Bank Statement Loan

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.

Turn Bankstatementimage Into Manwithmoneyimage

Start Now!

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!

_______________

Market Updates

_______________

“Credit Inquires” has been a topic of much conversation and concern in recent years.  The following is current information you should know about “credit inquiries you cannot avoid”.

Do not try to avoid virtually all credit inquires.   A growing number of people do not want any, or virtually any credit inquiries to be pulled on them even if they are applying for credit.  They tell lenders that they want to be considered for the financing without their credit being pulled.  There are “credit inquires you cannot avoid”.
This is not feasible or realistic, especially if the request is in the name of an individual.  In most of these cases, these request are in the name of a small business and the owner wants the request to stand in the name of the business by itself without their name.
If a business has less than 35 employees, in most cases the lender requires the owner’s credit to be reviewed.

Virtually no lenders will decide your loan request with a consumer obtained bureau.  Consumers can contact credit reporting agencies as well as outside vendors that provide bureaus and get all 3 credit reports.   These reports are not the same reports that lenders obtain.  Consumer reports are formatted differently and are simpler than the lender’s report.  The consumer version often provides more written explanation and sometimes less numerical detail.  Consumers will sometimes take these reports and tell the lenders that they want the lenders to use their consumer obtained reports rather than what the lenders use.   However, the lender’s version is usually more current than the consumer’s version.  The consumer version may be two or three weeks old.  The lender feels that the consumer’s version may not reflect items on the bureau that may have happened within those most recent two or three weeks.

There are many outside vendors that provide intermediate party credit reports.  Lenders are not, and should not be expected to know whether those vendors provide updated and satisfactory information.  Lenders are not obligated to use those reports.  As a result, consumers should not expect to avoid credit inquires by demanding that lenders use their consumer credit report version.

Credit inquires you cannot avoid 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 credit inquires you cannot avoid 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.

Thank your for visiting our credit inquiries you cannot avoid resource page!

If your business is trapped in a merchant cash advance, you can,
“escape my merchant advance” by paying off the balance and terming
it out much longer, from 6 or 9 months, all the way out to 36 months
or longer.

Determine what your balance is.   Complete a list of your equipment assets,
which includes Computer, medical, industrial equipment and machinery.
We will approve a loan to payoff your balance and payoff your merchant cash advance
and help you set up a 24, 36 or 48 month repayment term.   Even if you only want
to term the balance off to 24 months, this will significantly reduce your monthly payment compared to what your business was paying.

If you took out a $25,000 merchant advance for 6 months you were paying around $248 per day, or $5,457 per month.   By terming the financing out to 24 months, you will reduce the monthly payment to $1,562 per month, which is only 28% of what you were paying.  If you go out 36 months, you will reduce your payment to $1,083 per month, 19.8% of the amount you were paying.   This difference will make a dramatic positive influence on your cash flow.

You will only need to complete a short 1 page Mini app and provide an equipment list which can be completed online.   The approval process takes 1 – 3 business days.  If you are approved, the closing documents are E-Mailed to you.   You complete them and return the completed documents via fax.   A verbal verification call is completed with you and you receive funding within 1 to 2 business days afterwards.

Escape the merchant cash advance now and call us today at Toll Free: 855-787-1113 and we will assist your business in correcting this highly restrictive negative to your business cash flow.

 

The Government will completely run out of money and ability to use extra ordinary measures to pay current obligations sometime in the fall.  The worry is how ugly the fight will get.

There is no evidence, and there are no signs that the act of raising the debt ceiling will be congenial.   All indications are that the amount of the debt ceiling increase will be minimal as well.   Rather than increasing the amount of the debt ceiling by a larger amount that will last 2 or 3 years,  congress has already indicated that they expect the amount of the debt ceiling increase to be only around $500 billion, an amount that will have to be revisited by 2014.

It appears that both parties are more concerned about their own agendas and appearing to hold out for the best deal possible, rather than the fiscal health of the domestic economy and the long term credit of the country.   In 5 to 10 years, a high percentage of sitting politicians will not be in office.   However, any damage they do now in terms of the credit rating of the country will be either permanent or last for decades.

Any further downgrade in the country’s credit rating will be solely attributed to how much the two parties fight.  Credit rating agencies have already stated that the U.S. credit rating downgrade in 2011 and any upcoming are mostly due to the inability of the government to come together and solve the problem.

The credit rating agencies have already stated that they may downgrade again if there is further intense fighting between the parties and go to the brink before a deal is closed.

The treasury department is currently engaging in extraordinary measures of moving money around to meet the government’s commitments.  Congressional Republicans are finalizing a list of requirements they will demand that the administration meets in order to ensure their cooperation.   However, bond rating agencies have already stated that another round of fights may trigger another credit downgrade of U.S. Treasuries.   Is another credit downgrade coming with the upcoming debt ceiling fight?

Counter arguments have been made by some U.S. politicians that not increasing the debt limit will not be as dire as predicted because Congress could authorize payment of principal and interest on existing U.S. debt, while not paying other obligations in other areas.   However, bond rating agencies such as Fitch has indicated that such a ploy may basically be considered a thinly veiled default and may well still trigger a review of the Government’s credit rating.   Their view is that this is nothing more than debt prioritization, which pays certain obligations but not others, and is just another term for default.

Politicians have already shown that they are apparantly willing to use the debt ceiling to score perceived short term political points on an issue that will be forgotten in a few weeks at the expense of the nation’s credit, rather than compromise, or at least make it a priority not to fight on such a critical issue.   The nation’s credit deserves far better than this from both parties.  It appears that the extreme wings in both parties are driving the debate to a head.

Another major danger in this type of fighting is that the debt limit has to be increased every few months, or roughly every year at the longest because it is only increased by a relatively small percentage on each occasion.  If the branches of Government would agree on a plan to raise the debt ceiling ongoing by an agreed set of circumstances, these credit downgrade threats would largely go away.

“I need to get out of my merchant advance.”, or “I want to payoff my merchant advance”, and “I want to payoff my cash advance” are becoming more frequent and louder requests by businesses.  Other very common pleas include “Escape my cash advance”, or “solve merchant advance problem”.

Regardless of the plea, many businesses have taken out significant short term loans against their credit card sales, which are advances against their future sales.  These loans are as short as 3, 6, and 9 months.  By taking out this type of loan,  your businesses cash flow during the term of the financing is substantially tightened because you not only have to use future sales to pay back the loan taken out, but have to do it in the very short time frame of a few months.

Call us today at Tel: 919-771-4177 or Toll Free: 855-787-1113.   We will help you get out of your merchant advance loan with several long term options of 24, 36, 48 or 60 months. 

Many businesses in this situation would greatly help their short term cash flow to get out of these merchant advance loans.   Businesses needed the funding at the time for critical reasons, but then they are finding that 6 and 9 month terms are too short term,  and require them to pay far more per month than they can comfortably handle.   If sales are not significantly on the upswing, cash flow can become even tighter than before the advance.

The good solution to the”I want to get out of my merchant advance” dilemma may well be to take the amount they owe, and extend the term out to 24, 36, or 48 months.  Businesses can take out an asset based loan against their equipment,  or a general loan against the business.   Smallbusinessloansdepot can help.  We specialize in helping you get out of a merchant advance with often simple and easy loans that range from 24, 36, or 48 months.
Since most businesses have equipment and other assets, the vast majority of businesses will qualify asset wise.

Get out of merchant advance

Call us today at Tel: 919-771-4177 or Toll Free: 855-787-1113.  Don’t remain in the restricted cash flow difficulty of a merchant advance loan.   Pay this loan off, and add back hundreds or thousands of dollars per month into your businesses monthly cash flow by extending the term through a leaseback against equipment, or other longer term loans based on the strength of the business in general, not it’s future sales.

Call us today and get out of the Merchant loan advance circle with an asset based or business based long term loan.

Sample “Get out of merchant advance” solution. Mike’s wholesale auto parts in Charlotte, NC took out a $50,000 merchant advance for 6 months.  The monthly repay on the advance is $10,900 per month.    Mike’s wholesale realizes this monthly cash flow outlay is far more of a strain on their cash cash flow than they anticipated and are interested in significantly extending the term to get out of the merchant advance.

Mike’s wholesale applies for a long term asset based loan, based on assets such as computer equipment and industrial equipment, though they could have chosen real estate, or the strength of the business as a whole.   They are approved for $50,000 over a 36 month term with a monthly payment of $2,075 per month against their Computer equipment.  The closing documents are E-Mailed to the customer.  The customer completes and faxes in the documents and overnights the originals.   Upon receipt, the the closing documents are reviewed for accuracy.  Mike’s wholesale is contacted on the phone for a final verbal confirmation and authorization.   Funds are wired into their business checking account within 1 business day.  They want to payoff the merchant loan and do so.  Mike’s wholesale was able to reduce their monthly outflow for this financing by $8,825 per month.

Frequently asked questions:

Question: How do I know whether I can get a 24, 36 or 48 month term?
Answer: In most cases, if approved, the business can choose any of these
term options.   Most businesses that do tell us “I want to payoff my Merchant
advance”, and are happy to be able to extend the term to 24 or 36 months, which
are the 2 most frequently chosen options.

Question: I am not sure I have enough Computer equipment or industrial equipment to cover the loan amount.  Can  I still get the amount I need? 
Answer: Yes.  We have programs that allow companies to get the full amount they
need, even if they do not have that much equipment.

Question: All I have to put up as collateral is some of my equipment?  I don’t have to assign part or all of my sales also, or put up Real Estate? 
Answer: Yes, in most cases, you only have to put up the equipment, or some of the
equipment you have.   Your future sales are never put up for this option to help you
get out of your Merchant loan.   If you do have Real Estate and are interested in a large
amount, such as $150,000 to $250,000 then you can choose to use both your equipment
and Real Estate to go higher.   This is an option you have.  The terms for this option of financing may be as high as 72 months.

Question: What do I have to provide to apply for this?  Do I have to provide bank statements for this type of loan also?
Answer:  You do not have to provide bank statements for this request.  All you need
is a simple one page application and one page equipment list.  You can easily complete this online or print out the short application and equipment list and Fax it in.

Question: Do I have to provide any financial statement or any other cash flow information for this request?  
Answer: In most cases, you do not have to provide any financial information.  However, if you need a significantly larger amount and your financial statements are readily available and show good cash flow, you can choose to provide them as part of the request.

Question: Do the assets, or equipment have to be new or almost new?
Answer:  The assets, or equipment do not have to be new.  The main factor is the condition of the equipment.  The equipment can be several years old, as long as the condition of the equipment is good or very good.

Question: Can I take this loan out personally and then use the funds to pay off the merchant advance?
Answer:  For this product, your business will need to apply in the business name.  Once the funding has been approved in the merchant name you can use it to pay off the merchant transaction.   Simply provide us with a balance.  We will call the merchant, get a final payoff and wire the funds to the merchant and pay off your transaction.   You will then begin paying the transaction back on the monthly basis instead of a daily basis, dramatically improving your monthly cash flow and have achieved your “get out of merchant advance”
goal.

Get out of Merchant Advance 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 Get out of Merchant Advance 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.

Thank your for visiting our get out of merchant advance resource page!

Business optimism is at a 6 month high.   According to statistics by the National Federation of independent business, optimism by businesses is the highest since late last year in several key categories. The organization’s optimism index increased to 92.1, up from 89.5 in March 2012, and the 2.6 point gain was the highest jump since October 2010.  The survey size was 1,873 firms.

According to the statistics, businesses are optimistic in multiple areas, including planning to hire new employees, with 6% of respondents planning on hiring new employees versus 0% in March 2013,  and 1% in January 2013.  23% planned on moving forward with increased capital spending versus 20% in December 2012.  4% expected higher sales versus none in the previous months.   Another important area of improvement is an increase in increased sales prices from 0% at the end of 2012 to 3% in April.   Businesses have confidence that consumers will be willing to pay rather than be driven off by higher sales prices.

These statistics are not reflective of a strong economy, rather continuation of a slowly rebounding economy.  The surge in the stock market over the last 2 years has been cited as a reason for optimism by many companies in other recent polls.

There has been virtually no shift in businesses’ view of an ease in credit conditions, which
continues to be viewed as difficult with tight access to credit markets.  Businesses continue to report having difficulty obtaining the financing needed for new hires, and other capital spending needs such as expansion.  These tight credit markets are causing many businesses to research alternative growth financing such as accounts receivables financing, contract financing, loans based on gross sales such as bank statement loans, loans  that businesses can obtain based on the sales of the business.  This funding can be accessed through networks and hedge funds specializing in alternative business loans.

The National Federation of Independent Businesses stated in summary that 4 of the index’s 10 main components measured contributed to most to the increase in the optimism percentages.   The SBA, Small Business Administration states that small businesses are considered to be less than 500 employees, which represents 99% of all companies.

You have applied for a business loan and been turned down.  What should you do now?

The first step is to call up the company that turned you down.   Determine if you are speaking with someone that has the knowledge and experience to provide you with useful information about the decline.  If you received a letter, call and confirm the decline reasons.   In many cases, you may have been formally turned down for more than 1 reason, and as many as 4 decline reasons.

Ask if significantly lowering the amount of the request,  adding a strong co-signer, or adding more collateral would cause them to reconsider and possibly approve the application.  For these questions, if possible, speak directly with the credit department that makes the credit decision.

If any of the reasons are for credit, you will want to contact at least one of the credit reporting agencies to determine what is on your credit file.   You may already know most of what is on your file, though you should get a copy of your file to confirm it.   If there are any inaccuracies, you should dispute them with the bureau.   This is easy to do and can improve your bureau without significant effort.  If the bureaus cannot prove the information is accurate, you may have success in getting it removed.

Once you accept what is on your credit report, begin looking for other alternative loan options.   First determine what are the strengths of your business and weaknesses of your business.   When you contact companies, find out as much as you can about what their alternative loan options are based on.   Instead of choosing the business loans you like best, organize the loan types in terms of what your business is most likely to qualify for.  Of those loan options,  then decide which ones you believe you should proceed on.

Discuss the loan options with the representative and speak with someone who is knowledgeable, rather than someone reading from a script.   If they don’t give you logical answers to your thoughts or concerns, try to speak with someone else.  Don’t feel that you must get all the funds you need through 1 type of loan, or all of it immediately at that time. There may be 2 loan types that you should proceed on.   If your business needs $100,000 in total,  and you only qualify for $50,000, this may still work by getting the funding in segments over time.   You can take the $50,000 you qualified for and work on getting the rest of the funding required over the course of the next few weeks or months.  Chances are you did not need the entire $100,000 immediately.  Most businesses that receive $100,000 do not spend it all or even most of it within the first 30 days.

If you have financial statements and they are strong, consider submitting them with the application even if the are not being requested.   If certain information is not being requested, it may still be very helpful to your request to provide it.   If your last 3 months business checking account statements are strong, you should consider providing these as well.

Why participate in Google Circles?
Adding people to your Google Circles and other people adding you to their circles is something which should be done because it continues adding significant value to the articles and blog posts you are already writing, including posts on your website and in forums.

How does it add value to me? The more people that have added you to their circles, the more weight everything you write carries.  Think of it as being an author.  Each person that adds you to their circles says you are credible.  This increases the weight and value Google assigns to you as an author and what you publish.  The more weight Google applies to you as an author,  the higher your rankings will be for what you publish.  Google has stated that it will continue providing results from sources with the highest credibility.

How can I participate in Google Circles?
Establish a G-mail account.  If you have a G-Mail account, you have a Google plus option in the far left of the top menu bar you see while reviewing E-Mail.  Google plus is a forum where you can post any thoughts, articles of interest you have seen, and more.   A main option is to add people to your Google circles or for other people to add you to their circles.  Add people organically.  As you come across them through your regular work, you can add them and they can choose to add you.  If you comment on their work or their google plus posts, they may add you.  If you have a rapport established with someone already, you can ask them to add you to their circles and you can reciprocate.  You can also contact friends and add each other to your circles.

As you obtain more credibility, you will notice that many of the articles and blogs you write will rank significantly higher.  They will be read and approved of by some in your circles.  The ranking of your publications is also boosted by those whose circles you are in that click
on, read and recommend your articles and blogs.

Learn how our equipment loan program can solve your businesses equipment needs.   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.     

As part of their decision making process for obtaining a business loan, business owners should also consider which type of loan will be the most difficult to qualify for, and which will be the easiest to qualify for.

In most cases, business owners carefully consider the terms, including interest rates, number of months, total amount of the repay, and early payoff considerations.   Not often enough do business owners consider whether or not they will qualify, and other detailed conditions of the loan.  If a business loan has good basic terms, but is very difficult to qualify for, then the fact that it has advantageous terms may not be very relevant.

Some lenders can place one or two conditions on a line of credit which can completely negate all of the other advantages of the financing.  For instance, for some lines of credit, the lender may come in at the last moment and require the borrower to put up residential real estate, or even their primary residence as collateral.  When the lender does this, the borrower should be savy enough to see that this is worse than if they had taken out a home equity line of credit because even on a home equity line of credit, only the house is taken as collateral.

If the lender is asking for the applicants primary residence on top of a business line of credit, and the borrower agrees, then they are agreeing to doing a home equity line of credit and offering to give the bank many of their business assets as collateral as well.   Unless the borrower really needs that financing that is being offered, borrowers would be advised to look for other financing, or attempt to negotiate the terms of the approval with the lender.

When business loans are approved, they are often approved contingent on certain loan conditions being met.  One of those provisions may be an annual payout requirement.

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.

With the latest requirement to raise the debt ceiling approaching, Congress has, for many months, promised to fight each debt ceiling increase request.  On this occasion in March 2013, all indications are that Congress will not fight the administration in it’s request to raise the debt ceiling.

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.

There is a simple way to get a 10% increase in an approved loan without having to qualify for it.  Just ask for an increase in the approval and ask for an amount that equals a 10% increase.

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, companies that sell and distribute equipment such as Vending machines and Arcade games have always had more difficulty obtaining financing for reasons mentioned in a recent post.  In this segment, we will discuss what Vending companies can do to increase their chances of getting financing.

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.

Vending companies, companies that sell or place vending machines or Arcade machines have traditionally had a difficult time obtaining financing for the business.  What are the reasons Vending companies have difficulty obtaining financing?

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.

Landlord waivers are often required for business loans.   In many cases the need for a landlord waiver is questioned by the borrower.   Why do lenders often require landlord waivers?

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.

If your business needs a larger business loan and you know the business will not qualify for the larger loan, a strategy to get the full amount needed is to get multiple loan parts.   Get several smaller loans to achieve the goal of obtaining the full funding of the larger loan amount needed. 

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.    

Over the years, it is known that traditional banks and similar lenders prefer lending to certain industries, such as Medical, professional and manufacturing.     Does that mean that certain industries are at a disadvantage when applying for a business loan?

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.

Accountants often fall into the activity of giving business owners advice on how to report their financial statements.   In many instances,  Accountants automatically will try to report the financial statements for their clients with as little net income as possible.    However, is there a case to be made that Accountants be required to be certified financial planners?

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.

Medical practices have been considered desirable by traditional funding sources for a long period of time due to the professional nature of the business and the low default rate.  Other factors for this include a consistent accounts receivable balance due to a high percentage of the patients having insurance.

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.

 

 

Leases have long been a popular financial instrument.   Leases are often reported differently than regular loans.   Depending upon the lessee, the reporting differences may be an advantage or a disadvantage.

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.

There is a long history in credit of using a strong Co-signer to strengthen an application. However, can a strong Co-signer make up for a bad credit primary applicant?

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.

There are many reasons why a business may decide they want to change the company name.  Sometimes the reasons are due to expansion, for good reasons, and also for not so good reasons, such as solving an image problem by finding a new name.  An example of large Corporate name change for a bad reason could be Valujet.    Valujet suffered a major crash in the Florida Everglades in the late 1990′s and primarily for this reason, changed their name to Airtran.

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 blanket liens are not uncommon, especially with traditional financial institutions.   However, what are UCC Blanket liens, what do they cover and what restrictions do they cause businesses?

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.

 

When businesses request funding for higher dollar amounts, they typically will consider an asset based loan or unsecured loan.   Which financing type is more likely to get the businesses a higher funding amount, and which financing products should a business apply for?

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.

Recently, some regular for profit companies have inquired how they can get free loan grants.    In general, Grants are not for profit companies, unless they fall into certain limited specific categories which sometimes change.

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.

There is currently little awareness, or interest,  if and how a Government credit downgrade affects all services that the Government can provide.

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.

Many business owners are conservative.   They obey the laws, watch their spending, and are cautious.   Many will say that the Government should not increase the debt ceiling knowing that the Government will be taking on more new debt.    It is a good idea for the Government not to take on new debt, but not this way.

Currently, the Government spends over 40% more than it takes into it’s coffers in revenues.   Economists have argued in past years,  by what percentage the Government can cut it’s spending in one year without hurting the economy, and many Economists felt that a cut of just 4% per year would slow down the economy short term, even if long term it benefits the country.

If the debt ceiling is not raised, or raised within one or two days after the deadline, the stock market will take a major dive.  Individuals will pull back on spending until they are comfortable with what will happen.  Large Corporations will follow suit and put on hold and delay any hiring or expansion plans.    Interest will continue to be paid or the country would suffer a true technical default.   World markets will truly be aghast and dive mostly due to the reckless self destruction.   Moody’s and Standard and Poors may impose another credit downgrade, further aggravating markets.

The Government will truly be forced to choose who receives Government money and who does not.   Watch in amusement as some of the same Congressmen and Senators who voted to not raise the debt ceiling suddenly demand that the flow of money continue for their districts.   Unemployment benefits, assistance for farming, highway money, and Government contractors will undoubtedly be among the first victims of a massive spending cut.   Companies that provide products for the military will also take massive cuts because Congress will make every effort to pay the soldiers.   If the department of education takes cuts this will cut funding to colleges and schools.   Other departments such as the Commerce department, the department of labor, and the State Department would all very likely take cuts.

While many people feel this would be good in principle, the state department includes funds for Embassies and Consulates, including the defense of those organizations.  The commerce department includes food safety and inspection.   Funding for Ports and border security have to be considered.    If the Department of Homeland security is cut, then many functions now happening would slow down.   Many of these employees would be temporarily cut.

The media effect would be tremendous.   Media outlets will interview unemployed and furloughed employees who will vent vicious frustrations.    Public opinion polls will reflect the worst ratings for Congress ever in it’s history.    Such a situation will be guaranteed not to be long term.    Congress will then quickly raise the debt ceiling.   Renewed talks of whether tax increases are justified in order to pay for desired services will begin.    People will realize the value of services lost, previously taken for granted.    Once it is accepted that the national debt must be address long term, their new found dependence of services will be weighed versus revenue increases and future proposed spending cuts.

Of the 3 major battles that are in process, the Fiscal cliff, the delayed spending cuts and the debt ceiling, the debt ceiling holds the most danger to the economy and the country.   The reasons have to do mostly with the dollar amounts are larger, those larger cuts are more sudden and the bond rating agencies have targeted a debt ceiling fight as a bellwether of whether they will downgrade the countries credit rating again.

Let’s compare all three.   In the most recent fiscal cliff battle, revenue rates were increased for those earning over $400,000 per year form 36% to 39%.    Those with incomes over $400,000 represent approximately 1% of the population.    Spending cuts were supposed to take place in the range of $1.6 trillion over 10 years through and where those cuts are supposed to occur is still a matter of debate.   Republican House Speaker John Boehner
(R) – Ohio, Senate Majority leader Mitch McConnell, (R) – Kentucky, and many in the rank and file membership of the House and Senate want to have major cuts in entitlement programs such as Medicare and other Government programs, possibly including the department of Education, the EPA, Environmental Protection Agency, and many others.
The most significant fact is that the cuts are supposed to be approximately $1.6 trillion over 10 years, which represents $160 billion per year, which represents only approximately 5% of the Government’s budget per year.

- The debt ceiling is much more dangerous for 2 reasons.    If it is not raised, it represents
a much larger cut, 40% to 45% immediately versus the 5% or somewhat larger cut being
negotiated in spending within the next 60 days.

Example of the numbers:

The government’s current budget is approximately $3.4 trillion dollars per years.   At the same time, government takes in approximately $2.2 trillion dollars per year in revenues, creating an approximate $1.2 trillion dollar budget deficit.   It has to borrow the difference. If the debt ceiling is not raised, it cannot borrow any money.    This means the government will have operate on $2.2 trillion per year instead of $3.4 trillion.    A shock of 40% plus in spending cuts will trigger massive austerity reductions in programs.    If these occur, expect the shock to immediately reverberate through the general public within days or less.

After 2 months of intense fighting and bickering, politicians in Washington have come to an agreement that, in the most minimal way, will avert the fiscal cliff.   However, the politicians only agreed to revenue rate issues and delayed the spending issues for only two months.   So in only 2 months, there will be another big fight, which means that the fight actually begins now.

If that were not enough, there will be another major political battle over raising the debt ceiling, which will need to be raised in the short term, within possibly 60 to 90 days as well. One would not be faulted for wondering when the politicians will actually Govern and deal with other important issues such as creating jobs, stimulating the economy, skilled jobs training, foreign wars, energy concerns, etc.   It seems that the politicians are not gauging the overall anger of the public.    It appears that each representative is gauging how the political battles are received relative to their political districts.    If it plays well in their district, they have little concern about how their vote plays nationally.

The politicians are already positioning themselves for the upcoming debt ceiling increase request by the president.   Just today, House Speaker John Boehner has already stated that he will not meet with President Obama as part of the negotiations.   President Obama stated that, unlike last years Debt Ceiling fight, he will not have a fight over the debt ceiling this time.   The President stated the Congress should pay for the spending that they Authorized and voted for so there should not be any reason to have a battle over it.   Senate minority leader Mitch McConnel stated today that any increase in the debt ceiling would have to be matched dollar for dollar by spending cuts in order for Republicans to back the increase.

Just today, Senators John McCain (R) – Arizona and Lindsay Graham (R) – South Carolina have stated that they plan for a big fight and not allow a debt ceiling increase without large spending cuts to entitlement programs.   However, most reputable economists agree that spending cuts in the order of 40% + all of a sudden would cause a decrease to GDP far greater than the decrease in the GDP during the recession of 2008.   Senator Graham stated that he wants decreases in entitlement programs by increasing the eligibility age of Social Security from 65 to 68.   If this age limit is increased much more, it may end up equaling the average life expectancy.

So the real question becomes, does the Government really want it’s citizens to have a retirement or downsize Social Security dramatically by basically raising the eligibility age so high that people won’t have a retirement?

In last years June 2011 fiscal cliff fight, President Obama went on the nightly news to state that if there was no agreement on the Fiscal Cliff, then it could not be guaranteed that Social Security checks would go out.    In this years fight, the president has not stated the same message with regard to Social Security.    This creates the question,  if there is no agreement on the fiscal cliff, does the same danger apply that Social Security checks may not be issued, or may not be issued on time?

In this round, the president and other lawmakers have talked less specifically about a variety of programs that will be cut or not receive funding and how it may affect certain sectors of the population.   It seems that the politicians do not want to frighten only one group, and in this case it would be the most vulnerable group within the population, Seniors and the elderly.    The truth is that certain programs will be cut and they may include Medicare and Social Security.   It may not have been specifically talked about on this occasion but it is a real possibility.

The debt ceiling will be raised, that is certain.   The only real question is if it will be raised before damage is done to the economy.    There are several ways through which the economy may be damaged if the debt ceiling is not raised by the deadline.

- The stock market will react very negatively in fear that spending may be cut over 40%
instantly.   Markets will also react negatively due to the fact that the bond rating agencies
Moody’s has stated that they would very likely lower the ratings of U.S. Treasuries if
there is not an agreement, preferably longer term agreement on the Fiscal cliff.

- If the debt ceiling is actually broached beyond the hard deadline and not solved, there
would be spending cuts in the order of 40% + instantly.  This would be a major shock
to the economy.   A sudden Government decrease in spending of over $1 trillion would
definitely be a shock to the system.  Politicians would be unwise to play politics with this issue.

It appears that certain lawmakers don’t want to stop the fiscal cliff.   Those reasons seem clear to be politically motivated rather than for the good of the country.

Many lawmakers state that they will not sign on to the fiscal cliff offers that have been presented thus far because those offers would involve raising taxes on those earning more than $250,000 per year and they simply cannot vote for that under any circumstances.   Some democrats have insisted that they cannot vote for any spending cuts that would cut Medicare and some other programs.

The part that is incomprehensible to close observers is that while this belief may be respected, if lawmakers do not come to an agreement, taxes will increase far more on everyone rather than modestly on the affluent.   Spending cuts will be significant across the board for many programs rather than just for some programs.

If lawmakers do vote any agreement, in future elections, Republican incumbents fear they will be accused of raising taxes as well as agreeing with, and promoting Obama’s agenda by challengers from the right in Republican primaries in their district.  Democratic incumbents are concerned they will be attacked for cutting beloved social programs such as Medicare and social services in democratic primaries in their district.

As a result, it appears that many politicians would rather allow large tax increases, large spending cuts, a possible additional U.S. Credit downgrade, major decreases to the stock market, and another recession actually occur, rather than risk accusations by political challengers in future elections.   Stay tuned, the ride is just beginning.

Update 01/13/2013   –   The fiscal cliff was partially avoided and delayed.   The revenue increase aspect was agreed upon, while the spending part of the deal, which is really half the equation, was simply delayed for 2 months, as an agreement could not be reached.  Political heads of Government came to this agreement at the last minute, while rank and file politicians in the house, especially Republicans, voted against a deal.   It would have been interesting to see if the politicians that voted against it, over the course of the two to three weeks afterwards would have still insisted on their district receiving the same level of Government spending.   After all, they certainly give the impression that they want to cut spending, only not in their districts.

The fiscal cliff deadline of January 1st 2013 is fast approaching.   It appears that no deal will be made, we will all go over the cliff, and the Mayan apocalypse will be proven correct a few days too late.   But a deal will be made, that is 100% assured, even if it is a few days late, and here is why.

The tax increases will take affect, and the public will be seriously displeased, but they will not protest in mass.    Polls have shown that while the public does not want tax increases, much of the public has come to understand that in order to solve the country’s budget deficit and national debit, tax increases combined with spending cuts must take place, even if they do not like it at all.

What will set the public into a far greater fit of anger and rage will be the automatic spending cuts.   When the sequester was put into place, it was done as a last ditch threat as part of the fiscal cliff talks of 2011.    During those talks, it was agreed that a bipartisan commission would be set up in 2012 to come up with a solution to the problem.   As an incentive to push both sides to come to an agreement, a sequester of large tax increases and spending cuts would take place.   This was only supposed to be a motivator.   It was never expected that the sequester would happen because every sensible person knew the the reality of the sequester is far worse than the items both sides objected to while trying to come to an agreement.

Once the spending cuts hit, they will be very large.   Many citizens receiving government checks will get a substantial reduction or delay, or both, in their checks.   Not much motivates people to take action as when they don’t receive money they feel they should receive.     Ultimately, the leaders of the political parties know this and will come to an agreement.

U.S. Import prices fall .9% in November and export prices decline .7%, per the bureau of labor statistics.   The bureau reported that the decline was led by lower fuel prices.

The bureau further reported that fuel import prices were down a full 3% in November after edging down .1% the previous month.   The decline for overall exports was driven by lower non agricultural prices which the bureau said more than offset a .1% uptick in agricultural prices.  In spite the November decline, the price index for overall exports was up .7% over the year.

The advance was primarily due to an increase in Soybean prices of 30.2%, 14.5% in corn prices, and a 19.8% rise in wheat prices.    These fluctuations will continue, most especially in those areas in which fuel prices have the most influence.    In this report, lower fuel prices were cited as the major reason that U.S. import prices fell .9% in November.   However, fuel prices increased in the short term after that.    The reports for import prices in December will likely reflect this increase in fuel prices.   Since fuel prices are set by world markets, the government has little control over the resulting price increases and decreases in imports.

Other significant issues which may affect commodity prices are the continuing lingering drought in the next few months.   A major danger in the next few months is also the danger that barges will not be able to transport goods down the Mississippi river due almost historically low water levels.    If goods cannot be transported via barges, then goods may have to be transported via rail, which is significantly more expensive.   The current prediction is that unless there are significant additional rains, barge traffic will have to be reduced or possibly stopped sometime by end of January 2012 or February 2013.

 

 

.8% decline in Producer Price Index in November reported per the 8:30 A.M. November 13th report by the Bureau Of Labor Statistics.

The bureau further reported a decrease of .2% in finished goods in October, which followed a 1.1% rise in September.  In the initial stages of processing, prices obtained by manufacturers or intermediate goods declined 1.2% in November, while the crude goods index edged up .1%.   The bureau reported that on an non adjusted basis, the finished goods index advanced 1.5% for the twelve months ending November 2012.

The bureau stated that the declined in the finished goods index in November was due to a sharp decline of 4.6% in finished energy goods.   Prices for the finished foods inventory rose  1.3% in November, the sixth consecutive monthly increase.   Low oil and fuel prices were cited again as the primary reason for the .8% decline in the Producer Price Index.   Since fuel prices continue to fluctuate dramatically over time, these prices may fluctuate as well.  Expect the price index to possibly increase for the November report or December report, or possibly both, due to increasing oil and fuel prices in the period just prior.    The (PPI), Producer Price Index is tied closely to commodity prices, not just fuel, but other raw materials.   If the prices of other raw materials, such as metals increase, this will further push up prices and the (PPI), producer price index.

The producer price index also included the price of food commodities, which is also affected by the price of crude oil and fuels.  When the price of any crude oil increase in any given month is removed from the math, in most of those cases, the Producer Price increase will reflect and increase in most of those cases.   The main exception to this is in the prices of food commodities.   In many years, if there is a bumper crop, food commodity prices will go down and lower the (PPI), even when lower fuel prices are taken out of the factoring.

 

Leave a Reply