Answers to Some Questions about Business Loans
Despite constant advertisements from banks and other financial institutions, business loans are not at all easy to get. As a matter of fact, it is a rather labyrinthine arena that can be quite confusing for the uninitiated. Here are some common questions about business loans, answered;
Are “stated” revenue business loans still available?
Yes, but due to the state of the economy and increasingly higher defaults on business loans, many lenders who formally granted such loans and lines of credit no longer do so. A lender may, at their discretion, request business tax returns and all relevant financials at any time, regardless of whether or not the loan or credit line is applied for under “stated” revenues.
Conversely, with full documentation loans that do require tax returns, lenders may waive this requirement and are often inclined to do so, if the principals have high personal FICO scores with strong personal assets. Therefore, the bottom line is the stronger the principal of the corporation or LLC applying for financing, the greater the probability that the lender will approve financing as requested with minimal documentation.
Can a business loan or line of credit be cancelled by the lender?
This is a complex question, and the answer is a qualified “yes.” Aside from discovery of fraud after the loan or line of credit has been issued—which, of course, is valid grounds for cancellation—a line of credit is not a term loan. It is, therefore, important to remember that the lender has the means and discretion to lower or even cancel a business line of credit.
Do not be fooled or led into believing that a line of credit will be there forever until you decide to use it. Lenders often evaluate your business periodically through unannounced business and personal credit re-evaluations during the term of the line of credit.
In addition, due to the current state of the economy, many lenders across the board have decided to cut business credit lines. The result is that more frequently, business owners suddenly wake up in shock when they receive their monthly line of credit or credit card statement from the bank and find that their credit lines have been cancelled entirely and/or greatly reduced.
One way to beat the banks at their own game is to take a good portion of your line of credit and deposit it into an interest-bearing account at another bank or get a term loan with fixed monthly installment payments.
Do you need a business plan to get a business loan?
A formal business plan is generally not required in most commercial loans under $200,000 for established businesses in operation for over two years with sufficient credit history and tax documentation. However, when applying for a business loan, it is always a good idea to have a well thought out plan for the use of the funds, and be prepared to explain it to the lender as they probably will ask you what you intend to use the funds for.
If you are seeking substantial funding over $200,000 and/or are seeking startup capital for a new business and/or venture capital, a business plan is often required. It’s always a good idea to consult with experts in providing you with information for you to package your loan request to the correct lenders who are interested in your industry and financial qualifications, as well as those who are readily familiar with lender requirements for your plan and can assist you in writing an effective business plan that meets and exceeds these requirements.
Can you get a business loan if you filed for personal bankruptcy but are the principal of the business?
This is a complex question which requires consideration of a number of factors, such as was the bankruptcy a Chapter 7 or 13, and if it was a 13, did the principal make timely payments? How long ago the bankruptcy occurred is also a major factor, and if it was within the last two years, the chances of being approved are slim in the real world of today’s lending climate.
In this situation, it is a good idea to consult with experts who are adept at legally avoiding the red tape that many such individuals experience by effective corporate restructuring through a qualified loan guarantor.
More inLoans & Mortgages
5 Celebrities Who Had Mortgage Issues
For us common people life is all about earning, spending, taking loans and mortgages, earning more to pay debts. We would...November 29, 2022
Habits That Make Us Unhappy
Each day includes a couple of dozens of repetitive actions. Some call them habits, some call them rituals. Sometimes they literally...November 28, 2022
Money Management Mistakes. How You Should Handle Money?
Do you know that every second person in the world makes one or even several financial mistakes every day, which seriously...November 28, 2022
The True Causes of Shopaholism Lie in Childhood
Sellers of Happiness A considerable part of the responsibility for an increasing number of “drug addicts from shopping” have, in particular,...November 28, 2022
Here’s How You can Become A Smart Grocery Shopper
It’s smart visiting the local grocery store, shopping list in hand. Actually two lists are needed here, the what-to-buy list and...November 26, 2022
Business Loans Versus Line of Credit: What’s Your Best Bet?
When it comes to obtaining funds for your business, let it be known that you are actually not limited to outright...November 26, 2022
Organic Shampoo is the Better Choice for Hair Care
The popularity of using organic shampoo is on the rise. Organic shampoo can help revive limp, dry, lifeless hair from the...November 26, 2022
Summer Must-haves every Beach Bums Should Have
Summer is the best way to get those tans on and laze in some ‘vitamin sea’. Spending time on the beach,...November 22, 2022
We Bet You Didn’t Know How Profitable These Celebrity Fashion Lines Were – Part I
Celebrity-supported fashion lines certainly don’t have the best of reputations considering Heidi Montag’s critically doomed design attempt with Heidiwood or Lindsay...November 22, 2022