Applying For a Small Business Loan and a Government Business Loan

Applying for a small business loan refers to the process by which a business owner requests funding from a lending institution. The process is usually not very easy and many documents are required for a lender to consider loan requests.

The most common documents a lender will require of small business loan applicants are the loan application, personal and business tax returns, a personal financial statement from each owner of the business, certified financial statements of the business, documentation of the business’s structure, a list of all outstanding debts, and a business plan. A business plan usually includes expected revenue and how the loaned money will be spent.

Depending on the lending agency, applicants may be required to also submit a proposal on how they will repay the money, including payment amounts and the length of the loan repayment term. Other times the lender will already have a set plan regarding loan terms.

Lenders also consider the available capital and collateral of a business when an owner applies for a small business loan. Lenders want to know how much the owner has invested in the business and what collateral can be used to secure the loan in case it is not repaid.

The interest rates and payment plans differ according to which lender is chosen for a small business loan. Having good credit and a healthy financial history can help a business owner secure the best terms for a small business loan.

Applying for a small business government loan usually means to go through the United States Small Business Administration (SBA) to obtain funds for a business. The most basic type of loan offered by the SBA is a 7(a) loan, which is provided by lenders such as banks. These lenders structure their loans according to the SBA’s requirements and receive a guaranty for a portion of the loan. These loans are available only by guaranty, and both the lenders and the SBA share the risk of loans not being repaid. 7(a) loans come directly from the lenders; therefore, they are technically not government loans.

To apply for a small business government loan, business must meet all of the following eligibility requirements:

* Be a for-profit business
* Meet size requirements for the business’s industry
* Lack internal sources for financing
* Demonstrate ability to repay loan

Certain types of 7(a) and special purpose loans may call for additional eligibility requirements. Other important factors considered when applying for a small business government loan include effective management, character, owner’s equity, and collateral. An individual may also be asked to provide a “Statement of Personal History” to analyze the abilities of the individual.

Other variables that a business owner should be aware of when applying for a 7(a) loan are the maximum loan amounts, interest rates, fees, guaranty percentage, maturity terms, and prepayment penalties.

What You Need to Know About a Small Business Loan Application

Believe it or not, every small business loan application doesn’t have to take up a few weeks of your life. Not every lender will require perfect credit, a complicated business plan, and pages and pages of documents just to tell you whether or not your business is going pay rent this month. Occasionally small business owners find themselves in a financial tight spot. That’s a simple fact of doing business. What’s not a fact is that the major banks, SBA and fast cash merchant cash advance companies are your only options for a small business loan application. Read on to learn what other small business loan applications options you have.

The Good and Bad of a Small business Loan Application from a Bank

If you have ever tried to fill out a small business loan application from a traditional bank, you may already understand the headline. If you haven’t, allow me to fill you in. Banks place heavy emphasis on the entrepreneurs personal as well as business credit, in addition to many other factors. For some business owners, a few missed payments on a credit card can be the difference between receiving funding and being left out in the cold.

Most banks will also want years’ worth of tax returns and other documents for their loan application. They will spend weeks analyzing the data, slogging through every decision you have ever made. You will also need to explain exactly how every penny of the loan will be spent in advance, and detail it in a business plan.

Banks will also require a list of collateral and capital that you are willing to risk on the loan. Should your business run into hard times, you may find the delivery van that you need to run your business has been taken away by the bank.

Finally, after the banking crisis of the last few years, many banks are still feeling the after effects of their poor lending policies that led to the near collapse of the economy in the first place. This can make it difficult to simply find a bank that is accepting small business loan applications at all.

I don’t want you to think that bank loans are all bad. Quite the contrary, banks provide some of the cheapest and safest working capital a business owner could ask for, which often more than makes up for the inflexibility of the loan application process.

What about an MCA or alternative loan for small business?

An MCA (Merchant Cash Advance) is a very different form of lending. To qualify, most lenders require you to have been in business for more than a year, as well as a minimum monthly number of credit card transactions. While the terms and process are much more flexible than a small business loan application, the price tag for the capital can vary widely from lender to lender.

MCA’s are not technically a loan; rather, the lender purchases an amount of future credit card sales your business is expected to make at a discount. Because of this, the loan is repaid in micropayments as credit card sales are made. The advantage to this is there are no large monthly minimums to meet. The disadvantage is a slightly higher overall cost unless the lender has access to inexpensive capital and can provide a discount on merchant account services that will further offset the cost.

Unsecured loans, while sometimes more expensive, often have a much simpler small business loan application process. The trade off is the possibility of slightly higher interest rates to cover the risk of the loan. Because of that, it’s best to find a company that offers a lowest rates guarantee during the small business loan application process. Shopping around can help you save a substantial amount.

So what are your options?

Choosing the right option really depends on your situation. If you can afford the extra time and resources necessary to get a traditional small business loan, then perhaps it really is the best option for you. If you have less than perfect credit or believe you may have a few slow months coming soon, a loan based on cash-flow or an advance on your credit card sales may be the best option. In the end the key is finding a reliable bank or lending company that you can trust to help you find the right solution

Steve R. Johnson is a small business finance adviser for Performance Commercial Capital in Irvine, CA. Performance Commercial Capital specializes in small business financing, including: loans, merchant advances, factoring, and more, so we can offer you the best option for your company’s needs.

Small Business Loan Calculator Features and Benefits

The small business loan calculator has proven to be one of the most useful devices when it comes to calculating a number of commercial real estate investments. Mortgage calculators can be especially important tools of the trade in a few different areas; whether figuring out interest payments only or going with the ebb and flow of adjustable rate contracts, keeping an eye on these figures throughout the duration of most any given property transaction can be beneficial in many ways.

Those who’ve used SBA loans in the past have been able to rely on small business loan calculator settings to carry them through each phase of the commercial loans process. No matter the case, having access to a number of online mortgage calculators can make life much easier when dealing with a variety of lending scenarios.

Even when dealing with small loans, the price of doing business can eventually work to the advantage of the borrower. The same principle applies to those who qualify for unsecured loans and the like, when payment schedules may include higher rates. Because of the fact that some small business loan calculator setups have a few additional features to offer, the unexpected can often be handled; with commercial loans especially, unforeseen circumstances may change the game in a hurry.

Forecast Early Payoff With Your Small Business Loan Calculator

Depending upon which lending institution is handling the loan in question, the idea of paying off the loan early can become a reality. Prospective borrowers may want to make sure that an early pay-off clause is included in their SBA loans without having prepayment penalties; for example, those who qualify for unsecured loans can save thousands of dollars by paying off the balance a little faster than anticipated.

A small business loan calculator with this extra added feature can factor in additional amounts to be paid and apply them towards the total balance. In the past, commercial loans without this feature have ended up costing borrowers a bundle.

Not all mortgage calculators come with this feature. In addition to entering the standard information pertaining to small loans, such as the balance, interest, and monthly installments, entering in the extra payment amount will display how much loan recipients can save by paying their commercial loans off earlier than expected. Even though these small business loan calculator functions are becoming more commonplace, it’s vitally important to find out which lenders are offering this additional service.

Use Your Small Business Loan Calculator To Determine Best Financing Options

Those who are ready to refinance their first-lien mortgages may be able to take advantage of their SBA loans by seeing whether or not this early payoff condition applies, sans the penalties. Successful business owners should have a certain amount of clout as it stands, meaning that this type of leverage can be used to switch mortgage companies, if necessary.

Contacting other lenders isn’t a crime, and some may have this particular small business loan calculator function already in place. Having this type of leverage can put business owners in the driver’s seat while searching for the best available deals concerning their commercial loans.

In effect, renegotiating a second mortgage while saving thousands of dollars is more than possible; in fact, paying lower interest rates and monthly payments on a number of refinanced small loans just isn’t enough, especially when mortgage calculators with multiple features will be able to clearly indicate how much additional money can be saved in both the short-term and the long-run. A small business loan calculator with all the bells and whistles may be worth looking into.