A Bank Statement Loan is available now by Small Business Loans Depot.
New niche bank statement loans program for your business.
- Credit scores as low as 500 and lower
- Time in business as short as only 9 months- No Collateral required
Get a bank statement loan today based on what your company already has – Sales! Does your company have Gross Sales?Get business funding now!
Click on the “Contact Us” link above, complete the Mini “Contact Us” app or Call now Toll Free at: 855-787-1113 and get your business bank statement loan today!
Many businesses often wonder if they have excellent cash flow and have demonstrated a lengthy past history of being able to amortize a long term debt, then why should they be declined based on limited collateral or unsatisfactory personal credit when they have satisfactory business cash flow?
We agree! It’s that simple. Small business loans depot can provide a business bank statement loan, quickly, right now! Based on your Businesses revenue, we can assist you in getting money, quickly and easily.
Business Bank Statement loan features:
– Amongst highest qualification % of any business financing!!
– Every business has Cash flow
– Approximately 6 months bank statements requested
– Limited 1 or 2 page application
– Fast turnaround, one or two day approval common
– High approval rate
Get your Bank Statement Loan today. Call us today Toll Free at: 855-787-1113
Up to 125% of a customer’s total monthly deposits can be approved. If your business has average monthly deposits of $50,000, then up to $62,500 can be approved. If the businesses average daily balance, beginning balances and ending balances are strong, the approval amount can be higher.
This bank statement loan is used in effect, as a line of credit. The customer uses the line and repays. The customer can use the full line again immediately, or part of the line again immediately. The customer can also simply leave the line idle and not use it at their discretion for many months or longer. Unlike traditional bank lines of credit, this line does not require an annual pay down and it does not require annual or quarterly financial statements.
If the business owner has more than one significant business checking account, they can use multiple accounts to qualify for a higher line size. A bank statement dating back six months is submitted for each account. The higher the balances, the more the bank statement loan will be.
F.A.Q – Frequently asked Questions:
How much of a line size can I get?
The bank statement loan line size depends upon several factors. Average daily balance, amount of monthly deposits, number of monthly deposits, beginning balance, and ending balance are the primary factors. Time in business and to some extent, credit score are also considered.
How long does it take?
Once the business bank statement or statements are received, in most cases approvals are obtained in 24 to 48 hours. The customer receives funds into their business checking account.
How long is the term?
The term of these bank statement loans are between 3-18 months depending upon the time in business and the average daily balance and average daily collected balance.
Will this show up on my credit?
This transaction will not show up at all on the credit bureau at all or as a trade line with satisfactory repayment. The signer’s debt to income ratio will not increase. In addition, the owner will not appear to be more debt heavy in total. Another factor few know which lowers credit score short term is new credit and debt lines and additional credit and debt lines. Scores often go down because there is a new account on an individuals credit bureau, and the combined factor that it is an additional account, which adds to the total number of accounts with balances for that individual credit file.
Do I have to reapply to borrow again?
No! When the line has been repaid, at the customer’s discretion, they can leave the line idle, or re-borrow. The customer can obtain a bank statement loan again without a formal application by merely providing updated statements, the funding is wired into the customer’s account again. This can be repeated over and over.
What if I want a higher line size?
You not only do not have to submit another formal application, in many cases, the line size is automatically increased. There is no better customer than a repeat customer. Smallbusinessloansdepot does not punish existing repeat customers by giving new clients a better deal than you received. We reward existing repeat customers with higher line sizes upon renewal.
What do you look at to decide if we qualify?
Average Daily balance – The average daily balance, or the average daily collected balance the customer has in their business bank statement is reviewed and a factor in any approval amount. The higher the average daily balance of the business bank statement, the more higher the approved amount tends to be.
Amount and number of Monthly deposits – The number of deposits and the dollar amount of the deposits the customer makes on a daily basis is reviewed. A minimum of at least 5 deposits per month and $15,000 per month total deposits are preferred.
Beginning and Ending Balances – The customer’s beginning and ending balances are reviewed. Due to month end expenses, many business customers have lower business bank statement balances at the end and beginning of every month. Balances should not be too low in order to service the transaction.
Overdrafts and Insufficient Funds occurrences. The customer can have overdraft and insufficient funds occurrences. No more than three per month are preferred.
Sample Bank Statement Loan:
Verdi Management Company, a Freight management company in business for 1.5 years is requesting $40,000 to $60,000. They apply for a bank statement loan by providing their most recent 6 months business checking account statements. Upon credit review, Verdi Management is approved for $50,000. Upon Verdi’s request for funding, funding documents are E-Mailed to Verdi Management. The customer Faxes back the completed bank statement loan documents.
Upon receipt, the completed documents are reviewed. Ensuing, closing paperwork goes into funding. The customer is contacted by phone for a final verbal confirmation. The customer confirms the transaction and the deal is funded. After the verbal verification funds are wired into the customer’s account within 1 to 2 business days.
Business Bank Statement Loans Resources:
SBA Community Blog and Forum – Blog and Forums by the SBA, Small business administration. Questions can be asked and answers provided.
U.S. Department of Commerce – Helps american businesses become more innovative at home and competitive abroad.
U.S. Bureau of Economic Analysis – Provides statistics on consumer spending, corporate profits, travel and tourism and much more.
Entrepreneurworld – Resource for Entrepreneurs, including starting your own business, growing your business.
Bureau of Labor Statistics – Provides companies with up to date information on employment, demand, hiring, productivity and other information that may be useful to companies.
International Trade Administration – Creates jobs and economic growth by promoting U.S. companies abroad to governments in other countries.
More Business Bank Statement Loans resources:
Department of Labor – Provides information on many labor issues that can be useful to companies, such as insurance, regulation, wages, wage hours, compensation, safety and health
U.S. Patent and Trademark Office – U.S. office to file patents to protect a companies new or existing proprietary products.
U.S. Trade and Development Agency – Promotes U.S. Exports to Foreign Countries, please review if your company is interested in exporting goods to foreign countries.
CEO Refresher - A monthly newsletter on creative leadership ideas. Short articles, brief book reviews, models, management tools, quotations and commentary.
E-Network for CEOs – Online articles and much more for CEO’s
Public Radio Planet Money – All issues money related to the public.
Ethics Resource Center (ERC) – The ethics resource center advocates understanding of the practices that promote ethical conduct, through research, measurement of ethics and compliance programs
Corporate Governance – Links to sites that explore the corporate governance movement.
Thank you for visiting our business Bank Statement Loan resource page!
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“escape my merchant advance” by paying off the balance. (read more…)
Our features and benefits page will help you understand and learn how to use this equipment loan financing program for the life of your business. Since almost all businesses need equipment, virtually all businesses can benefit from this program.
Businesses can find a flexible solution to their equipment needs today, including short time in business, and lower credit score concerns in the $3,000 to $150,000 range.
Complete the contact form in the menu above, or call Toll Free at: 855-787-1113 to find out how to get the equipment you need at your place of business as fast as 3 business days. Approvals can be obtained in as little as one day and funds are wired into your business account as quickly as 2 to 3 days.
Use this equipment loan program to obtain computer electronic equipment, industrial equipment, machinery and medical equipment fast and easy. Scores as low as 600 and in some cases, lower, are accepted. There is no minimum time in business. New businesses can qualify to get equipment.
Other Equipment loan Features include: – Very flexible qualifications - Application and processing is fast and easy – No minimum time in business minimum requirement – Equipment loans as low as $3,000 to start – The equipment loan does not appear under the borrower’s personal credit
Frequently asked Equipment loan program questions:
What are my chances of being approved? If you have been in business for as little as 2 months or longer, you may qualify for an initial equipment loan to get up to $25,000 in equipment.
What is the most equipment I can get under the equipment loan programs? The higher the Gross Sales of the business, the longer the time in business and the higher the credit scores are, the more the business can get in equipment.
What are the terms of financing? Available terms are 12, 24, 36, 48 and 60 months.
How fast can it be done? The full process takes approximately 5 business days from the time the application is submitted, to the Vendor, or your business being funding by wire.
In most cases, traditional funding sources most often are the institutions that may require an annual payout provision as part of the loan requirements. For this condition, the loan typically has to be paid down to zero at least once per year. This is a major condition that borrowers should be very cautious about. This may seem like a minor aspect of the transaction, but could end up being very hard for the business to accomplish.
Businesses need to ask what will happen if this condition is not met. If the company does not pay out the loan one time per Year, what can the lender do? Does the lender, in this instance, have the right to call the loan? Will they raise the interest rate? Do they have the right to consider taking some or all of the collateral? Can they liquidate any listed stock or bonds that were put up as collateral? If so, how likely is it the lender may do this. Will they do this quickly or only after a protracted period of the loan not being paid? These are questions that need to be asked. The borrower may have put up real estate as collateral.
The borrower needs to carefully consider the requirements if real estate is held as security for the transaction. If the transaction is for a larger amount, $50,000, $100,000 or more, the borrower must carefully consider their cash flow throughout the year. Even for businesses that have Gross Sales of $1,000,000 – $2,500,000 per year, coming up with $50,000 or $100,000 at any given time will be very challenging or may not be possible.
The business should consider their average monthly bank balance as an estimate of the maximum amount they can come up with at any given time. Whatever that amount is, will likely be the maximum they should have as a balance for a business line of credit that has an annual payout.
The vast majority of representatives sense the political environment is not conducive to a fight at this time due to the Sequester battle just having ended. The public has been told for weeks that due to budget cut requirement of the Sequester, a variety of services they hold as important will be cut, that many employees may be hit with job furloughs, and other similar bad news such as this for several weeks. If this is followed by a massive Government shutdown, the public backlash is expected to be fierce. For this reason, Congress has indicted it will not shut the Government down.
The public’s perception is that Government not only cannot agree on anything, but that it can do nothing other than fight, blame each other, and spew out the harshest vitriol it can think of. Basically, it cannot accomplish anything. While there still is the possibility that things can turn and a shutdown can happen, a shutdown now is a long shot. During the last debt ceiling debate at the end of last year, one month before the deadline, both parties were pleasant with each other and saying nice things. Possibly what is most likely to happen is for the basic problem to continue to not be solved, and for the solution to the problem to be delayed, much as it has for the last 25 or more years.
Many loan programs allow for a 10% increase on a newly approved loan if either the credit representative or the customer simply asks for it. In many of these cases, credit is not pulled again, there is no additional review and a reason for the increase is not asked for.
Very few consumers are aware of this and do not take advantage of this. Such an increase is not advertised by lenders because they wish to approve what the customer asked for or the maximum they can qualify the customer for. They merely do this in the event a customer wants more, 10% is considered small enough to be within the risk parameters of the credit decision.
As an example, a customer applies for $50,000 and is approved. If the customer indicates they wish for more funding, they typically can get an additional $5,000 simply by asking for an increase. An automatic 10% increase is the limit, lenders will not stretch to a 20% increase without a further review or more information, possibly financial information being asked for. For example, if a customer is approved for $50,000 and insists on $75,000, then further financial information may be asked for to consider the request, such as a Personal Financial Statement or Business or Personal returns. If the applicant can show just a small amount of other sources of income, that may satisfy an increase request. In some instances, providing the most recent 3 months business checking account statements is enough.
These are some of the ways in which a borrower can increase the amount of an approval.
Vending companies can seek financing options that use other strengths of their company, such as cash flow, to secure the financing. Instead of applying for an asset based loan, Vending companies can choose from a variety of financing options. Another option is a basic business line of credit. A business line of credit is significantly more difficult to qualify for, however, if a business has a longer time in business and there is strong business and personal credit, they may qualify for a business line of credit.
Further, if the Vending business provides the most recent 3 months business checking account statements, strong recent cash flow will assist them in their financing efforts. If there is more than one owner and the 2nd owner has stronger credit, both owners signing will further allow the business to have a higher chance of qualifying.
Another way for a vending business to more easily qualify for financing is to apply for fewer pieces of equipment at one time. This will allow for a more easy qualification process. The final way is for businesses to voluntarily provide their financial statements.
Many business owners are under the impression that they should try to avoid submitting financial statements, even if their statements are strong. This is an incorrect approach.
If the financial statements are strong, they should be submitted.
One of the primary reasons Vending companies have always had more difficulty obtaining financing is that the collateral is less desired for several reasons. The Collateral is less valuable, it has less value when it is being resold, and the collateral is often in many different locations, sometimes one or two dozen locations.
In the event of a default, if the collateral is to be recovered, it would be far more difficult to recover than with more conventional collateral that is located on the property of the borrower. In some cases, it may not be possible to recover the collateral at all. If the collateral is location in the physical location of another business, the other business owner may not want a third party repossession company on their premises to pick up assets located on their property. It may hurt their business and look bad. If a customer has to many assets from one Vendor and that Vendor goes Bankrupt, a company that comes by to pick up the collateral may suddenly show up one day to pick up many machines. For instance if a bowling alley contracts for many machines with 1 Vendor, the bowling alley would not want a repo company to come by one day and pick up half of the Vending machines and Arcade machines. That would significantly hurt the short term business of the bowling alley.
It would be far better for the bowling alley to use several vendors for vending and arcade. If one Vendor has difficulty, the bowling alley, in this example would only lose a few of their pieces in the event the Vendor were to get into difficulty, and a few items could be easily replaced.
Lenders require landlord waivers to avoid complications in the event of default. If a loan involves collateral that is on the premises of the borrow who leases the property rather than owns it, the landlord waiver allows the lender to enter the property and obtain the collateral in the event of a default. If the lender were to not to require a signed landlord waiver, they could not enter the premises of the borrower to take their collateral.
They could not enter the property by law and the owner of the property could potentially seek recourse against any company entering the premises without their permission on behalf of the lender. There are some financing arrangements in which a landlord waiver is obtained by the lender, but is not considered critical by them. In other types of financing, the lender will consider a landlord waiver absolutely critical and will not fund a transaction without the waiver.
In the vending industry, lenders that finance multiple vending machines will not fund transactions without all of the required landlord waivers. Lenders that finance vending machines know that if they finance 10 vending machines, those 10 machines may be in 10 different locations throughout a metropolitan area. If the borrower defaults, the lender would have to go to 10 locations with truck over a wide geographical area to pick up the collateral. They cannot simply show up at a place of business to pick up collateral. They have to have permission from the owner of the property because they will be uninstalling equipment, which is considered making a change to a property. The lessee agrees in the lease not to make a change in the property without the permission of the landlord, so the lessee is obligated to contact the landlord.
In the event of a default in which the lender does want to get the collateral, the last thing the lender wants to do is at that time is contact 10 different landlords and hope they all agree to an on site repossession. The landlord knows if they allow that to occur, the business that leases space from them and from whom they receive rent may go out of business.
The landlord does not want the lessee to go out of business, much less go out of business in an abrupt fashion. In such an instance the landlord would greatly prefer to deny the request if the feel they can do so.
These are the reasons why lenders will ask for and obtain a landlord waiver when a business loan is first closed.
As an example, if a business needs $100,000 and knows it cannot qualify for $100,000 in one loan, the business can get multiple loans. In this example, if the business knows it can qualify for approximately $35,000, but not $100,000 and it needs $100,000, the business should first obtain a $35,000 loan. After obtaining and receiving the $35,000 loan, the business can apply for another $35,000 round of funding, followed by a final round of $35,000 in funding. By going for 3 rounds, the business has achieved the full goal of $100,000 in funding.
In many cases, the business does not need to use all of the funding in the first week or two, or even in the first month or two. Many times, the business uses the funding over the course of weeks, and even months. Had the business obtained the $100,000 all at one time and used it over the course of 3 months, that would have amounted to almost the same result had they obtained the funding in 3 parts of $35,000 over the course of 2 or 3 months. As an example, if a Restaurant is doing a build out and expanding the restaurant by taking out a wall and expanding floor space, they spend the money as the work is completed over time, not all at once.
First the expense of breaking out the wall is incurred, followed by new construction, then electrical, then interior. All of these expenses occur over time. The general contractor does not charge this all upfront.
The strategy of multiple loan parts over time can be an effective way for a business to get all of the funds it needs.
In short, yes. Service industries, industries that are heavy in service and hospitality do not have some of the advantages that other industries such as Medical and manufacturing have. Service and hospitality industries generally do not have hard collateral which manufacturing and Medical have much more. Both medical and manufacturing both have valuable equipment which can be taken as collateral in a loan request.
Another advantage that the Medical, professional and manufacturing sectors have is that on the average, they stay in business longer than service and hospitality industries. Service industries such as Restaurants have a higher frequency of going out of business.
The past due rate for industries such as Medical is far lower than average in the loan portfolio. One of the reasons lenders like Medical practices is that their past due ratio and default ratio is among the lowest of any industry. It is also known in the lending industry that Restaurants go out of business more often than the average business. This results in a double negative for lenders. If a certain business sector goes out of business more frequently and they do not have collateral, then the lenders will lose more often lending to these sectors, and they will lose more money at the time. In summary, the lenders lose more money more often.
While Restaurant and certain hospitality organizations do have some collateral, Restaurant equipment and hospitality equipment such as beds and furnishings will bring in far less than production equipment and used medical equipment.
Lenders will not discuss these issues, however most traditional lenders do not favor certain service industries such as Restaurant, as well as hospitality industries.
There are reasons Accountants should have knowledge of both financial planning and business credit to assist them in their conversations with clients. Accountants may automatically take as many deductions for their clients as possible and show the clients net income as low as possible, sometimes close to $0. This may happen without having conversations with their clients about whether this is in the best interest of the client in the short and medium term.
Accountants and many of their business clients may think the Accountant is doing the best job possible if the Accountant shows the net income of the business as close to $0 as possible. This type of reporting may occur for several years without any substantive conversation between the Accountant and the business owner.
In many cases, the Accountant is not considering whether their business clients will have financing needs in the following two to three years. If the business will have financing needs, it is important for the Accountant to be aware of this and discuss with the owner of the business the importance in the credit review process of showing a healthy net income. In many cases, the business owner will not be aware themselves of this issue, especially the owners of newer businesses.
Financial statements can be reported differently by Accountants in many cases by reporting officer’s salaries, amortization and depreciation differently. There are also other items that can be carried over into future reporting years. Different figures will result in a different net income reporting. Accountants should have a strong or almost expert knowledge of the credit issues already, since they likely will have done the financials of many businesses. The onus should really be on the Accountant to advise, or at least make their business clients aware of the significant drawbacks credit wise, if the reported figures for net income is too low.
However, this high percentage of insured patients applies primarily to traditional medical practices. Dental practices and Chiropractor practices have a far lower level of insured patients than medical practices. As a result, when Dental practices and Chiropractor practices apply for financing at traditional and some non traditional sources, the lack of patient insurance used for payment is considered in the loan request.
When a Medical practice applies for financing, their accounts receivables may total in the hundreds of thousands of dollars. Most Dental and Chiropractor practices will have Accounts receivables under $100,000 with most being below $50,000. As a result, traditional financiers are not able to use and assign the practice’s accounts receivables as collateral for financing, which makes their asset position somewhat weaker in the financing request.
The root cause of this is that most individuals have health insurance but not as many have dental insurance. Those that have dental insurance often elect the insurance through one of their workplace programs. A very limited number of individuals have insurance that will cover treatment procedures at a Chiropractor. However, there are more insurance policies available to cover dental work than chiropractor work.
As a result, when Dental practices and Chiropractor practices seek financing, they should be aware that they have one less significant asset available for the financing than a traditional medical practice. One strategy that can make up for this is to work with their Accountant to make sure their financial statements are reported in an way that makes their bottom line more profitable. There are some accounting options that businesses and their accountants can choose from that will more likely allow a practice to show a positive net income which will closely considered as part of the credit evaluation whether the practice can handle the additional debt service.
In many cases, leases are not reported on personal credit, especially business leases. In a business lease, the lease is not reported on the signer’s personal credit. For more established businesses and individuals with a longer, more established credit history, the fact that the lease is not reported is considered an advantage because it will not be counted as an additional debit to the individual. Conversely, if the lease were reported, it would be considered a disadvantage.
In the case of newer businesses, younger individuals or individuals with limited credit, the fact that the lease is not reported on individual credit could be considered a disadvantage. In these situations, the lessee may want to build up positive business credit and personal credit and a new significant reporting would be an advantage. For any business that is less than 3 to 5 years old, a lease reporting will help the business credit since the business is building up credit.
Many of the business credit agencies will report the lease or show the lease under one of their industry trade account listings. D & B, Experian Business credit report and Paynet will typically report the trade reference. The lessee can take the lease number, lender name and lease approved amount, contact the business credit reporting agencies and check if they are being reported. If not, the lessee can provide the information to the business reporting agency and get it listed. Some of the business credit agencies may not have an account or file for the lessee’s business. In that case, the lessee needs to decide if they want to establish a file. The business credit reporting agencies may charge a significant fee to get a business credit profile established.
If that occurs, the lessee needs to have as many business trade accounts ready as possible. The lessee should have a list ready with existing trade reference company name and account numbers.
In general, a strong Co-signer does not make up for a bad credit primary applicant. If the primary applicant has significant derogatories, especially significant recent derogatories, a strong Co-signer will in most cases not be able to help turn a decline into an approval. A strong Co-signer does have a positive effect on an application is situations when the primary applicant is not strong enough, or has limited or weak credit, or has minor derogatory credit.
There are several reasons why a strong Co-signer is often not helpful when the primary signer has significant derogatory credit. Lenders know that in most cases, Co-signers sign solely to help the primary applicant get the loan. A Co-signer normally does not intend to take a benefit by Co-signing. Examples are parents that Co-sign for their children to help them get a car loan. However, there are many other examples. Sometimes another relative may Co-sign, or a friend may Co-sign just to help the primary person get the loan. In such instances the secondary signer does not want the proceeds or asset that is being applied for. Due to this, if the primary applicant runs into difficulty and cannot repay, the Co-signer often be very unhappy about the prospect of paying the loan because they received no benefit from it. In the past, lenders have heard Co-signers outright tell them that they just signed the papework to help the primary person get the loan. In some cases, the C0-signer really believes that they really will not be responsible and that the limit of their role is that the just signed the paperwork and there was nothing more to it that that.
Another main reason that lenders do not want to make loans to bad credit primary signers even with a strong Co-signer is that if the primary has a lot of recent derogatory credit, the lenders know that statistically, there is a much higher chance that the primary applicant will go into arrears and past due compared to primary applicants with limited derogatory credit and a high credit score. Since the percentage of borrowers that go past due is higher, lenders know that they will end up going to the Co-signers asking for recourse in a higher percentage of instances than with stronger credit primary signers.
There are some loan products which are exceptions to this, but in most cases for the reasons stated above, a strong Co-signer will not help a derogatory credit primary applicant get approved for a loan that they otherwise would have been declined for.
When it comes to financing, a name change is not a good idea and should be avoided. Even if the business can provide evidence it is the same company and only the name was changed, this explanation has always been looked at warily by lenders. To lenders, a name change is looked at as almost a new business, or at least to a large extent, a new business, whether it is or not.
This hurts significantly in a financing request because if a company has been in business for 7 years, and changes the name in the last 2, it will almost look to a lender like the business is 2 years old. Another factor in how the business is looked at is what the business credit report says. If the business credit reports have the old company name, this will hurt. If the business credit reports have the new company name and the business start date shows the full 9 years in business, this scenario will be penalized far less severely.
One answer would be to only somewhat change the business name, if possible. For instance, if the company name is Alley Pizza, it would be better to change to Back Alley Pizza or Alley lane Pizza rather than Jim’s World Pizza. If the name change is wholesale, it looks like owners have changed hands.
In summary, if a business wishes to change it’s name, the owners should consider if financing is in their plans in the following 2 or 3 years, and if so, this should be factored into the decision if the name is changed, and what it is changed to.
UCC stands for Uniform Commercial Code. A UCC lien means that a lien has been placed at the State on some asset, either tangible or intangible, at a company. A UCC blanket lien means that a lien has been placed on all assets, furniture, fixtures, and equipment. This is how the lien is generally listed at the state. Further details of the lien will vary based on the lender. Often the lender will write in specific details, which may include:
1. A lien on Vehicles or a lien on Accounts receivable.
2. A lien on any future assets, during the term of their loan
Both of the above lien conditions can be very significant to a business and business owners should be very cautious. If a lender puts a lien on a company’s Accounts Receivables, this means that if the company completes a job and is due a payment that far exceeds the remaining balance with the current lender, the current lender is the ultimate legal owner and legally entitled to the Accounts Receivable asset.
What can be considered the more insidious lien is a lien on any future assets during the term of the loan. Under this condition if the company buys 5 commercial vehicles for cash, the lender technically owns those vehicles. If this lien condition is observed to the letter, then a business could technically not take out any future asset based loans because the newest lender will want to take out a lien on that asset and may be unaware that a previous lender has a lien on all future assets of the borrower.
There is a legal grey area even with a regular UCC blanket lien filing. The regular UCC blanket lien says a lien on all assets, furniture fixtures and equipment. If a business goes out and acquires another asset free and clear, then it is still a current asset, which is covered under the UCC. If the business acquires an asset which another lender puts a lien on due to a new loan, then there may legally be an ownership conflict with that collateral. The new lender may not have a clear legal right to that asset based on the previous lien.
In many of these cases, there are significant issues that come with the lien filings and businesses should do due diligence.
What is considered a higher loan amount for a business loan request? In general, amounts up to $50,000 are considered low enough that they will be evaluated “App only”, which means that a decision will be rendered based just on the application information. When a request is over approximately $50,000, financials will be required. Any amount over $100,000 will be considered a larger request.
For requests over $50,000 to $100,000 and more, it will be easier to qualify through asset based loan programs rather than unsecured programs. Lenders generally will consider a business with similar credit guidelines up to those amounts, especially up to $25,000. Above those figures, businesses will need to have Gross Receipts over $1,000,000 or so in order to be seriously considered for a $100,000 unsecured loan. If their sales are lower, or significantly lower, they should consider only asset based loans.
There are multiple asset based loans that businesses can consider. In general, the most common types are those in which the lender will take a blanket lien on the business. This occurs most frequently when the lender is a traditional lender. The blanket lien means a lien on all furniture, fixtures and equipment. Another type of asset based loan is when the company puts up equipment assets. A further asset based financing type is when the business puts up liquid assets, such as listed Stock, Money Market accounts, or even Certificates of Deposit.
Whatever financing is chosen, if a business is requesting over $50,000 to $100,000 or more, they should generally consider asset based loans, as the approval rates for unsecured loans in this dollar range and above is significantly lower.
The general public overwhelmingly seems to believe that there are many grants available, mostly from the Government, which never have to be paid back. Grants are issued primarily to non profit businesses. There are some exceptions, and those exceptions vary over time. In some instances, States may issue grants to certain start up businesses, or to businesses in certain industries. It is not uncommon for States, and sometimes the federal government to issue grants to businesses that are in very specific technology industries in their efforts to provide an incubator for certain new technologies.
Sometimes states will issue Grants to certain businesses in the farming sector as States wish to promote the continued health of farming in their States. There are also instances in which certain minority owned businesses may be provided Grants. In general, For profit businesses do not receive Grants. Federal and State governments do not wish to provide money from revenues to businesses that are engaged in for profit endeavors.
It should also be noted that there are many companies that advertise paid services in which, for payment rendered, they will instruct the buyer how to obtain a grant. Many of these advertisements do not indicate that these Grants are not for profit businesses and that they are only for non profit businesses. There are also many companies that advertise books as well as online books that are sold on how to obtain Grants. These fall into the same category in that these books are being sold on how to get something that in the vast majority of cases, does not exist.
In both the short and long term, a Government credit downgrade has a significant affect on the services Government can offer to society, mainly in a reduction of those services. One need only look at Greece to see the nightmarish affects of many downgrades in credit, to the point where Government issued bonds going into junk status.
When the Government suffers a down grade in it’s credit rating, it may be foreced to offer a higher rate of interest on the securities it issues to attract capital investors. Currently, the Government pays approximately 12% of the revenues it takes in to investors through the Government Treasury bonds it has issued. This means that the Government is now using approximately $300 billion per year to pay interest owed. The public receives no benefit from this money. It is, in essence, completely wasted money. If there is another credit downgrade, or several downgrades, it may force the Government to pay a higher rate of interest on the same Treasury bonds to attract the same investors.
If an extra 1% in interest is paid, this is very significant because it is likely to be a permanent increase rather than a temporary or fluctuating increase. In order for the interest payment on bonds to go down, the credit rating issued by Moody’s and Standard and Poor’s would have to be upgraded. Considering the Government’s large and consistent budget deficits, this scenario is unlikely, especially in the short term. The extra 1% paid in interest will represent approximately $10 billion dollars per year, each year, ongoing for those Treasuries issue in that 1 year. If this is done each year, with a budget deficit of $1 trillion, this is approximately and extra $10 billion every year, on top of the previous year’s trillion.
So how does this affect or decrease services?
This is money that the Government cannot now use, that is previously did use, to fund any services or benefits, including Medicare, Social Security, Education, Military, Highway, unemployment, job training, or any other areas of the budget. Every year that the Government says it has to reduce the benefits to Medicare and Social Security because of limited funds, those funds that are now being paid in interest could have been used to fund these programs, rather than cut them. A future post will focus specifically on the dollar amounts per year.