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How to Get Business Loans Even with Bad Credit No Collateral and No Cash Flow

John Rowley - Sunday, April 12, 2015

1.

Most business owners go to their bank when they need money. But according to the Department of Revenue, less than 2% of all business loans come from the big banks.

Banks deal with very conservative risk and business lending is VERY risky as over 90% of businesses fail within their first 10 years.

The result is that 89% of business bank applications are typically denied per the Small Business Lending Index. This is also why Bloomberg says “Funding a new small business? Don’t bother with banks”.

Even though most struggle to get money, 86% of small businesses rely on some type of credit or financing for survival per the National Federation of Independent Business.

 And per SBA the major reason for business failure is insufficient capital and lack of adequate funding.

And since most small businesses can’t easily get money, that leaves over nine million American businesses that need money and can’t get it, according to the National Small Business Association.

Are you one of the nine million who need money and can’t get it? If so, you’re going to love what you’re about to learn!

If you’re looking for money for your business, there’s great news. There’s actually billions of dollars to be lent to small businesses but, most of this money will NOT come from the big banks.

The real problem isn’t that there isn’t money to borrow; it’s that most business owners don’t know WHERE to go to get approved.

All of the big banks and mostly smaller banks use SBA loans as their primary business funding program. These types of conventional bank loans are very hard to qualify for as the borrower must qualify per SBA guidelines and the lender’s guidelines.

SBA loans are also tough to qualify for because the lender and SBA will evaluate ALL aspects of the business and the business owner for approval. To get approved all aspects of the business and business owner’s personal finances must be near PERFECT to ever get approved.

Click Here for a checklist of what you’ll need to qualify for SBA loan. https://www.sba.gov/content/sba-loan-application-checklist 

WOW, that’s a lot of stuff! As a result most business owners struggle to get approved for financing because they and their business aren’t “perfect” as the lenders and SBA require. They don’t have collateral, cash flow, and the credit needed for approval.

The great news is there are a lot of funding options outside of these conventional banks, SBA loans.

Contact us today to learn more about some alternative financing options with great terms that you may qualify for right now.

2.

SBA Loan Requirements

SBA Loans are the main types of business loan offered by most conventional banks.

These are great loans for business owners who have what it takes to qualify. Keep in mind most business lending comes from alternative lenders who don’t have these types of requirements.

But conventional banks and SBA really focus on offering loans with minimum risk to them.  As a result, much more is required to get approved versus a conventional loan.

SBA has put together a checklist of what you’ll need before applying.  Check out some of the details…

To get approved for conventional loans you must have excellent personal credit, with no derogatory reported items, excellent bank credit keeping over $10,000 liquid in your accounts, and excellent business credit with a good Paydex score, typically 70 or higher

You’ll need to have excellent financials that show good net profits increasing from year to year. You’ll need to show you manage that cash flow good per your business and personal bank statements. And you’ll need substantial collateral to offset what you’re borrowing, sometimes equal to 100% of what’s being borrowed.

Other items you’ll need to provide for approval include: profit and loss (P&L) statement that must be current within 90 days of your application and include supplementary schedules from the last three fiscal years, and current and projected financial statements that include current and a detailed, one-year projection of income and finances and attach a written explanation as to how you expect to achieve this projection.

You’ll also need…

  • Original business license or certificate of doing business
  • Loan application history which include records of any loans you may have applied for in the past
  • Income tax returns that include signed personal and business federal income tax returns of your business’ principals for previous three years
  • Resumes for each principal
  • Personal background information
  • Business plan
  • Business credit report
  • An explanation of why the SBA loan is needed and how it will help the business

Per SBA pertaining to your personal credit report…”Your lender will obtain your personal credit report as part of the application process. However, you should obtain a credit report from all three major consumer credit rating agencies before submitting a loan application to the lender. Inaccuracies and blemishes on your credit report can hurt your chances of getting a loan approved. It’s critical you try to clear these up before beginning the application process.”

Notice, they mention it’s critical to clean up any “blemishes” on your credit. You’ll truly need EXCELLENT credit to get approved.

You also need to provide business lease, bank statements, and proof of collateral.

You’ll also be asked to provide…

  • Business bank statements
  • Your lease
  • Business licenses and registrations required for you to conduct business
  • Articles of incorporation
  • Copies of all contracts you have with any third parties
  • And franchise agreements
  • Proof of collateral

SBA are great loans if you meet the requirements for approval.  But even if you don’t, we can still help you obtain alternative financing even if you have credit issues, no collateral, or don’t have cash flow for your business.

Contact us today to let us know how we can help you get money and credit to grow your business.

3.

Monthly Cash flow of $10,000 or More Equals…

Cash flow financing is one of the most popular types of business financing today. Most ads relating to getting business financing with bad credit, and no startups, is a form of cash flow financing. The two most common types of cash flow financing are merchant advances and business revenue financing.

To get approved for cash flow financing you’ll need to be able to show six months of business bank statements and merchant statements.

Those bank statements must reflect that your business makes over $120,000 in annual REVENUE, or about $10,000 monthly. You can also get a merchant advance with $5,000 in credit card revenue monthly.

You’ll also need…

  • To be in business for one year to qualify
  • More than 10 transactions (deposits) per month into your bank account
  • You can’t have more than 10NSFs (non-sufficient-funds charges)
  • You should have some sort of balance left at the end of each month in your bank account

Revenue lending and merchant advances have short term loan of 6-18 months, loan amounts 10k to 500k, and loan amounts equal to 8-12% of annual revenue, rates of 10-45%, 500 credit score accepted and NO collateral requirement.

Personal credit isn’t a big factor of qualification, if you’re not currently in trouble now, such as being in a bankruptcy or having recent judgments or liens.

You can get money super FAST, in as little as 72 hours. Approval is easy, just a quick bank statement review.

You can easily renew your advance and get more money within 24-48 hours with a review of two months bank statements, once you’ve paid down 50% of your initial advance. You can get approved when you’d get denied with most other sources, this is just one of the most forgiving business lending options available today.

4.

Asset Based Financing

If you have assets that can be used as collateral for business financing you have some AMAZING options available to you with great terms. 

And, you can get great terms regardless of your personal credit in most cases.

Acceptable collateral for collateral-based financing include account receivables, stocks, bonds, and other securities, inventory, purchase orders, equipment,  401k, commercial real estate, floor plan and book of financing. 

Account receivable factoring: 80% of your receivables can be advanced within 24 hours, the other 20% when the invoice gets paid. You need to be in business for one year or longer and your receivables must be from another business or the government.  Interest rates range from 1.25-5%.

Securities-based credit lines: You can get 70-90% loan-to-value of stock or bond value. Rates are as low as 2-3% and you get a working capital line-of-credit. 

Inventory Loans: If you have $300,000 in inventory you can get financing for up to 50% of your inventory value. Rates are normally 2% monthly on the outstanding loan balance. This is a great finance solution for retail stores, factories, and other businesses that have large amounts of inventory.

Purchase Order Financing: Get $5,000-500,000 in purchase orders paid. You can get up to 95% of your existing purchase orders advanced to your suppliers through letters of credit. 

Equipment Sale-leaseback: You can borrow against existing equipment you own IF you don’t already have a lien. You should have a single piece of equipment that’s valued at $10,000 or more to apply. Loan amounts go up to $2million.

401k Financing: Your 401k or IRA can be used as collateral for business financing. Rates are usually less than 5% and you can borrow as much as 100% of the current value of your 401k.

You are basically investing your 401k into your own business, instead of buying stocks in other businesses. There are no tax ramifications, and this is based on proven IRS strategies.

House-Flipper Financing: Get financing for up to 65% of the after-repair value of your investment properties and get the money you need to purchase and rehab the property. Your credit scores should be over 660, you should have flipping experience and you’ll need to be liquid $25k or more to get approved.

Commercial Real Estate Financing: Get loans of $75,000-20,000,000 and get up to 55% loan-to-value for refinances of your commercial real estate. You can get 20-30 year loans with rates of 4-8% if your FICO score is 650 or higher. Conventional and SBA 504 loans are available.

Book-of-business Financing: This type of financing is exclusive for insurance agents only. Use the commissions from the book of business as collateral and get 3-5 year loans with great terms. 

These are some of many asset and collateral-based financing options we have for your business. Contact us today to learn more.

5.

All You Need is Credit…

You have several good unsecured options when looking to get cash and credit for your business.

These options don’t require collateral or cash flow for approval, and not offered at most banks. 

Unsecured Business Credit Cards give you approval amounts from $10,000 to $150,000. You’ll need excellent personal credit with open revolving credit, low inquires, and utilization under 30% to get approved OR have a personal guarantor who meets that requirement.

Approval amounts are usually equal to your current credit limits now and you can usually get 0% interest for 6-18 months. 

And these accounts report to the business bureaus helping you build your business credit, with no impact or reporting to the consumer credit bureaus. 

You can also get Business Credit with no personal credit check or guarantee. And there are no cash flow or collateral requirements for approval. These type of accounts report to the business bureaus because they are linked to your EIN not your SSN.

You can get immediate vendor credit approvals, even as a brand new business. Then in 30-90 days you’ll start to get store credit cards. And in 120-180 days total you can start to get cash credit cards. Cash credit limits can exceed $30,000.

Business credit is a great “catch all” for those who don’t have a strength such as cash flow, collateral, or credit.

Contact us today to learn more about credit-based financing.

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