Tag: Loan

Small Business Loan – Business Financing #business #registration

#business loans

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Financing

Working Capital Finance: Loans for your day to day business needs

Innovative financing designed to fuel your business

Managing finance is unarguably the most important component of any business. For SMEs, timely finance is the key to making the most of business opportunities. Keeping this in mind, we at ICICI Bank have designed a package of loans to best suit their business requirements.

Term Loans: Invest in your business

Fund your expansion and asset purchases

Avail ICICI Bank s Term Loans to make long term capital investments, whether in plant and machinery or commercial assets.

Customised Solutions

Get loans to match your specific needs. Our tailor made loans for SMEs let you choose the option most convenient and suitable for your business.

Loans for New Entities

The initial period is most difficult for a new business startup. Get working capital, cash credit facility and other loans from ICICI Bank after just a year of operations.

Collateral Free Loans

Get cash credit and term loan through a government backed CGTMSE loan up to Rs. 1 crore

Loans without Financials

Business loans based on past transaction history

Finance for Importers Exporters

Get Export Finance, Letter of Credit, Bank Guarantees and foreign currency loans to support your business.

Loans for Schools and Colleges

Grow your educational institution with our Working Capital and Term Loans.

Secured Loan for Merchant Establishment against credit card swipes

Get loans of up to Rs 2 crore against your credit card receivables.





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Start-Up Business Loan #introduction #to #business

#startup business loans

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Start-Up Business Loan

These loans ranging from $1,000 to $10,000 are ideal for individuals who have been in business less than six months and who have either a home-based or incubator-based business. These loans are commonly used for things like working capital, operating costs, inventory purchase, equipment purchase and marketing.

The features of this loan include:

  • Interest rates starting at 10.99%
  • Loan terms from 6 to 60 months
  • No pre-payment penalty
  • Closing costs of 3-5%
  • $135 processing fee applied only to closed loans
  • Credit score of 575 or higher.
  • Sufficient cash flow to support monthly loan payments.
  • No bankruptcies in the past 12 months or foreclosures in the past 24 months (flexible for loans under $2,500).
  • No late payments on your rent or mortgage in the past 12 months (flexible for loans under $2,500).
  • Must have a full- or part-time job and proof of income.
  • Other criteria may apply.

If you don’t meet these basic requirements, we encourage you to check back after you’ve had a chance to strengthen your application.

Please be aware that Accion does not lend to businesses involved in: Real Estate, Mortgage Brokers, Development Companies, Adult Entertainment/Materials, Drug Paraphernalia, Distribution, Sale or Manufacturing of Firearms; Non-FDA Weight Loss Products, Traditional Lending Institutions, Alternative Lenders, Check Cashing, Factoring Organizations, Non-Bank Cash Advances, Pawn Shops,Non-Profit Organizations, Non-U.S. Companies, Collection Agencies, Currency Exchanges, Precious Metal Sales, Investment Opportunities, Gambling Establishments, Lotteries/Raffles, and pyramid or multilevel sales plans.





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Business – Industry Loan Guarantees #innovative #business #ideas

#guaranteed business loans

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Business Industry Loan Guarantees

Program Status: Open

What does this program do?
This program bolsters the existing private credit structure through the guaranteeing of loans for rural businesses, allowing private lenders to extend more credit than they would typically be able to.

Who may apply for this program?
Lenders with legal authority, sufficient experience, and financial strength to operate a successful lending program like:

  • Federal or State chartered banks
  • Savings and loans
  • Farm credit banks
  • Credit unions

What kind of borrower may the lender request a guarantee for?

Are there restrictions on the borrower?

  • Government or military employees may not own more than 20%
  • Majority ownership must be held by US citizens or permanent residents (1)

What is an eligible area?

  • Any area other than a city or town with a population of greater than 50,000 inhabitants and the urbanized area of that city or town.
  • The borrower’s headquarters may be based within a larger city as long as the project is located in an eligible rural area
  • The lender may be located anywhere
  • Projects may be funded in rural and urban areas under the Local and Regional Food System Initiative

How may funds be used?
Eligible uses include but are not limited to:

  • Business conversion, enlargement, repair, modernization, or development
  • Purchase and development of land, easements, rights-of-way, buildings, or facilities
  • Purchase of equipment, leasehold improvements, machinery, supplies, or inventory
  • Debt refinancing when new jobs will be created and other conditions are met
  • Business and industrial acquisitions when the loan will keep the business from closing and/or save or create jobs

Guaranteed loan funds MAY NOT be used for:

  • Lines of credit
  • Owner-occupied housing
  • Golf courses
  • Racetracks or gambling facilities
  • Churches, church-controlled organizations, or charitable organizations
  • Fraternal organizations
  • Lending, investment and insurance companies
  • Projects involving more than $1 million and the relocation of 50 or more jobs
  • Agricultural production, with certain exceptions (2)
  • Distribution or payment to an individual owner, partner, stockholder, or beneficiary of the borrower or a close relative of such an individual when such individual will retain any portion of the ownership of the borrower

What Collateral Is Required?
Collateral must have documented value sufficient to protect the interest of the lender and the Agency. The discounted collateral value will normally be at least equal to the loan amount. Lenders will discount collateral consistent with sound loan-to-value policy. Hazard insurance is required on collateral (equal to the loan amount or depreciated replacement value, whichever is less).

Maximum Advance Rates
Real Estate: 80% of fair market value
Equipment: 70% of fair market value
Inventory: 60% of book value (raw inventory and finished goods only)
Accounts Receivable: 60% of book value (less than 90 days)

What is the maximum amount of a loan guarantee?

  • 80% for loans of $5 million or less
  • 70% for loans between $5 and $10 million
  • 60% for loans exceeding $10 million, up to $25 million maximum

What are the loan terms?

  • Maximum term on real estate is 30 years
  • Maximum term on machinery and equipment is useful life or 15 years, whichever is less
  • Maximum term on working capital not to exceed 7 years
  • Loans must be fully amortized; balloon payments are not permitted
  • Reduced payments may be scheduled in the first three years

What are the interest rates?

  • Interest rates are negotiated between the lender and borrower, subject to Agency review
  • Rates may be fixed or variable
  • Variable interest rates may not be adjusted more often than quarterly

What are the applicable fees?

  • There is an initial guarantee fee equal to 3% of the guaranteed amount
  • There is an annual renewal fee, currently 0.5% of outstanding principal (3)
  • Reasonable and customary fees are negotiated between the borrower and lender

What are the underwriting and security requirements?

  • The proposed operation must have realistic repayment ability
  • New enterprises may be asked to obtain a feasibility study by a recognized independent consultant
  • The business and its owners must have a good credit history
  • At loan closing/project completion, the business must have tangible balance sheet equity position of:
    • 10 percent or more for existing businesses, or
    • 20 percent or more for new businesses.
  • Key person life insurance may be required and the amount negotiated. A decreasing term life insurance is acceptable
  • Personal and corporate guarantees are normally required from all proprietors, partners (except limited partners), and major shareholders (i.e. all those with a 20 percent or greater interest)

How do we get started?

  • Applications are accepted from lenders through our local offices year round
  • Interested borrowers should inquire about the program with their lender
  • Lenders interested in participating in this program should contact the USDA Rural Development Business Programs Director in the state where the project is located

Who can answer questions?
Contact the local office that serves your area.

What governs this program?

  • Loan Processing – Code of Federal Regulation, 7 CFR 4279-A and B
  • Loan Servicing – Code of Federal Regulation, 7 CFR 4287-B
  • This program is authorized by the Consolidated Farm and Rural Development Act (ConAct)

Why does USDA Rural Development do this?
This program improves the economic health of rural communities by increasing access to business capital through loan guarantees that enable commercial lenders to provide more affordable financing for businesses in eligible rural areas.

NOTE: Because citations and other information may be subject to change please always consult the program instructions listed in the section above titled “What Law Governs this Program?” You may also contact your local office for assistance.

(1) Individual borrowers must be citizens of the United States (U.S.) or reside in the U.S. after being legally admitted for permanent residence. Corporations or other non-public body organization-type borrowers must be at least 51 percent owned by persons who are either citizens of the U.S. or reside in the U.S. after being legally admitted for permanent residence.

(2) Production agriculture is eligible only if the project is vertically integrated, ineligible for USDA Farm Service Agency (FSA) farm loan guarantees, and agricultural production as part of the loan is both secondary (less than 50 percent of the business) and less than $1 million. Nursery, forestry and aquaculture operations are eligible without these restrictions.

(3) The annual renewal fee is currently one-half of one percent (.5%) of the outstanding principal loan balance as of December 31st. The renewal fee rate is set annually by Rural Development in a notice published in the Federal Register. The rate in effect at the time the loan is made will remain in effect for the life of the loan. Annual renewal fees are due on January 31. Payments not received by April 1 are considered delinquent and, at the Agency discretion, may result in cancellation of the guarantee to the lender. Holders’ rights will continue in effect as specified in the loan note guarantee and assignment guarantee agreement. Any delinquent annual renewal fees will bear interest at the note rate and will be deducted from any loss payment due the lender. For loans where the loan note guarantee is issued between October 1 and December 31, the first annual renewal fee payment will be due January 31 of the second year following the date the loan note guarantee was issued.





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How to Get a Small Business Loan – Finance a Business – Wells Fargo

#getting a small business loan

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Financing a growing business

Learn about financing options for small businesses.

Supporting both the operation and expansion of a growing small business often requires some additional financial support. Getting a small business loan or grant can help you bridge the gap when you need to make capital investments, increase your workforce, or move to a larger space. To help you decide which type of funding might be right for you, here are a few great small business-financing options:

Line of credit. Using a line of credit as working capital can make it easier for you to manage your cash flow as your income or expenses fluctuate. It allows you to borrow only the funds that you need giving you more control over the amount of interest you will accrue.

Business loans. For larger investments, it may be time for a term loan. Like a mortgage or personal loan, term loans come with fixed interest rates and monthly payments over a period of years. Unlike a line of credit, a business loan will provide you with a large sum of cash upfront. These loans can be ideal for expanding your space or funding other large investments.

Commercial loans. For established businesses that own commercial real estate, a commercial loan is another option. Like a home equity loan, a commercial loan allows you to borrow against the equity you’ve built in your business property. Depending on the value of the property and the equity you hold, this could mean more borrowing power.

Equipment loans. If you’re specifically looking for cash to fund the purchase of new equipment – including vehicles, manufacturing or production machinery, farming equipment, or other necessary equipment – then an equipment loan or leasing program may be what you need. Like business loans, equipment loans offer fixed interest rates and payment plans over a period of time.

SBA loans. Wells Fargo is the nation’s #1 provider (by dollar volume) of loans guaranteed by the US Small Business Administration – or SBA 7(a) loans. SBA 7(a) loans have longer repayment terms and lower down-payments than most conventional bank loans, and can be used for the purchase of owner-occupied real estate, business acquisition, equipment, or working capital. Wells Fargo also offers the SBA 504 program for larger, fixed asset purchases or construction.

Federal or state grants. Small business grants – money that does not need to be repaid – are limited and harder to secure than loans. State and federal business grants are funded by taxpayer dollars, and the money is awarded through a complicated legislative process. For more information on how to get a small business grant, visit www.grants.gov.

By knowing which small business financing options are available, you’ll have a better idea of where to turn when you’re ready to take your business to the next level.

Business insights from experts

Discover our comprehensive resource library, offering guidance and information to help you start, run and grow your business.

Wells Fargo Works for Small Business ®





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Top 5 Small Business Loan Requirements – How to get a Small Business Loan

#sba loan requirements

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Top 5 Small Business Loan Requirements

The time has come to expand your business with new employees, a larger location or a new product line. It’s an exciting time, but stressful because you’re not sure you have the cash reserves to manage the expansion.

For many small businesses, this situation calls for a small business loan a cash infusion that pays for itself, plus the interest, with the new opportunities and extra income it allows you to create.

Many of our Kabbage customers are new to small business lending. Though they’re familiar with personal loans, they only know the basics of small business loans and lines of credit. For those who “resemble that remark” and for more experienced folks who would like a review of how to get a small business loan here is your expert-researched, Kabbage-curated list of the top five small business loan requirements to get the best possible small business loan.

#1: Strong Credit

The bad news about small business lending is it can be hard to qualify for the best rates and deals. The good news is this decade has more options for good small business loans than any other time in history. You can choose between platform lending. traditional loans (like from a bank) and a variety of hybrid options available from local vendors or via the internet.

This flexibility doesn’t mean your company shouldn’t look as good as possible on paper. Your FICO credit score will figure heavily in any lending decision, so (if time permits) spend time grooming that number in the months prior to applying. Research what other metrics the lenders you want use, and groom them as much as possible, too.

If you have a major ding in your credit, like a repossession or string of late payments, be prepared to discuss them and why things will go better in the future.

#2: Solid Business Plan

Part of understanding how to get a small business loan is ensuring you have a solid business loan. You should have one of these anyway, since a strong business plan is a prerequisite for stellar business success. Traditional lenders will expect to see an updated, professionally prepared business plan as part of the lending process. Lacking one tells them you’re not ready for the “big leagues” and are a bad credit list.

Though platform lenders like Kabbage won’t insist on seeing your formal business plan, similar documents about your social presence, industry statistics and unique market advantages all of which are part of a comprehensive business plan will go into decisions about what to lend you and how much it will cost.

Either way, get a business plan together.

#3: Compelling Personal Resume

Traditional lenders want proof that the people responsible for running a business are qualified to do so, and part of that proof will be seeing the resumes for you and other principles like owners and executive officers. This resume should be as solid, well-edited and up-to-date as any resume you’ve ever sent out.

Consider: the purpose of a resume is to get you the job you want. The purpose of this resume is to get you the job of running the company you want, instead of the company you have.

Platform lenders don’t look at your traditional resume, but they will look at your business’ curriculum vitae in terms of performance metrics and social sharing. Take time to groom those items as substantially as you would a regular resume.

#4: Bulletproofed P L Statements

Like your business plan, you should have these anyway. You should be using your profit and loss statements as part of a robust monthly “vital signs” check for your business. If you’re not doing them, dig into your accounting software for half an hour. You’ll find a tool that compiles P Ls from your records. If you’re not using software to keep track of your financials get started on doing that.

Lenders of all stripes are looking for three things in your P L: reliability, professionalism and ethicality.

  • Reliability – They want evidence that you will be able to make your promised payments, based on enough cash flow to cover the loan. If you don’t, the lender will assume that lending you money is too high a risk.
  • Professionalism – Lenders presented with incomplete, inaccurate or hastily prepared P L statements will assume that your business is similarly disorganized.
  • Ethicality – If you “fudge” your numbers to look better and get caught, you are done with that lender. The decision makers will assume that you cut ethical corners in other places.

#5: Knowledge of the Loan Needed

This is actually the first of the small business requirements that you should address, but we wanted to mention it last so it would be the freshest in your mind. Lending isn’t what it used to be – a situation where you went to a couple of banks, all of which offered the same basic products, and hoped they would agree to give you a loan.

Modern small business lending includes a wide array of traditional, platform and peer-to-peer options with wildly varying qualification requirements and rates of interest. Before you start working in earnest on the other four requirements for your loan, decide what kind of loan you need. That way you won’t waste time and effort preparing the wrong documents.

Do you have a tale of success or woe to share with the Kabbage community about when you aced a loan application or were embarrassingly unprepared? Share your story in the comments below.





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6 Smart Reasons to Get a Business Loan #business #proposal #sample

#getting a business loan

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6 Smart Reasons to Get a Business Loan

Co-founder and CEO, Fundera

November 9, 2015

Spreading the word that you re considering a loan for your business can be met with all kinds of opinions. From general naysayers to cautionary anecdotes, everyone you meet will have a story as to what might happen if you take out a loan to start or expand your business venture.

While it s true that not every reason is a good reason to go into debt for your business, that doesn t mean that good reasons don t exist. If your business is ready to take a leap, but you don t have the working capital to do so, here are six reasons you might re-consider applying for a small business loan .

1. You re ready to expand your physical location.

Your cubicles are busting at the seams, and your new assistant had to set up shop in the kitchen. Sounds like you ve outgrown your initial office location. Or maybe you run a restaurant or retail store, and you have more customers in and out than you can fit inside your space.

This is great news! It likely means business is booming, and you re ready to expand. But just because your business is ready for expansion, doesn t mean you have the cash on hand to make it happen.

In these cases, you may need a term loan to finance your big move. Whether it s adding an additional location or picking up and moving, the up-front cost and change in overhead will be significant.

Before you commit, take steps to measure the potential change in revenue that could come from expanding your space. Could you cover your loan costs and still make a profit? Use a revenue forecast along with your existing balance sheet to see how the move would impact your bottom line. And if you re talking about a second retail location, research the area you want to set up shop to make sure it s a good fit for your target market.

2. You re building credit for the future.

If you re planning to apply for larger-scale financing for your business in the next few years, the case can be made for starting with a smaller, short-term loan in order to build your business credit.

Young businesses can often have a hard time qualifying for larger loans if both the business and the owners don t have a strong credit history to report. Taking out a smaller loan and making regular on-time payments will build your business s credit for the future.

This tactic may also help you build relationships with a specific lender, giving you a connection to go back to when you re ready for that bigger loan. Be careful here, though, and don t take on an early loan you can t afford. Even one late payment on your smaller loan could make your chances of qualifying for future funding even worse than if you d never applied for the small loan at all.

3. You need equipment for your business.

Purchasing equipment that can improve your business offering is typically a no brainer for financing. You need certain machinery, IT equipment or other tools to make your product or perform your service, and you need a loan to finance that equipment. Plus, if you take out equipment financing. the equipment itself can often serve as collateral for a loan — similarly to a car loan.

Before you take out an equipment loan, make sure you re separating the actual needs from the nice-to-haves when it comes to your bottom line. Yes, your employees probably would love a margarita machine. But unless you happen to be running a Mexican Cantina, that particular equipment may not be your business s best investment.

4. You want to purchase more inventory.

Inventory is one of the biggest expenses for any business. Similar to equipment purchases, you need to keep up with the demand by replenishing your inventory with plentiful and high-quality options. This can prove difficult at times when you need to purchase large amounts of inventory before seeing a return on the investment.

Especially if you have a seasonal business, there are times when you may need to purchase a large amount of inventory without the cash on hand to do so. Slow seasons precede holiday seasons or tourist seasons — necessitating a loan to purchase the inventory before making a profit off it.

In order to measure whether this would be a wise financial move for your business, create a sales projection based on past years sales around that same time. Calculate the cost of the debt and compare that number to your total projected sales to determine whether taking an inventory loan is a wise financial move. Keep in mind that sales figures can vary widely from year to year, so be conservative and consider multiple years of sales figures in your projection.

5. You ve found a business opportunity that outweighs the potential debt.

Every now and then, an opportunity falls into your lap that is just too good to pass up — or so it seems, at least. Maybe you have a chance to order inventory in bulk at a discount, or you found a steal on an expanded retail space. In these instances, determining the return on investment of the opportunity requires weighing the cost of the loan versus the revenue you stand to generate through the available opportunity.

Let s say for instance, you run a business where you get a commercial contract for $20,000. The trouble is, you don t have the equipment to complete the job. Purchasing the necessary equipment would cost you about $5,000. If you took out a two-year loan on the equipment, paying a total of $1,000 in interest, your profits would still be $14,000.

If the potential return on investment outweighs the debt, go for it! But be careful with your calculations. More than one entrepreneur has been guilty of underestimating true costs or overestimating profits as a product of over-enthusiasm. When you re weighing the pros and cons, it often helps to perform a revenue forecast to make sure you re basing your decisions on hard numbers rather than gut instinct.

6. Your business needs fresh talent.

When working at a startup or small business, you wear a lot of hats. But there comes a time when doing the bookkeeping, fundraising, marketing and customer service may start to wear on you — and your business. If your small team is doing too many things, something will eventually fall through the cracks and compromise your business model.

Some businesses choose to invest their money in their talent, believing that this is one way to keep their business competitive and innovative. This can be a great move, if there s a clear connection between the hiring decision and an increase in revenue. But if having an extra set of hands around helps you focus on the big picture, that alone may be worth the loan cost.

Regardless of the exact reason you re considering a business loan, the point is this: If, when all costs are factored in, taking out the loan is likely to improve your bottom line — go for it. If the connection between financing and a revenue increase is hazy, take a second look at whether taking out a loan is your best choice.

You want to be confident in your ability to pay back a business loan over time and to see your business succeed. Every business decision involves taking a risk. Ultimately, only you can decide whether that risk is worthwhile.





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Small Business Loan – Business Financing #sell #my #business

#business loans

#

Financing

Working Capital Finance: Loans for your day to day business needs

Innovative financing designed to fuel your business

Managing finance is unarguably the most important component of any business. For SMEs, timely finance is the key to making the most of business opportunities. Keeping this in mind, we at ICICI Bank have designed a package of loans to best suit their business requirements.

Term Loans: Invest in your business

Fund your expansion and asset purchases

Avail ICICI Bank s Term Loans to make long term capital investments, whether in plant and machinery or commercial assets.

Customised Solutions

Get loans to match your specific needs. Our tailor made loans for SMEs let you choose the option most convenient and suitable for your business.

Loans for New Entities

The initial period is most difficult for a new business startup. Get working capital, cash credit facility and other loans from ICICI Bank after just a year of operations.

Collateral Free Loans

Get cash credit and term loan through a government backed CGTMSE loan up to Rs. 1 crore

Loans without Financials

Business loans based on past transaction history

Finance for Importers Exporters

Get Export Finance, Letter of Credit, Bank Guarantees and foreign currency loans to support your business.

Loans for Schools and Colleges

Grow your educational institution with our Working Capital and Term Loans.

Secured Loan for Merchant Establishment against credit card swipes

Get loans of up to Rs 2 crore against your credit card receivables.





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Current SBA Loan Rates #home #business #ideas

#sba loan rates

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Credit Cards

Banking

Investing

Mortgages

Loans

Insurance

Credit Cards

Banking

Investing

Mortgages

Loans

Insurance

Current SBA Loan Rates

You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here’s how we make money .

For many small-business borrowers, government-backed loans are the holy grail. SBA loan interest rates are some of the most competitive among lenders.

So keeping up on the Small Business Administration’s terms and rates is part of a smart approach to finding a business loan. The 7(a) loan is the SBA’s most popular product and offers a flexible sum of cash for a variety of uses, including managing daily operations, purchasing new products and refinancing high-interest loans. Business borrowers also find low-cost financing for land and other major purchases with SBA 504 loans.

The SBA sets interest rate guidelines for lenders, which helps keep small-business owners borrowing costs low.

Here’s a breakdown of SBA business loan terms and rates, including interest and fees.

SBA loan rates

SBA 7(A) LOAN TERMS:

  • 7(a) loans do not have a minimum loan amount and max out at $5 million. The average SBA loan was around $374,000 in 2015.
  • The SBA guarantees 85% of your loan if it’s less than $150,000 and 75% if it’s more than $150,000. However, it limits guarantees to $3.75 million.
  • SBA loans aren’t easy to qualify for. Read up on the qualifications for SBA loans to make sure they’re right for you.

SBA 7(A) INTEREST RATES:

7(A) LOANS REPAID IN LESS THAN 7 YEARS

*The prime rate, hiked on Dec. 17, 2015, is 3.5%.

Example: The maximum interest rate for an SBA loan of $25,000 or less, paid in less than seven years, is 7.75%.

But interest rates make up only part of your expenses. Your APR reflects your true cost of borrowing, including your interest rate and all fees associated with the loan.

How SBA loan rates are set. Interest rates for SBA 7(a) loans are the daily prime rate, which changes based on actions taken by the Federal Reserve, plus a lender spread. The spread is negotiated between the borrower and the lender, and can result in either fixed or variable interest rates. However, the SBA caps the maximum spread lenders can charge based on the size and maturity of the loan.

A lender providing an SBA loan may also calculate interest rates using the one-month London Interbank Offered Rate plus 3% or the SBA’s optional peg rate instead of the daily prime rate.

GUARANTY FEES

7(a) loan guaranty fees are based on the loan amount and maturity date and apply only to the guaranteed portion of the loan. Lenders are required to pay the SBA the guaranty fee, but some pass the expense on to you. However, the SBA limits the maximum amount you will be charged.

You ll pay no guaranty fee if your loan is less than $150,000. If it s more than $150,000 and matures in less than a year, you’ll see a 0.25% guaranty fee.

If your loan is for more than $150,000 and takes more than a year to mature, you’ll be charged based on a three-tier system:

  • 3% on loans of between $150,000 and $700,000
  • 3.5% on loans of between $701,000 and $1 million
  • 3.75% on loans of more than $1 million

CDC/504 loans

Business borrowers looking to buy land, buildings or major equipment with long-term, fixed-rate financing can apply for SBA 504 loans. These loans are partially funded by certified development companies, nonprofit organizations focused on community economic development. The loans require collateral, typically the assets that are being financed, as well as personal guarantees from the principal borrowers.

504/CDC SBA LOAN TERMS

  • 504 loans are available in 10- or 20-year terms: As of March 2016, 10-year term loans had an effective interest rate of 4.33% and 20-year term loans had an effective interest rate of 4.55%.
  • Fee percentages are fixed but reset every five years based on principal, often resulting in a lower payment for the borrower.
  • The minimum loan amount is $50,000; the maximum is $5.5 million.

How 504 loan rates are set: Small-business owners seeking a 504 loan are on the hook for a down payment of at least 10% of the cost of the project. A traditional lender, such as a bank, puts up 50% of the loan, and a certified development company puts up as much as 40%. The SBA guarantees 100% of the CDC portion of the loan.

SBA 504 loan terms are primarily made up of the following:

  • The Treasury bond rate: Loans with 10-year terms are priced based on the five-year Treasury bond, while loans with 20-year terms are based on the 10-year Treasury bond.
  • A guaranty fee that is paid to the SBA.
  • A servicing fee that is paid to the CDC.
  • A fee paid to the central servicing agent.

When applying, you ll be quoted an effective interest rate, which is the sum of those three fees and the Treasury bond rate. However, you ll also pay a one-time fee of 2.15% to the SBA, as well as some additional fees, meaning your total cost of borrowing (or annual percentage rate) will be slightly higher than your effective rate.

The bottom line on SBA loan rates

SBA loans give you the best interest rates, though the application process can be complicated and time-consuming. If you find yourself in need of money fast, numerous online lenders can help you get the capital you need. However, they have less favorable APRs.

Find and compare small-business loans

If SBA loans aren t the right fit, compare other small-business loans to meet your needs and goals using our tool. We gauged lender trustworthiness, market scope and user experience, among other factors, and filtered lenders by categories that include your revenue and how long you’ve been in business.

To get more information about funding options and compare them for your small business, visit NerdWallet’s small-business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

This post has been updated. It was originally published Jan. 8, 2016.

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Merchant Cash Advance vs Business Loan – Small Business Blog #memphis #business #journal

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Merchant Cash Advance vs Business Loan

When things are going great, businesses have the cash flow they need for success and growth. During lean times or tight transitions, though, your company may need to find a cash advance loan to keep the doors open or to successfully expand. Though a myriad of funding options exists, merchant cash advances and platform lending like that offered here at Kabbage.com are two of the most popular and advantageous options.

The trick is understanding the difference between the two. Each has its own unique characteristics, and is more or less appropriate for a specific business need.

Let’s start with definitions.

What is a Merchant Cash Advance?

A merchant cash advance gives a business up-front cash, and takes payments from the credit card receipts on a regular (often daily) basis according to an agreed-upon amount. If you’ve been in business for more than a year, you’ve almost certainly received at least one phone call offering you merchant advance funding.

What is a Business Loan?

A business loan also provides up-front cash, but is paid back in monthly installments. These are usually withdrawn directly from your operations account, but terms are flexible if another method works better for your business.

For example, let’s say your company needed $1,000 for an advertising blitz in the month prior to your peak season. With that advertising in place, you would be positioned to lead the pack in your region for your industry. Without it, your competition would get the lion’s share of the business and the lost business would amount to far more than the $1,000 you would invest. But it’s been a year since the last peak season, and you don’t have the cash on hand. You need the cash, and like any smart business person you look at the two cash advance options for your business in detail.

Merchant Cash Advance vs Business Loan

Though it comes from the newer platform lending model. a Kabbage business loan is still legally a loan. This means it’s scrutinized by federal authorities and subject to limitations and enforcement. Merchant cash advances aren’t technically a loan because of how the payments are structured. This means they aren’t as regulated or carefully watched. This doesn’t automatically mean that merchant advance funding comes with abusive interest rates and contracts, but it does mean you should read and understand that contract as completely as possible.

Merchant cash advance loans approve any business that shows a history of credit card receipts sufficient to pay the money back. This makes them attractive to companies with new or bruised credit histories. Kabbage loans look at data from a variety of sources, including social sharing indicators, your cash flow reports, traditional credit reporting and industry metrics. Armed with that information, Kabbage can grant credit to struggling companies (at a higher interest rate to justify the risk), but can give lower rates to those who have earned them.

In this category, both means of lending are about equivalent. Kabbage loans deliver funds within 24 hours of approval. Most merchant cash advances work at the same speed – but not always. Ask about this if you go with merchant advance funding and need the money quickly.

Merchant cash advances take a percentage of credit card sales until the loan is paid. Kabbage loans take 1/6 th of the loan plus interest each month for six months. If your company needs flexibility that matches performance, a merchant advance might be the better option. If you want reliable, predictable costs for the borrowed money, Kabbage loans serve those goals more effectively.

For the first two months of a Kabbage loan, the interest rate is between 1 and 13 percent of the principal, based on the metrics gathered during the approval phase of the application. The rate then falls to 1 percent for the remaining six months of the loan. Merchant cash advance operations do not typically publish their interest rates. Independent analysis of a variety of merchant advance funding offers puts the average APR at more than 38 percent.

Merchant cash advances often include set-up fees, processing fees and even payment fees that can as much as double the actual cost of the loan. Kabbage loans include no extra fees. They cost as much as the “price tag” says.

Which is the better option? As with all business decisions, there’s no single good answer. Platform lending like Kabbage serves one set of business needs, while cash advance loans serve a different set. While we can’t give you a definite answer, we hope this has helped you identify the best questions. If not, watch this two minute video on Merchant Cash Advances vs Kabbage Business Loans for more information.

If you have experience with merchant cash advances versus business loans, tell us a bit about it in the comments below. Help the Kabbage community benefit from your experiences.

Jason Brick speaks internationally to small businesses after a fifteen-year career in managing companies for himself and others. His books include the best-selling Mastering the Business of Writing and upcoming Ownership Evolution. When not writing or speaking he enjoys martial arts, board games, cooking, travel and spoiling his wife and sons. He usually lives in Oregon, but is spending the year in Malaysia.

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  • Business Loan Rates #small #business #tips

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