Asset Based Loan

Credit – Character versus Capacity to Repay

Does character matter when a loan is being reviewed by a lender, or should capacity to repay be the only issue?

Two of the tenants traditional lenders teach their lending staff is capacity to repay, and character, also referred to as willingness to repay.   Capacity is determined by credit, cash flow, length of employment, or time in business for a business, debt to income ratio, financials, possibly bank statements, and the amount of the new debt to be serviced.

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Why is character an issue in lending?   When lenders say character, they more so mean willingness to repay.  There are numerous instances in which the borrower is able to repay but chooses not to for a variety of reasons, including:

– Prioritizing debt accounts.  The debt holder has limited funds and prioritizes what is most important to repay. Some lenders will lose out is this decision making process by borrowers.

– Unwillingness to continue paying on accounts that are joint with someone else, most often a spouse. Often, one of the signers signs more so for the benefit of the other person to obtain rather than for themselves. Over time, due to divorce or a deterioration in the relationship between the parties, the signer who had just signed in order for the other party to obtain financing  is no longer enthusiastic about paying, or outright unwilling.

Partners.   Often partners in a business signer on behalf of each other.   If the business dissolves, or even if the business continues but the relationship deteriorates, one party may discontinue paying on a debt, placing the payment of the debt in jeopardy.

Child Support. In some cases, individuals pay mortgage, rent, car notes and credit cards, even vacations, but not child support. This is considered a character issue.

Lack of ongoing perceived value of the debt. A  good example is vacations.  Someone who has borrowed for a vacation no longer receives any benefit of the vacation after it is over but is now obliged to pay the debt.

For a variety of reasons, many detailed above, character, or willingness to repay is a significant consideration by lenders.

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Asset Based Loan

Cash Flow – The First Form of Repayment

Cash Flow, the first form of repayment, is the number one way borrowers have the ability to repay.

The first form of repayment is cash flow.

Traditional sources such as banks have long looked at capacity to repay, followed by willingness to repay.

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What is looked at in order to assess cash flow?   In most cases, financials.  That means the last 2 years tax return, plus an interim Profit and Loss statement and Balance Sheet.

However, the financials only give an accountant created, dated picture.    The most current business checking account statements should be included in the review.

Keeping foremost in mind that cash flow will almost always be what allows repayment, business owners should review the most recent cash flow numbers before approaching a lender.

If the numbers are not attractive, the applicant should re-consider waiting.

Apply when the numbers in their checking account go up, or until their accountant reviews their interim Profit and Loss statement.

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Asset Based Loan

Are Credit Inquiries Really That Bad?

A lot has changed in the world of credit inquiries in the last 35 years.  Many people believe they are very bad and they should try hard to avoid them.

30 Years ago,  many people did not know what credit inquires were.

In 2022 a high percentage of the population knows what credit inquiries are.  Many believe that even one or two extra inquiries are very harmful to their credit.    Are they really THAT bad?

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In terms of credit issues that may be considered “bad”, credit inquiries are probably the least worst offenders.  Credit scores recover from credit inquiries faster than just about any other personal credit item that is considered derogatory.

When Credit Inquiries begin to hurt credit

Inquiries will have a very limited affect on a credit file if the number of inquires is small.   Credit inquiries begin to hurt a credit file more significantly if the number of credit inquires is more than about 5 in one month.

When some of these inquiries are from Car Dealers or Mortgage companies, they may not affect a person’s credit score at all.

If the number of inquiries is 5 in the last 30 days, try to minimize the number of inquires in the next 30 to 60 days.

Once an individual does have more than 10-15 inquiries within a month, as long as they go a few months without almost any inquiries, their score will recover quickly.

Their credit score will likely be close to what it was within 2 to 4 months.

In summary, are credit inquiries really that bad?    In many cases, a few credit inquiries on a credit file within 30 days have a minimal impact on someone’s credit bureau score.

Asset Based Loan

Cash Flow Loans

Cash Flow Loans

Will cash flow loans become as significant as traditional loans, including collateral based loans, in the future?

It seems so.  Since the recession of three years ago, many business’s credit and the personal credit of the owners was hurt.
Businesses needed working capital but banks were, and are still, balking at making loans to all but the most top shelf companies.

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Loans based on the company”s cash flow, as proven by their bank statements and tax returns will become increasingly prominent in the industry.    Companies which offer such loans will also come into existence in greater numbers and offer more diverse products to satisfy the increasing demand of these loans.

After all, many business owners wonder, if my credit has been hurt in the recent past, but my company’s cash flow is now excellent even if my credit has not caught up, why don’t you do a loan based on my proven cash flow?     The answer, more and more, will be – Yes, we will

Asset Based Loan

Broker Funding Source: MCA Integrity Focused

Broker Funding Source

Use an ISO broker funding source that gets you the highest approval rates and the most diversity of programs.   Increase your income by providing several forms of ethical business loans to your customer’s.

Advantages of these broker funding sources include asset refinance:

✅ More businesses will prequalify for this product than any other product because more businesses have equipment than any other asset.

✅ Machinery, Construction Equipment, Tractor Trailers and Farm Equipment.

✅ More businesses qualify for $5K to $25K than for larger amounts such as $250,000
Fund difficult to fund restricted industries, such as used car dealers, attorneys and others.

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FAQ, frequently asked questions about broker funding sources

What does a commercial loan broker do?

The mission of a commercial loan broker is to contact business owners and find out what problems they are trying to solve. The broker then matches the products that will give the business what it wants.

Why should I offer these programs to my business customers?

We offer unmatched integrity and 35 years experience with the widest range of business funding programs that are available. We do not circumvent brokers or put customers in bad deals. We help you offer business loans that will help your customer the most. Each customer’s strengths and weaknesses are different and match best to certain programs.

How do I become an independent loan broker?

Establish a customer base that creates a steady source of business loan leads and renewals. We help you develop the sales skills and products and how to talk to your customer about them. Contact us to get started and get a business license with the Secretary of State.

Clawbacks or no Clawbacks

A Clawback happens if the customer defaults soon after the financing transaction is funded.  The funder asks the broker to return the commission.   This normally happens if the customer has defaulted within 30 Calendar days of closing or between 21, 22 or 23 payment days.    Our asset based as well as some of our revenue based MCA Merchant Cash Advance transaction do not have a clawback or are much more limited in the possibility of a Clawback.    Contact us to ask about this.

Most businesses have either revenue or Equipment.   With these multiple flexible programs, you will be able to get a very high percentage of your customers approved and funded.

This product can be very effective as an additional loan product.  Offer along with your main loan products that you already offer.  As an example, you are a broker that offers merchant cash advances and accounts receivables financing.   Your client wants $200,000 and you have secured $125,000 maximum in funding through your 2 core funding products but the customer still really needs another $75,000.  Your client is a Manufacturing company and they have Accounts Receivables.    By factoring their receivables, you obtain the extra $75,000 that they need.

Meet all of your customer’s loan needs

We have other broker funding source options, including loans against Retirement accounts and Against Commercial Real Estate.   By offering many products as a broker, you will be able to offer your customer every product they may qualify for.    Some customers may not get the funding they need through just one or two programs.   By being able to tap into other programs like unsecured and commercial real estate backed loans, some customers can get the full funding they need instead of falling short of their goals.

Use a broker funding source. Get the highest approval rates and the most diversity of programs. Multiple programs to get clients all the funding they need.

Help solve your customer’s problem and give them what they need for their business!

Submit to us for immediate access to their best-in-class funding programs.  This includes low rates, longer terms, weekly payments and fast online checkout funding.

Just submit a completed and signed app and the most recent three months’s business bank statements.    We can send you a quick 30 second online application for your customer’s to complete!

  • 6 month and up to 24 month offers.
  • Daily and weekly payments.
  • Same day approvals and funding opportunities
  • Online closing with corp office assistance to help push through any last minute closing hurdles and issues.
  • Buy rates as low as  1.10
  • $5,000 to $250,000
  • $200k + in annual revenue, $3k avg bank balance, 3 or less neg days per month, and 1 yr in business needed
  • Offers start with a 600 FICO
  • 1st position lines.   Customer must net at least 50% of funds after payoff if another funder is being payed out.
  • Build business credit for your client.
  • Renewals at 50% are available.

Thank your for visiting our broker funding source page.  Because the success of your business is our goal.

If your customer needs help improving other areas of their business, they can contact SCORE the  is the nation’s largest network of volunteer, expert business mentors

Asset Based Loan

Real Estate Leaseback versus Equipment Leaseback

Why do an Real Estate Leaseback versus Equipment?  If your goal is to get $100,000 or higher, a Real Estate Leaseback may be better.    If your company needs less than $100,000, an equipment leaseback has several advantages over a real estate leaseback.

An equipment leaseback can often times be completed with just a one page application.   An equipment leaseback does not often require a formal asset appraisal by an independent company.  The transaction is faster.   It typically only requires 1 or 2 weeks completion time.   Closing is easier and less documentation is required.
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Since less paperwork and financials are required, less information is analyzed that could cause a decline.   The more documentation that is required, the more likely something will trigger a decline.

The above factors should be considered when deciding which financing to apply for.

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Asset Based Loan

Is Credit Important on a Leaseback?

Is credit important on a leaseback?   Yes,  credit is important for a leaseback.    The vast majority of funding programs are concerned with the ability and the willingness of the borrow to repay.

Many times, potential borrowers ask, there’s enough collateral there, why do you need to look at my credit?     On a leaseback, the collateral may even be Real Estate, or valuable Industrial or construction equipment.    If the borrower defaults, what does it matter.

It  is not the lenders desire for the borrower to default.   In fact, it is typically the last thing they want.    If the borrower defaults, now the lender has to reposes the equipment.   Then they have to hire an outside vendor to liquidate the collateral.   By the time this is all done, the lender has often taken a substantial loss.   The lender would much rather the borrow simply repay the monthly payment. The lender earns their interest, the transaction is fully paid and the lender moves on.

These are the reasons why credit is looked at.   If the collateral is valuable, weak credit may not be a make or break issue for the lender.     With valuable collateral, the lender’s primary interest in looking at the credit is to make sure the potential borrower does not have current past due credit.

As a result,  it is clear that credit is important on a leaseback.   However the transaction may be approved and closed even if the credit is not good.   The Equity in the Asset may override the need for good credit.   These decisions are at the discretion of the Lender.

Is credit important on a leaseback Resources:

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Asset Based Loan

Commercial Real Estate Leaseback

Can a business get a Commercial Real Estate Leaseback in this market with current real estate values?   Yes, Commercial Real Estate Leasebacks are happening.

Full appraisals,  additional scrutiny of cash flows through the review of 2 to 3 years of tax returns, bank statements, rent rolls if not owner occupied, and lower LTV’s, and more may well be required in the current environment.

The lower LTV on a commercial real estate leaseback is a big issue.

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The lender wants to protect themselves in a sinking market by lowering the LTV’s.     Instead of 60%, 70%, or 80% LTV’s, 40% – 60% LTV’s may be in order.

After a sound cash flow situation of the borrower is verified, the lower loan to value will primarily protect the lender in this environment.    This is to be expected to continue throughout 2011 and 2012.

After the full appraisal is completed, if the value is sufficient and credit is acceptable, the lender will do an environmental survey.  Upon passing the survey, the lender is ready to proceed with a Commercial Real Estate Leaseback.

Commercial Real Estate Leaseback Resources: –  Provides important sales and statistical real estate information

Asset Based Loan

Alternative Loans For Small Businesses

Alternative Loans for businesses

This article will assist small businesses in learning where to find and secure alternative loans.  A full range of topics will be discussed.   Traditional financing, including SBA loans are extremely difficult to get.   Viable options must be made available to entrepreneurs.

The formation of businesses, business credit, loan types and amounts.  Hispanic business loan and other hurdles to minority business loans are considered.   LGBT and gay friendly loan resources are provided.  Also included is how they all affect a business’s ability in obtaining credit.    A number of topics will be detailed and address subjects known by very few business owners nor discussed by credit specialists.    Many of these are critical for businesses to understand in order to secure credit.   Other options include getting loans in smaller segments or increments in order to get funding at all.
Topics include how to apply for a small business loan.   Things not do when applying for a small business loan will be discussed.   Businesses do not need to try to apply for the highest loan possible or use just one loan type to get financing.

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Many business owners request the highest amount possible when applying for a business loan.   This is not the best approach.   If a business requests too much they may be declined simply for asking for too much.   A business may qualify for $100,000.   However, if they apply for $150,000, they may be declined because they do not qualify for $150,000.   If the business only wants $100,000, they should only apply for $100,000.

A business does not need to get all the capital they need from one program and one loan.   A business may be able to get $50,000 on an asset based loan and another $50,000 through a business line of credit.  This tactic will allow the business to obtain all of what they need rather than only getting $50,000 if they had applied for one type of loan.

When forming the business, the business owner should pick the business type they think they will stay with for a few years.   If the begin as a sole proprietor then switch to a Corporation after only 1 year, they should probably start as a Corporation.

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