan. Note that the more the down payment, the higher are the chances of getting the loan approved. The rates are more reasonable here, and the term can be up to 5 to 7 years.

Asset-Based Loans

An asset-based loan would work best for business owners who have a low credit score, and cannot qualify for an SBA-approved business funding for commercial remodeling. However, the borrower would still have to be the owner of the business property to qualify for the loan, as these are secured by commercial real estate. Besides, it also requires a larger down payment to qualify for asset-based or hard money loans.

Asset-based financing is generally more expensive than traditional bank loans and SBA loans, but they can have reasonable interest rates. Besides, the term to repay the loan amount can also be very flexible, but it would depend upon the lending party and their terms and conditions. An asset-based loan can be great for business owners who have an old facility and want to renovate it into a modern industrial unit.

Online Loans

Online loans and business lines of credit are the easiest to qualify for, but they can be very much expensive depending upon the lending institution. The lender usually does not put much emphasis on the credit score of the borrower here. Besides, there is no need for making a down payment to secure the loan either. However, lenders might require the borrower to agree to offer a general lien on their business assets to get the loan approved.

This business funding option can be the best thing for business owners who have a bad credit score as well as for new entrepreneurs who do not have much experience in managing a business. The funds are released very quickly here and it can be used for virtually any business need. The only thing to take note of here is to manage the scheduled payments sensibly, so that the business assets put as collateral are not seized because of default.

The post 5 Ways to Secure a Commercial Remodeling Loan appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.

Technically, working capital refers to the amount of money you have left after cashing in your assets and settling your liabilities within a period of 12 months. It is important that you have a positive working capital to keep the business functions up and running. Securing a working capital loan will ensure that you always stay in a better position financially and maintain the normal flow of your business operations.

Generally, working capital loans involve a shorter repayment term, which can range from three months to one year. This means that the interest accumulated on the loan would be much smaller than other traditional business loans. That is why working capital loans can be a great option for small businesses to make the most of during downtime.

Downtime can be experienced by any business at any time, so being ready for the hard times will always be a wise choice. This is especially true for seasonal businesses, such as those that make most of their income during the holiday season or any specific time of the year. A working capital loan can help such businesses manage their operations smoothly even when they are not making any sales.

Besides downtime, there can be many other financially tough situations where a working capital loan can help. For instance, if one of your biggest clients drops off or if you face some kind of a lawsuit, this can have an adverse effect on the financial state of your company. However, when you have positive working capital at hand, you can deal with such scenarios easily without having to run in all directions to get some business funding.

You can also use a working capital loan to pay off your short-term debts so that your business continues to stay in a healthy place. This will also help you to focus on the growth and expansion of your company. As your business capital remains positive with a working capital loan, you can have peace of mind and make thoughtful decisions to take help take your company to new heights.

The post How Working Capital Loans Can Benefit a Small Business appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.

Generally speaking, a credit sleeve can be considered a form of a business working capital loan. This is usually seen within the energy industry, where the credit agreement is backed by physical energy assets as well as certain cash flow obligations for the sleeve recipient in order to manage the business operations. Businesses go for this option when they see a decline in their credit quality, which could affect their ability to secure traditional forms of business funding. In some cases, a credit sleeve can also be the best option when a business does not have any other sources to finance its operational costs.

Credit sleeves work as a co-guarantee between two parties, where one of them contractually backs the other and offers a guarantee to the lending institutions that all the debts would be repaid in time. In case the sleeve recipient fails to repay the loan amount as scheduled, the physical assets put as collateral by the sleeve provider can be seized by the lending party to pay off the debt.

Typically, this type of business financing is opted by established companies when one of their subsidiaries is financially struggling and cannot avail any traditional funding from lenders. In such a case, the financially stable subsidiary can offer a credit sleeve backed by its physical assets to the economically weaker subsidiary, which in turn would make the lending parties feel comfortable to offer a loan to the financially struggling subsidiary. The sleeve is taken as a short-term financing arrangement, which allows the weaker subsidiary to secure the required working capital to manage its operational costs. This form of business financing is seen amongst joint ventures as well.

Note that a credit sleeve is different from asset-based business financing, and works as a financial helping hand extended by one business to another to meet short-term economic difficulties. It differs from reserve-based lending as well, where the energy company pledges its reserves as collateral to secure the loan amount. Similarly, it differs from pre-export financing too, where only the first proceeds from the sales are used to repay the loan amount.

The post Everything you Need to Know about Credit Sleeve appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.

A small business can borrow any amount from $50,000 or less to $5 million under this program in order to meet with its business requirements. However, this will depend upon how they qualify for the SBA Microloan Program. That being said, the loan amount can be used for a variety of purposes, such as to purchase raw materials, manage staff reimbursements, launch an advertising or marketing campaign, etc. Nonetheless, these funds cannot be used to refinance any debts or to buy a property.

SBA Microloan Program usually involves shorter terms, which means that the interest accumulated on the loan amount would be lesser when compared to the other types of SBA loans. Normally, they have interest rates ranging from 6.5% to 13% and repayment terms of up to 6 years.

Applying for the SBA Microloan Program

The SBA Microloan Program can be an amazing option for those small businesses that expect a positive impact on their business with a little funding. However, a borrower would need to meet the qualification terms and minimum requirements set by the intermediary lender to apply for the loan program. Note that the loan can only be obtained through local intermediaries, so the application process and requirements would depend upon the policies of the intermediary lender.

Most of the lending institutions would require the borrower to have a personal credit score of at least 600 to qualify for the SBA Microloan Program. The borrower would also need to sign a personal guarantee as well as put up collateral for the loan. Also, as it is seen with any type of SBA loan, the borrower would also need to present a well-devised business plan while applying for the SBA Microloan Program. This is especially important for startups and small businesses that are new to the industry and do not have much experience in the field.

Although the loan amount would be much smaller in the SBA Microloan Program, the application process would be very thorough. Sometimes, it could take even up to 4 weeks or longer to get the loan approved and receive the funds. That is why the Microloan Program might not be suitable for those looking for some immediate funding.

The post Everything you Need to Know about the SBA Microloan Program appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.

The most important thing to note here is that it can be very difficult for some businesses to avail a traditional business overdraft from major banks or financial establishments. It is seen that while some of the banks are removing their overdraft policies that are currently offered to small businesses, others are reducing the amount involved in business overdrafts. This is especially distressing for businesses that have an irregular income, such as those in the retail, tourism, and hospitality industry, because it can lead to a significant gap in their working capital.

Fortunately, there are many alternatives available to business overdrafts these days, which such businesses can avail to meet with their financial requirements. Below are 3 feasible alternatives to business overdrafts, which can help a business to maintain its operations smoothly.

Revolving Credit Facilities

Revolving credit facilities work quite similar to business overdrafts by offering a consistent source of funding to the company with a pre-set limit. In other words, it can be like a small business loan that is ready to be used as and when needed. Besides, the borrower is only required to repay the amount used, which makes revolving credit facilities a much reliable option to secure business funding as required.

Merchant Cash Advances

Merchant cash advances are a way of financing business operations in exchange for their projected card sales. It involves flexible repayment schedules and the option to top up the funds when a part of the advance loan has been repaid. The most amazing thing about merchant cash advances is the speed of processing the funds; the borrower can draw out cash within a couple of hours after setting up the account.

Business Credit Cards

Business credit cards can also be a good source to acquire some quick working capital. They work the same way as a personal credit card does, but come coupled with many business-specific features, such as expenses tracking and the option to link multiple cards to the same account. The main benefit of business credit cards is the amount of funding, which can be much flexible when compared to business overdrafts. However, note that the credit limit, as well as the interest rate, might vary from lender to lender.

The post 3 Feasible Alternatives to Business Overdrafts appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.

Short-Term Loans

This is the most common type of business funding these days. Working capital in the form of short-term business loans is easy to acquire, involve comparatively fewer costs, and can be used for a wide range of purposes. These loans give the borrower access to a lump sum that is to be repaid usually within 3 to 18 months.

Lines of Credit

This is one of the most flexible options for business funding. This financing option offers the borrower access to a pre-defined amount, which can be used as and when needed. Working capital in the form of a line of credit can work best for small businesses, as they can have it as a backup in case their revenue goes down.

Merchant Cash Advances

Working capital loans can also be sourced as merchant cash advances. Here, the lender would fund the borrower a fixed amount in advance in return of a definite share of the projected credit card sales of the company. This is the easiest way of securing business funding these days, but it could involve comparatively more interest rates.

Invoice Financing

This is the simplest way of acquiring working capital funding for a business. Invoice financing can be a great way to manage the daily operational costs where customers are usually late to pay their outstanding invoices. This can work to free up the business capital and cash flow that can be used to maintain business operations.

SBA Loans

A short-term loan secured by the Small Business Administration can be a great source of working capital. The SBA 7(a) loan program especially works well for acquiring working capital for small to medium businesses, which gives them access to funding ranging from $5,000 to $5 million that can be used for a variety of purposes.

The post 5 Types of Working Capital Loans appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.

SBA Business Physical Disaster Loans

This loan program is designed by the SBA to help businesses replace or repair the damages in their property that are not covered by insurance. The loan amount available with an SBA Business Physical Disaster loans can go up to $2 million and the interest rates usually range from 4% to 8%. The loan term can be as long as 30 years with monthly repayment schedules. However, in order to qualify for the funding, your business should have suffered physical damages because of the disaster as well as be located in an SBA-recognized disaster area. Not only that, but you should also have a personal credit score of 600+ and pledge collateral in order to qualify for the loan.

SBA Economic Injury Disaster Loans

This program is designed by the SBA to offer working capital loans to businesses affected by a disaster. It involves short to medium terms, and the interest rate on the loan amount is usually set at 4%. The funding is aimed at helping businesses that have experienced considerable economic damages and can offer up to $2 million to meet with their standard operating costs. Note that in order to qualify for the SBA loan, your business must have suffered a significant financial loss because of the disaster. You should also be able to show your ability to repay the loan to get the funding approved by the agency.

SBA Military Reservists Economic Injury Loans

This loan program is designed by the SBA to help businesses cope with their loss of revenue when one of their main employees is called up for active military service. The agency offers up to $2 million to meet with the normal operating expenses in such cases. The interest rate on the loan amount is generally set at 4% here and it involves short to medium repayment terms. In order to qualify for the funding, your business should have suffered the loss of an important employee because he/she was called for active military duty, and his/her absence led to an inability to meet your company’s day-to-day operational costs.

The post A Quick Look at the Different Types of SBA Disaster Loans appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.

A stretch loan is different from a senior stretch loan, where the business loan combines senior debt with junior or subordinated debt in one package, which is usually sourced to fund leveraged buyouts. Stretch loans, on the contrary, are typically acquired by businesses as working capital in order to manage the daily operational costs of their company. This way, the borrower can ensure that the loan amount would be smaller and it would accumulate less interest. The only thing to note here is that the loan amount would have to be repaid within a short period, and that could involve big monthly repayment schedules depending upon the principal amount acquired. Regardless, such a stretch loan can be used for a wide range of purposes and in turn bring more revenue for the business.

Take for instance that you want to buy new inventory to restock your warehouse, but have not collected the accounts receivable balance from your retail customers yet. In such a case, you can get in touch with your lending institution, and ask for a stretch loan to finance the inventory purchase. As soon as you collect the outstanding accounts receivable amount, you can repay the stretch loan without any hassles.

Note that the maximum amount for stretch loans is determined by the lender, and the interest rates involved would be a bit higher than that seen in a normal working capital loan. Not only that, but it can also have other fees involved that can make it more expensive than traditional business loans. Still, a stretch loan can be a great option to ease the financial burdens on your shoulders to run the business. With this business funding option, you are not required to take a huge loan amount to meet with day-to-day operational costs, which can incur more accumulated interest.

The post What is a Stretch Loan appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.

Generally, a working capital loan involves repayment terms starting as short as three months and can go for as long as one year. In addition, the interest rate can be higher when compared to other common business funding options because of how small the loan amount is. That being said, so long as the loan is repaid on time a working capital loan can be used to fund business operational costs again and again as per the needs of the borrower.

A term loan, on the other hand, features longer repayment periods ranging from one year to five years. These types of loans are usually designed to cover daily expenses and regular costs, as well as help to cover bigger investments that would, in turn, help the company increase its revenue. The loan amount here is usually determined based on the projected sales and returns on investment, and it can go as high as $5 million depending upon other criteria set by the lender. In addition, the common prerequisites involved in term loans, such as repayment method, need for collateral, interest rate, etc., vary depending upon the lending party as well.

Both of these loan types are suited for smaller businesses and startups that are finding it difficult to manage their regular expenses. However, it is important that you only apply for a working capital loan or a term loan when you are confident that you can pay off the debt in time without having to run into any cash crunch situation. For instance, you should never secure business funding only to pay off your bills or manage the inventory. Instead, it should be used to cover the cost of running your business so that you can have a stable revenue to repay the loan amount in time.

In general repayment amounts are lower when it comes to term loans, meaning that it can be easily managed when compared to working capital loans. Besides, you can also use the loan amount for a wide range of purposes, such as buying new equipment, launching a new marketing campaign, or securing an additional property, and in turn, leading to more revenue for your business. So in a nutshell, while working capital loans are great for minor expenses, term loans can be better for major expenses that can help deliver long-term results for your business.

The post Working Capital Loans vs. Term Loans appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.

Usually, a lending institution approves a specific percentage of the real estate purchase value depending upon the relevant property development plans. If there are no plans yet, the lender might offer another product to purchase the property and to continue with building the project. The risk is very high in property development financing during the construction, as it can be very difficult to sell the secured collateral when it is only half-way done. That is why the interest rates charged on this type of business loan are usually much higher.

Property Development Financing Costs

The costs associated with property development loans can vary greatly from lender to lender. As the risk assessment is done by the lending institution, they are in charge when it comes to determining the interest rate based on perceived risk factors. To evaluate the risk, the lending party considers the location of the building, the borrower’s financial history and experience in similar projects, the loan size, and repayment terms. The lender would then fix an interest rate on the property development loan which can range anywhere from 5% to 16.2% per annum.

Apart from the interest rates, the lending institution can also charge a fee for the arrangement of the property development loan which is around 1% to 2% of the total capital. The lender can also charge a fee for redemption, which is again 1% to 2% of the principal amount. There is also the broker fee to think about too. If the borrower is using a broker to secure the loan then the broker fee can be around 1% to 1.5% of the capital amount.

Property Development Loan Amount

The amount of funding the borrower can get usually depends upon the value of the collateral, the risk factors, as well as the gross development value. The lending institution releases the funds at regular intervals and in stages in order to manage the loan as well as help to protect itself from any losses. The stage payment can be released either every month or at specific benchmarks set by the builder. Generally, most lenders release around 60% to 70% of the property value as it is on day one during the first stage. However, some lending institutions will release the full amount for the property’s purchase value depending on other factors.

Another key thing to note in property development loans is that the borrower needs to communicate regularly with the lender and arrange for site visits as necessary to ensure the smooth release of stage payments. The lender could also appoint a monitoring surveyor to ensure proper release of stage payments as well as to check that the project is right on track as proposed in the plan. The monitoring surveyor can also check the quality of the works done as well as analyze the value of the property at regular intervals.

Risk Assessment and Repayment

Every lending party has its own strategy when it comes to assessing risk before approving a property development loan. Normally, the lenders will require the borrower to provide personal details such as name, date of birth, and address of communication. They would also need details of the company, details of the planning permissions, revisions, and future applications, as well as the expected timeline to complete the project. In some cases, the borrower is also required to submit the detailed costing which the lender can then evaluate and use as a point of reference to release the funds as applicable.

The repayment of the loan amount can be done monthly, quarterly, annually or in full at the end of the project as agreed by both the lender and the borrower. The monthly interest is added to the loan amount so the borrower is not required to pay anything every month. This is because development projects usually have a very poor cash flow during the construction period, and most of the income comes after the completion of the project.

A commonly cited drawback of property development financing is that lenders require too much information to assess the risk in order to approve a loan. Although this can be facilitated by a well-planned project proposal, some of the information might have to be provided individually. Regardless, this type of business financing can be a boon to property developers and can create opportunities for better profits by allowing them to take on bigger projects. Property development financing also allows a builder to work on multiple projects at the same time by helping to ease their financial burdens.

The post What is Property Development Financing? appeared first on Business Financing, Line of Credit, Fast Business Capital :: Fundygo.com.