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Small Business Financing Infographic: Know Your Loan Options

%24 SMALL BUSINESS FINANCING: KNOW YOUR LOAN OPTIONS TERM PRINCIPAL The amount of time Amount lent. over which the loan will be repaid. THE BASICS OF BUSINESS LENDING RATE OR INTEREST RATE CREDIT LINES The price of the loan (paid to the lender until the loan IB. balance is zero). A revolving loan that allows you to draw the specific amount you need, up to the credit limit. Interest is only charged on the amount used. AMORTIZATION TERM LOANS The distribution of payments into equal amounts where the amount of interest per payment decreases as the principal is paid down. "Classic loans" with fixed payments that include principal and interest over a specified period of time. INSIDER TIP Commercial lending is NOT regulated like consumer lending. Commercial lenders do not have to state their terms in APR (Annual Percentage Rate) which causes confusion for many business owners. TRADITIONAL SMALL BUSINESS (SMB) LENDING The Small Business Administration (SBA) is a government agency that provides guarantees on portions of small business loans. They do not lend money directly to businesses but enable banks to offer more loans and lower interest rates. BANK INSIDER TIP Loans through banks and credit union are ideal for established businesses with solid cash flow and good credit. However, it can take 3-6 months for loan approval. TOP 5 SBA LENDERS IN 2014 LENDER NO. OF LOANSS TOTAL LOANS 2,781 ÅÅi $801,774,095 VI00 WELLS FARGO BANK 2 LIVE OAK BANKING COMPANY $387,196,250 463 3 U.S. BANK NATIONAL ASSOCIATION $288,445,290 /0 2,326 JP MORGAN CHASE BANK, NATIONAL 3,021 $264,885,000 THE HUNTINGTON NATIONAL BANK 2,540 Ö i $249,692,480 BUSINESS LOAN CHECKLIST Below are the documents most commonly requested by banks: O Personal Background Information V Banks Statements O Resumes O Legal Documents V Business Plan • Business licenses and registrations • Article of incorporation • Contracts with third parties • Franchise agreements • Commercial leases O Personal Credit Report Business Credit Report O Income Tax Returns O Financial Statements O Collateral For a full list of documents, visit the SBA website: A FEW QUESTIONS SBA lenders will almost always ask you these questions, so be sure you've discussed with your team, and have good answers! • Why are you applying for this loan? • How will the loan proceeds be used? • What assets need to be purchased, and who are your suppllers? • What other busines debt do you have, and who are your creditors? • Who are the members of your managment team? SHORT-TERM SMB LENDING INVOICE FACTORING A factoring company buys one or more of your invoices, and advances you a certain amount of the invoice. The factoring company collects the invoice for you and keeps a certain cut. MERCHANT CASH ADVANCE Short-term lenders use one of two payment structures - daily debit or Merchant Cash Advance where a fixed amount or percentage of sales is paid to the lender daily. Note: It's not uncommon to see effective APRS of 30-150% APR on MCA loans. INSIDER TIP: Daily debit can be tough on businesses that have sporadic cash flows during the month, such as restaurants that make the majority of their revenue on the weekends. INVESTMENT SMB LENDING Perfect for businesses unable to obtain bank financing. Although interest rates are higher than what banks offer, they are substantially lower than the short-term alternatives. $500K 9-27% 5 YEARS INVESTMENT LENDING TERM LOAN ASSET BASED LINE OF CREDIT A term loan from an investment lender that Secured by an asset such as a has the structure of a traditional term loan. borrower's accounts receivable They are usually under $500k and less than 5 years in length with rates 9-27%. balance. THE BEST OPTION FOR YOUR BUSINESS Does one of these sound most like your business? Consider the corresponding financing type. Are you an established business with solid cash flow Are you a young business with few funding options? and good credit? Consider bank and credit Check out merchant union loans cash advance Do you rely on accounts receivable and have credit or revenue challenges? Are you close, but can't quite get SBA financing from banks? Investment lending Is your next best optlon Look into factoring or an asset-based line of credit COMPARING FINANCIAL PRODUCTS $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $50,000 LOAN AMOUNT TERMS: 6-18 months MCAS Factoring 30 to 150% APR TERMS: Investment Lending 9-27% APR 12-60 months TERMS: 60+ months Banks *Prime Rate to 12% APR "The primary rate is the Interestrate that banks charging ther most credit-worthy customers. It is already determined by the fereral funds rate, which is the overnight rate which banks lend to one another. GET MORE TIPS ON SMALL BUSINESS FINANCING IN OUR EBOOK BROUGHT TO YOU BY xDealstruck | 855-610-5626

Small Business Financing Infographic: Know Your Loan Options

shared by StaceySD on Feb 11
When it comes to small business lending options there unfortunately is no one-size-fits-all package. Businesses must consider the pros and cons of short-term lending, investment lending, loan sizes, v...




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