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How To Get A Business Loan

April 5, 2012 By Leave a Comment

We have all heard the current economy has made it very hard to get a business loan. Further, getting a business loan without a proven business track record is supposed to be hard. But is it really?

There are plenty of lenders out there with funds for business loans and the good ones will help you learn how to get them. It is always strange to me that lenders are shocked when their borrowers are not familiar with the process. So hear is what you need to remember before you apply. Please keep in mind the 5 C’s Of Credit.

  • Character – How you have handled credit in the past.
  • Collateral – Security you can provide for the lender for repayment of the loan.
  • Capital – The money you have personally invested in the business.
  • Conditions – Describe the intended purpose of the loan and how your niche fairs in the market.
  • Capacity – The ability to pay back the business loan.

Capacity is the most important decision for a lender who is interested in making a loan. They must decide if you have enough cash flow to make the payments. Then they must consider the length of time it will take to pay it back and if they think you can really do it.

This is all part of a banks risk assessment for the loan. But keep in mind that in order to stay in business, banks and lenders need to make loans. They want to approve you based on the above. So never be afraid to ask for a business loan.

When you go in to apply make sure you bring three things with you to.

  • Tax Returns from the last 2 years
  • Personal Financial Statement
  • Your Business Plan

Next, be prepared to answer a few very basic questions about your intent.

  • How much money do you need?
  • How long will you need it?
  • What are you going to do with it?
  • How are you going to pay it back?
  • And, What will do if you don’t get the business loan?

If you have a good understanding of everything mentioned above, you will be ready to discuss getting a business loan from your bank or business lender. But what if you don’t?

What If I Don’t Qualify For A Business Loan?

What if you learned about the 5 C’s of Credit and don’t have a business plan? What if you don’t know exactly how much money you need or market data about your niche? How then, do you get a business loan?

How To Get A Business Loan

You’ve Been Approved!

The answer is to ask for one. Just ask for it from the right people. There are more loan programs out there than you could ever count. There are several programs for first time borrowers with no business track record or plan. Many are used to establish your business credit for the first time.

For those with no business track record or are first time borrowers, unsecured business loans are an attractive option. They are easy to get and can be based on your personal credit history and require no collateral for the bank.

A lot of business owners don’t even realize that loan programs like this exist but sometimes they are much more attractive than traditional SBA loans. There are few, if any, restrictions on how the money is used and the loan can even be used to pay down existing debt.

Today’s economic conditions require creative financing and getting an unsecured business loan may be the perfect answer for people looking for a business loan to keep their doors open or expand for the future. Fill out the form on the right to get qualified absolutely free!

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3 Programs To Finance Your Business

April 3, 2012 By Leave a Comment

Finance Your BusinessIt is no great secret that people in business face challenges and money is one of the biggest. Today, most people believe that it is small business that will turn things around. So why is it so hard to get a loan?

Part of the problem is the size of government. Believe it or not, it is shrinking. Cutting the fat saves on costs.

Spending money to attract business has always been important, but it has been cut back in many areas. Cities and States have problems just providing basic services. So priming the pump is now not an option for some areas.

Providing loans to create more jobs is the goal, but few seem willing to step up to the plate to make it happen.

Why Lenders Won’t Lend

Even the Federal Reserve low interest loans program has not made it much better for business owners tap into the funds. Lenders are trying to clean up their balance sheets so the process has simply gotten tougher.

Lenders want to write off bad debt. They also want to avoid future risk. As a result, it is now just harder to get business loans.

Because so many people need help finding loans, the Small Business Authority is trying to step in. They offer services which help to find and structure business loans.

The goal is to help businesses survive tough times and prepare them for future growth. Here are 3 of their current programs. Are you prepared to take advantage of them?

Flexible Term Lending Program: This program provides loans from as little as $50,000 and up to $5million. The terms range from seven to twenty five years and depend partly on how the proceeds are to be used. The rates can extend up to 2.75% over prime and float. Any “For Profit” Business in the United States can apply.

Fixed/Floating Rate Program: Here the terms are much the same as above but rates can be fixed based on current market rates. It should be noted that neither program allows proceeds to be used for real estate.

Conventional Real Estate Loan Program: This is the program which allows proceeds to be used in buying commercial real estate. You can even use the loan to upgrade, refinance or expand your property. Rates can float or be fixed with terms up to 30years with loan amounts up to $5million.

The fact that such programs may be welcomed news to some but how hard is it to get approved? Like most loan programs these days, lenders are looking for low risk applicants. Many small business owners feel they no longer appeal to lenders.

The truth is that many small business owners have had change their approach to business. Times are tough, and have been since 2008. Many owners have been forced to find creative ways to keep their doors open. But it can come at the expense of their business credit.

We hear a lot about late payments on business loans along with downsizing of employees and shrinking services. During this credit crisis people who have had to make tough choices when managing their money. The result for many has been denial of new credit.

It just does not seem fair but there is good news for business owners who are looking for loans. There are great business loan programs out there for nearly every one. In fact those looking to avoid government backed loans that contain limit use of proceeds may be in luck.

Borrowers want to be use to use their money how they see fit. But most business loans contain several restrictions. Did you know that very few people even know they can get approved for a loan using their personal credit?

Being turned away by the big lenders may not be such a bad thing. It has allows small business owners to learn about other ways to find loans. In many cases the loan terms are even better for the borrowers.

If you have not explored other types of business loans seek them out. If you would like some guidance, you can get pre-approved for free by filling out the form on the right. Getting a business loan has never been easier than it is right now.

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Alternative Business Loans

March 16, 2012 By Leave a Comment

Alternative Business LoansNow quickly approaching the end of the first quarter of 2012 it is safe to report back on the business loans trends that really did take hold and changed the way we all did business in 2011. Many times, the buzz words in our industry do not really reflect what is going in the market place but the following really does represent the business loan trends of the past year.

Since the credit crunch began over four years ago the trend of big banks saying no to business loans has been at the heart of the industry so small business lenders have had to turn to alternative capital sources to continue their operations and try and turn a profit in a severely depressed economy. There were a few alternative lending sources which came to the forefront by 2011 and they seem to be going string early in this first quarter.

Alternative Business Loans Making News

Chief among these hot new sources for business loans are Credit Unions, Community Development Financial Institutions, Micro Lenders and Accounts Receivable Financers. The methods for determining growth in new loans from these types of sources are shown in the increase percentage rate in approved loan applications compared to the total number of applications submitted. The trend shows that these alternative lenders are approving more loans while traditional business lending banks are declining.

Credit Union Business Loan

Remember, a credit union is not a bank, it is a member owned institution. Therefore, the rules governing the issuance of loans differs from traditional banks in many ways. In 2011 the requirements for reserves Credit Unions could have tied up in business loans was relaxed which gave them room to aggressively enter the business loan market. In fact, collectively, they are lobbying the Government to nearly double their 12.5 percent cap on business lending in the near future.

Since credit unions are member owned they tend to be thought of as more “local” and have a vested interest in the communities where their members live. The rise in their loan approval rates are combination of several factors but competitive rates, access to more of their reserves and an understanding of local small businesses are the main reasons.

CDFI Business Loan

You may have also heard of a CDFI, or Community Development Financial Instituion, which is simply and financing entity giving business loans under the guise of community development. Special legislation back in 1994 gave rise to these institutions which have access to lending fund backed the U.S. Treasury.

Loans which do not qualify for traditional bank lending can often find help through a CDFI program which has the freedom to get a bit more creative with their funding programs. Again, these mainly focus on local business to business products because the Community Development funds are ideally suited to enhance local markets in combination with other community building efforts.

Micro Lenders

The term micro lenders refers to lenders who make small dollar amount business loans to entrepreneurial type businesses commonly in depressed areas. Not only do many inner city revitalization zone qualify for certain types of micro loans from non-traditional lending sources, but we often see web sites for individuals to make micro loans to needy people looking to start businesses in third world countries. It is a chance for individuals with no credit or bad credit histories to get a chance at starting a venture with very little investment.

Accounts Receivable Business Loans

These types of loans have long been know as factoring. Simply put, a lender will buy a portion of a companies account receivables at a discounted rate in exchange for money in the present. When the accounts are collected the balance owed is paid to the lender.

In factoring, a business owners can expect higher rates because some transactions are based on high risk so the lender is justified in the charges. These are to be avoided unless in very unique circumstances.

With the exception of credit union business loans, the other alternatives are not in the best interest of the borrower. Unless these loans are extremely short term, it is best to look for other options. If you are looking for competitive business loans in a nontraditional package, then fill in the form on the right and let Seed Capital do a free application to determine your needs.

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Business Loan Or Business Cash Advance?

January 4, 2012 By Leave a Comment

Business Loan Or Cash Advance?Since we have touched on Merchant Cash Advances people have asked us if they are the same as a business loan. They are really are not but the confusions sets in when a merchant cash advance is called an alternative business loan.

Technically a merchant cash advance is a business loan because you are borrowing money for your business but traditionally most people think of a loan is going to a bank and getting an SBA loan. Creative ways to finance businesses have always been around but saying that they are equivalent to a business loan is simply not true. It does not mean they are necessarily bad but they are definitely different than what we commonly believe a business loan to be.

Some would argue that a business cash advance is actually better for those with questionable credit because the terms focus more on what may happen in the future than what has happened in the past. Considering today’s economic climate, there are lots of business borrowers out there with less than perfect credit and this may be what makes this type of loan seem appealing.

Although we do not endorse any type of business cash advance, proponents of these programs definitely make them sound terrific. They are touted as a solution for start ups without any credit history and require no collateral. They point out how quickly their approval process is and that there are no personal guarantees required to get funding. Further, there are never any hidden fees because you know exactly what you will pay back before you get your money.

It really does sound great, but the same could be true for many other business loan alternatives so don’t let the sales pitches fool you.

What Will I Pay For This Alternative Business Loan

We are glad you asked because we don’t really know. This is where it gets confusing. Even as stated above, there is no requirement for business age order to get a cash advance but your time in business will reflect in your fee. Also, most of these types of loans are based on credit card sales. So first things first, you need to accept credit cards as a form of payment to qualify for a business cash advance.

If you do not take credit card payments there may be hope because even this creative financing can get creative, but typically accepting credit cards is part of the program. The actual fees and required payback period are generally dependent on your sales volume over the previous 6 months. This program is considered high risk for the lender and that risk is reflected in the fee.

Here’s how this Business Loan really works

You often here about the flexible terms that coincide with a business cash advance and while this is true, again it does not mean it is necessarily good. Your payment is based on your gross sales. If your sales go down then you pay less at that moment and if they go up you pay more until your loan is paid off. Let’s make this simple.

Business Cash Advance Amount: This is the amount you receive as your business loan and is usually based on your sales for the 6 months prior to application. We see loans granted between 80% and 125% of the average monthly sales.

The Fees: The fees are called factors in the industry and they are quite high due to the risk. We see them average between 20% and 45% of the total cash advance amount but have seen them higher for businesses that are more risky for a lender.

Retrieval Rate: This is the amount a lender takes out of your daily credit card sales in order to pay back the loan. The retrieval rate will be less than your Factor Rate so there is enough money on hand to keep the business going but it is usually between 15% and 25%.

Let’s Do the Math. If your “business loan” is for $50,000 with a rate of 35% (fee) and a daily retrieval of 25%, then you owe the lender $17,500 in interest and this will be paid back daily as part of your sales. The higher your sales, the quicker it will be paid back but your fee is still the same.

The good part is that a business owner will not have a high interest rate business loan hanging over their heads because it will be paid back shortly. If the business fails, then the lender takes the hit. But, it is a good bet that the lender has received most of their investment back should this ever happen.

It is true that the business cash advance is quick and easy but should never be confused with a traditional business loan. It is what it is and it is nothing more than a cash advance which should be treated with the same apprehension as they are on the consumer side.

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Unsecured Business Loan Alternative?

January 1, 2012 By Leave a Comment

Merchant Cash Advance Or Business Loan

Unsecured Business LoanFor those who have been turned down for a business loan in the past, they often feel that chances of them having their own businesses are over. That is simply not true, but if you have been keeping track of the business lenders over the last year or so, you would think your only unsecured business loan alternative is a merchant cash advance.

It is certainly an alternative but not always a good one to manage a sustainable business. Many companies swoop in offering a Merchant Cash Advance when a traditional bank says “no” to a business loan and they make it seem like a miracle. A merchant cash advance company makes it easy to apply and can give you an approval within 24 hours in many cases. So let’s take a closer look at this type of business loan.

For the purpose of defining a merchant cash advance, let’s say that it a creative way for a business to get capital based on sales. You basically get a predetermined loan and pay it back when you receive money on your sales. If you sell less than you plan, then you pay back less. If your sales are up, you will pay more and pay the loan off quicker. It sounds great doesn’t it? On the surface yes.

You will see many lenders say that a Merchant Cash Advance is the best way to have access to capital on an ongoing basis to run your business more effectively than other borrowing sources. But as with most instruments, the marketing is flashy and clever leaving a prudent small business owner to dig deep for all the facts. But let’s be fair, there are certainly some niches where a business loan in this form has a very strong appeal.

But let’s be as clear as we can about the difference between a traditional business loan and a merchant cash advance which is touted as the alternative.

A Merchant Cash Advance Is Different Than A Business Loan

From the perspective of a Merchant Cash Advance lender their product has many benefits. A traditional business loan comes with a lot of restrictions before any funding can take place. There has to be good business credit, a solid business plan and at least some sort of track record to justify the granting of a business loan. And this really is true because a because a business cash advance lender focuses on what may happen in the future as opposed to what has happened in the past.

A traditional business loan may require:

  • 2 years of financials that show a good repayment record
  • Certain types of collateral IS required
  • A stringent drawn out application process

A merchant cash advance company has an answer for all of that. Namely that there is no need for years of financial paperwork, no collateral needed because the business loan will be based on future sales and a very quick approval process. In the end the Cash Advance lender will tell you they won’t turn you down and the chances of unlimited loans from them are very high.

This all may be true but at what cost. A merchant cash advance is very expensive compared to a traditional business loan because they assume a very high risk. This is fair but most businesses should look to a high cost loan as a sustainable business model. There are unsecured business loan alternatives out there and they are just as easy to get.

For example, Seed Capital offers a quick turn around program with a minimum guarantee of $50,000 in working capital all while establishing future business credit. There are no strict requirements as with a traditional business loan and the turnaround time for the application processes is quick. And did I mention the application is free?

So do not get too hypnotized by the clever marketing strategies of the merchant cash advance lenders when you are hunting for a business loan.

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Getting A Business Loan Changed Greatly In 2011

December 31, 2011 By Leave a Comment

Where To Get A Business Loan In 2012

Business Loan 2012

 

Credit Union Business Loan
CDFI Business Loan
Micro Lender Business Loan
Merchant Cash Advance

This year shed light on several ways to get a business loan.  Some were good, but as the industry changes, so much remains the same. When big banks said no to a business loan, others stepped up to fill the void.

Credit Union Business Loan

First and foremost, a credit union is different than a traditional bank because it is owned by its members and technically not for profit. They tend to focus on customer deposits for revenues and attempt to originate competitive mortgages for their members. Membership to a credit union usually comes at a minimal cost and used to be industry specific. But things have changed and just about anyone can apply for membership. A credit union does have the ability to give out a business loan to its members but they amount of assets they can earmark for business loans is currently capped at 12.5%. There is a major push to raise this cap and allow credit unions to increase their place in the credit markets.

CDFI Business Loan

A little different, but also focused on extended local credit, are Community Development Financial Institutions, or CDFIs. They have been around for nearly 100 years but did not gain significant momentum until the creation of the Regulatory Improvement Act of 1994 when the Treasury got involved in funding CDFI initiatives and programs. Because of this Community Development Financial Institutions have access to SBA guaranteed business loans which expose lenders to less exposure than non-guaranteed funds. The CDFIs originated because these very lenders largely ignored communities in need who were plagued by poverty or lack of foreseeable profitability for a financial institution. Since the credit crunch of 2008, CDFIs have been a very viable alternative for those looking for a business loan.

Micro Lender Business Loan

In much the same spirit of credit crunch lending, Micro Lenders gained enormous popularity because of the ability to get very small loans without much credit history, if any at all. Initially most of the micro business loans were granted by private lenders in economic empowerment zones. An empowerment zone is an actual area which is designated for social, economic, physical and spiritual development. Before the establishment of such zones, these areas were again those neglected by traditional financial institutions who saw no upside to making a business loan based on the geographical location of the entity. But once capital was flowing into the area due to legislation, micro lenders began to look at a local business loan as an opportunity. A typical micro loan is around $1000 or less, but there are programs for up to $50,000 which can still be considered a micro business loan.

Merchant Cash Advance

The last alternative funding source making news this year were Accounts Receivable Lenders, now commonly referred to as Merchant Cash Advances, saw dramatic increases in applications since the credit crunch. The merchant cash advance has evolved slightly over the years and is a business loan based on future credit card sales. Business owners pay back their predetermined loan when they receive payment from their credit card sales. The upside that if sales do not meet expectations, then the merchant pays based on the lower sales. The rates are high but for merchants with the need for quick cash to keep their businesses running while waiting on money from sales to trickle in, this is an attractive option.

Of all the business loan options above, Credit Unions seem to be the most favorable for the borrower. However, as with most favorable programs these business loans are for very attractive borrowers only. If you do not have a high PAYDEX you will not be approved. The other options do serve their purpose but accept for very specific businesses merchant cash advances are too expensive to be worthwhile and micro loans simple do not provide enough money to be safely capitalized for long term success.

So as evolution of alternative lenders over the past year shows there in new interest by borrowers to get a business loan which if nothing else shows that the capital markets are on the upswing. But, even the most prudent business borrower need to be comfortable with all the elements of such programs before agreeing to sign on the dotted line.

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Is State Run Banking Better For Small Business Loans?

December 27, 2011 By Leave a Comment

North Dakota Small Business LoansIt is not that often that we look to North Dakota as a model for small business loans but the successes of the state’s banking system has spurred other states to take notice.  Of all the 50 states in our country, North Dakota is the only one with an official state bank.

The Bank Of North Dakota was founded in 1919 and as the official state bank, all state run agencies are required to bank with them.  The bank then serves as the hub of local development by making small business loans, farm loans and other economic development projects.  The fact that North Dakota is the only state without a budget deficit since the credit crunch began, has political rabble-rousers from around the country demanding their state’s look into such a system.

There are a lot of factors in play for North Dakota which may be leading  to their budget surplus and low unemployment and mirroring their state run bank may not work so well in other areas.  Nevertheless, several states have formed committees to do feasibility studies on the subject and within a few years we may other states following suit.

But critics of such measures have some very valid points.  The fact that North Dakota has the only state run bank in the Union does not mean they are the only state on the ball.  Every state has had the option to introduce legislation and chosen not to.  The main reason is that they do not see a need.

The truth is that a state run bank may sound like a good idea, but those claiming they need the state’s help securing favorable small business loans are not going to be good candidates for borrowing anyway.  Attractive business borrowers have access to capital in North Dakota and the rest of the country within the private sector.  In fact small business loans may be easier than ever to get for start-ups and low dollar borrowers.

North Dakota’s Banking success is very impressive but not really scalable.  Local businesses who are able to get business loans from the Bank Of North Dakota are viable candidates at any bank.  It is the other borrowers, who may require some creative financing options, which are the ones that need the most help.  Legislation and exploratory committees not necessarily the cure the economy.

If you are looking for a small business loan and have not yet established business credit, now is the perfect time to obtain financing.  Fewer small business borrowers are looking to banks, state run or not, for loans.  The funds with favorable terms are simply not there for most borrowers.  Programs like Seed Capital, help put new businesses, franchises and undercapitalized outfits in position to get unsecured business loans with very favorable terms.

All it takes is a free application and any business will find out if they qualify for these type of small business within just a few days.  The process is simple and there are programs available for nearly every business type.  So if you are in North Dakota, or anywhere else, apply for your small business loan today.

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Business Loans Oregon

December 26, 2011 By Leave a Comment

Is It A Good Time To Get A Business Loan In Oregon?

business loans oregonNext in are coverage of State’s business loans program is Oregon.  Oregon will start accepting business loans applications later this week due to their acceptance of over $16 million in federal funds.  Oregon already has a strong business loan program and these latest funds elevate state caps to at least $165 million to help bolster the local economy.

Just as with other states, lenders are seeking Federal assistance to strengthen their positions as they try and get capital into the hands of those who need it most, small business owners.  It is a kind way of saying that lenders are trying to reduce their risk exposure in difficult times, especially since they are under far greater scrutiny than in times past.

The buzz word in Oregon is jobs creation, so this program is getting a lot of public support.  But, does the public really expect to be able to get a favorable business loan?  Let’s hope not.  First, as with any State program, applicants should be solid risks.  The days of bailouts are over and anyone with less than stellar business credit or lack of a solid business plan, need not apply.

As harsh as this may sound it needs to be stated that federally backed business loans are not for everybody.  In fact the average business borrower is not even close to being a candidate because of the tough choices they have made in order to keep their doors open.  As much as they should be applauded for biting the bullet and shouldering the burden during dismal economic time, they will actually be punished.

Help is not on the way through the Oregon business loans program or any other.  While it is true that these state programs that we so much about on the news have provided millions of dollars in favorable business loans to countless businesses over the years, they are not geared toward the average borrowers.  What is good about them is they relay a positive message about the lending climate and subconsciously encourage those thinking about borrowing, to actually begin to investigate the process.

So How Do You Get A Business Loan?

Fortunately, getting a business loan is as easy as it has been all along.  Even in a down economy, lenders are willing to lend, as long as you know how to ask.  For the average business borrower with good personal credit, a business loan with favorable terms and even deferred interest payments are easy to secure.  Seed Capital can guarantee a minimum of $50,000 in unsecured credit lines based on filling out the form to the right.

You do not have to worry if you have no established business credit or payment history because the Seed Capital program is designed to leverage personal credit into a strong PAYDEX score which will bring even more borrowing opportunities in the future.  So if you are looking for a business loan in Oregon or anywhere else in the United States you just may be in luck.

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Get A Business Loan In 2012

December 24, 2011 By Leave a Comment

Business LoanIt is never too early to plan for your business loan in 2012.  Contrary to popular belief, securing a business loan has never been easier than it is right now and here is why.  People believe the only place to get them is through a bank, and the only ones available are regulated by SBA guidelines.  This is simply not true.  If you have good personal credit, there are programs out there to deliver the capital you need.

It has been proven that nearly 80% of all new businesses fail due to undercapitalization so understanding how to get a business loan, and what type of options are available, is crucial for your future success.  For example, did you know that you can get business lines of credit which do not appear on the credit file of the business owner?  It only takes about two weeks to get an unsecured line up to $150,000 with terms as low as 0%. Most business owners have no idea something like this even exists.

But first, it is important to understand the differences between business and personal credit.  Getting loans based on personal credit uses a person’s FICO score.  A score over 720 is considered good and helps people get credit with favorable terms.  But taking a loan for let’s say, a car, and can hurt your ability to borrow because loans are available for the value of the car and therefore you are using more than 30% of your available loan which can make securing further credit more difficult.

How To Get A Business Loan

In business, underwriters look at the PAYDEX score.  Someone with a perfect repayment history can receive an 80 PAYDEX score and unlike personal credit, using your business loan will not hurt your PAYDEX score.  When trying establish business credit it is important to develop two types of credit.  Cash Credit and Supply Credit.

Cash credit includes bank loans, credit lines and credit cards.  Supply Credit includes vendor accounts like gas cards, shipping suppliers and office suppliers.  With proper business evaluation business owners can strategically apply for credit in both of these categories.  With several applications, business loans totaling up to $150,000 is easily achievable.  Once credit is obtained you can then begin working to establish that all important PAYDEX score by making sure your payment history becomes flawless.  This will begin to take shape about 4 months after the first business loan.

Keep in mind that a PAYDEX score of 80 is what will serve to create more, and better, borrowing options for a business in the future.  But in the beginning, it is important to learn to utilize the initial credit lines that were opened in order to insure maximum profitability for your business.  Managing your initial lines well will help strengthen the relationships between a business and the lender and help increase the amount of credit being offered that very lender.

It is not difficult to get involved in such a program, especially with Seed Capital.  There are no business age or income restrictions.  This means that established companies or start ups can benefit from such strategies.  The only requirement to get started is that there must be a principal of the company with at least a 720 FICO score and relatively low usage of available credit.

So no matter what the state of economy may appear to be, and what you have read about the credit markets, getting a business loan is just as easy in 2012 as it has been during the best of times.

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New Jersey Business Loans

December 7, 2011 By Leave a Comment

New Jersey Business LoansIn our efforts to keep our business loans audience aware of happenings concerning them and their local states, today we focus on news out of New Jersey.  It may come as a surprise to many that each state is yet to have a fully viable business loans program that offers favorable terms to small business, but New Jersey now hopes to rectify that.

Proposal (S-3052) which aims to help New Jersey small business owners with a commitment to hiring gain access to capital was introduced and approved by the State Assembly earlier this week and is now on its way to the desk of Governor Chris Christie.

The proposal comes with plenty of red tape but for those well qualified businesses, the effort will be worth it.  Business Loans up to $250,000 may be provided at rates as low as 2% for businesses who will work toward increasing their hires by 10% over the next 4 years.  The proceeds do not need to be earmarked for salaries per say.  Monies can be used for capital purchases or other necessary business investment which will support the framework for future hires.

Any independently operated and owned New Jersey based business which currently employs fewer than one hundred people and has raised less than $10 million in equity financing or has received $10 million or less in monies from other sources is encouraged to apply through the state’s Economic Development Authority.

One of the most interesting facts about the New Jersey program is that its operating costs will be covered by the loan repayments and not be subsidized by the taxpayers.  With unemployment approaching 10% within New Jersey, burdened taxpayers will likely applaud the program as opposed to other state programs which have been plagued by criticism.

While certainly not a program for the “every man”, we applaud New Jersey for understand that there is a true need to get money into the hands of small business which is the driving force of any real hopes of an economic recovery.  There have been less politicians looking to gain political capital by attaching their names to the legislation as we have seen in other states so this proposal may be better intended and more viable skeptics may argue.

But, those New Jersey small business is desperate need of capital that do not have good business credit will not be welcomed with open arms.  These business loans are intended for attractive borrowers with good credit histories and solid business plans moving forward over the next several years.  From this perspective it may seem like empty promises from Government but taking bad lending risks and becoming business partners in sub par ventures should not be the role of Government and the buck has to stop somewhere.

Non traditional lending sources are still out there servicing start-ups and entrepreneurial ventures and rates are plenty favorable.  For those owners with good personal credit, there are even unsecured business loans available with interest deferrals and minimum loan amounts of $50,000 and higher.  There are few, if any, restrictions on how proceeds are earmarked and can even be used to restructure current debt which is never an option within the state programs.

Even businesses who are suited for the New Jersey Business Loans program, when it goes into effect, may find they are more comfortable with the terms they can get elsewhere because they allow more freedom and flexibility to manage their operations as they see fit.

Filed Under: Business Loans Tagged With: , ,
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