Entrepreneurs and business people alike are finding themselves in need of a fast business loan to help shore up working capital as the economy continues to falter. While a loan at a commercial bank may be an option for some, there are a number of factors that prohibit businesses from going this direction for their capital funding needs. Chief among them is the low approval rate and lengthy application process. While these loans may have the best rates and terms, many businesses find themselves with urgent capital needs.Consequently, many lenders have entered the marketplace that purport to be “fast business loans”. It is important that all business owners take a very sober and honest appraisal of these types of loans in order to make a decision that will positively affect the outcome of their business.1.)Read the Fine Print- Any lender that is claiming to offer “instant business loans” should be viewed with skepticism. Most of these lenders may be traditional “payday” type lenders or signature loan lenders that are trying to capture some of the business market. Usually the loan amounts are very small, often under $5000, and the interest rates and fees may be exorbitant. Never pay a fee upfront to apply for any loan, online or off.2.)What is the Loan Purpose?- It may seem obvious, but any business looking for a quick business loan may not be actually considering this question other than “paying a past due bill” or something like that. If the loan is not being used to generate additional revenue, or consolidate bills that will open up additional cash flow, a business person should strongly consider against it, even if they do have an over due bill. Moving debt from one lender to another, often at higher interest rates is a dangerous shell game for any business.3.)What is the interest/factor rate?- This one simple fact usually holds up in all forms of lending. The faster you get the money, the more you are going to pay for it. The reason is simple. True dedicated underwriting which helps a lender understand their risk and set the interest rate for the loan accordingly requires documents from the prospective borrower. If a lender is going to forgo this and underwrite the loan purely on electronically available means, it usually means you will be paying a very high interest rate to compensate the lender for this additional risk. Luckily there are options now that can get loan fundings to business owners in 7 to 10 days without paying extremely high interest rates.The bottom line for a those seeking fast business loans is, do not let your sense of urgency override good judgment and common sense. Take the time to understand all the terms correctly, and keep asking questions until you get an answer. The consequences may be disastrous for your business and business lenders do not necessarily have your best interest in mind.
Every business encounters major challenges in the cash flow at some point, which may necessitate borrowing of funds in order to sustain business operations. For startups, financial difficulties may come knocking at the door early on.Fortunately, small businesses that find it difficult to finance all their projects have a number of avenues to turn to for support. Finding a lender is not as tedious as it used to be, and the choices are more numerous today. There are bank loans and merchant service providers. Some loan packages are offered by government agencies, which attract many borrowers since they come with guarantees other lenders cannot provide. Loans come in all forms and sizes, and some are tailor-fit to meet the specific needs of the lender. The availability of more than one option is an indicator that business owners must evaluate their needs first in order to ascertain that a specific type of loan is indeed the best recourse given their current situation.Short-term Vs. Long-termTwo basic types of loans available to small business owners are long-term loans and short-term loans. Long-established commercial lenders usually offer long-term loans that have low interest rates. The amount of money is large enough to cover huge expense, such as additional capital needed in business acquisition and related activities. Small businesses looking for working capital can approach these lenders, and they usually get approval if they have a formidable business plan.Meanwhile, short-term loans are usually issued by credit unions and banking institutions. Whereas a long-term loan must be paid on a monthly basis, short-term loans are paid at the end of the term of the agreement. The interest rate is usually higher compared to short-term loans. Retailer looking for additional funding for a short project that is expected to provide huge profits in a brief time period can benefit much from this type of loan.Alternative optionsAside from conventional sources of funding, borrowers may opt to avail of alternative lending offers, such as those offered by online merchants. Applying for a business loan is now quite convenient since every step of the process can be conducted online. These offers are also quicker to process. It is possible to access capital without the difficulty posed by traditional procedures requiring mounds of paperwork. Alternative financing options work best for use in meeting the needs of an expansion, or sustaining operations when there are cash shortfalls.Small businesses that are in the early stages of operation often find it difficult to meet stringent requirements. Alternative lending methods are relatively more flexible, including cash advances, crowd funding, and peer-to-peer loans, among others. For small businesses, it is often easier and faster to secure financing using alternative means. Many business owners opt for alternative financing methods especially when they have urgent need for the money. There are situations where the time frame is critical because availability of funds determine whether the company’s daily operations can continue or not.It is not that difficult even for startups to get approval for a loan if they have a good credit score and a positive cash flow as well.
It is not unusual to find that business lenders and business loan brokers are not as forward-looking about commercial mortgage difficulties as most borrowers would expect, and I have published another article about commercial lenders to bypass. The focus here is on some of the typical commercial loan difficulties often overlooked by commercial lenders and borrowers.Unexpected business financing possibilities can result in severe complications with a business loan, and business borrowers should be prepared for these circumstances. There are many potential commercial mortgage loan obstacles to be evaded with prudent working capital management strategies. Business financing problems with a typical commercial loan are more numerous and serious than most business borrowers would think.A few of these business financing problems will be unavoidable, but in most cases these commercial loan challenges can be met successfully. Business borrowers and their advisors will be better prepared to take appropriate and timely corrective working capital management action by properly anticipating these recurring commercial mortgage difficulties.Avoidable Business Loan and Commercial Mortgage Scenario Number 1: Sourcing/seasoning assets and seasoning of ownershipThis particular commercial loan problem will not be relevant to all business borrowers. However, if it is relevant, commercial borrowers should seek out a lender without sourcing and seasoning requirements or limitations.Many commercial lenders will request business borrowers to document the source of the down payment (sourcing). Commercial lenders sometimes require that funds for a commercial mortgage down payment be verified, often for a period of up to 12 months (seasoning). If a lender imposes a minimum time a commercial property must be owned in order to refinance, this indicates seasoning of ownership.Avoidable Business Loan and Commercial Mortgage Scenario Number 2: A borrower wants to use subordinated debt (a seller second or other secondary financing) in order to acquire a commercial property with a smaller down paymentCommercial mortgage lenders will often not permit subordinated debt. With a business loan from more flexible lenders, a business borrower will not encounter restrictions on the use of subordinate financing and will decrease the down payment required.Avoidable Business Loan and Commercial Mortgage Scenario Number 3: A business loan situation that requires long-term business financingHow long is a long-term commercial loan? Business lenders often consider three years as the maximum period before a balloon payment will be due for a commercial mortgage.If that sounds like short-term business financing instead of long-term, there are business lenders that can arrange 30-year commercial mortgage loans. Longer-term business financing will often be the critical difference that facilitates a successful business investment because new business financing will not be required for many years and commercial loan payments will also be reduced.Avoidable Business Loan and Commercial Mortgage Scenario Number 4: Business loan recall provisions Commercial loan recall covenants mean that the business lender can force the borrower to repay early by calling the loan before it would normally expire. This potential concern is not applicable to all borrowers since some business financing agreements will not allow a loan recall possibility.Many traditional commercial lenders routinely place recall clauses in their commercial loan conditions. The terms which can cause a recall will vary but will commonly include periodic lender review of financials and credit history. Under these circumstances if prescribed levels of income and credit standards do not occur, then the lender will typically notify the commercial borrower that they must pay off the loan within a 30-90 day period.Business Financing Recall Contingency Plans: With a commercial loan recall, borrowers will need to refinance with a lender quickly. Prudent borrowers will exclude lenders that require recall agreements when evaluating business loan refinancing options.To avoid a potentially disastrous recall scenario for a commercial mortgage business loan, commercial borrowers would be wise to consider only commercial loans which do not have recall terms. For commercial borrowers who have recall provisions in their business financing agreement, it will be equally wise to consider refinancing their business loan before a recall occurs so that refinancing is accomplished according to the commercial borrower’s timetable.Copyright 2005-2007 AEX Commercial Financing Group, LLC. All Rights Reserved.