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What Are Bank Statement Payback Months?

Payback months are the business bank statements for the same months 1 year ago. Lenders use these to help predict your company’s revenues in those months in the current year.

Apply below: for programs that increase approval amounts with strong payback months, but don’t lower offers with weak numbers a year ago.

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4 Steps to understanding and handling this request

1.Understand Payback Months.
2.How to analyze your payback months statements .
3. Evaluate your requested amount.
4. Negotiation.

What are bank statement payback months?

1. Understand Payback Months:

Lenders evaluating a loan request may ask for payback months statements for the previous year.   This means they want the same months from 1 year ago that you would pay back any new loan this year.   They use to check if you can afford an mca merchant cash advance.

Example #1:

Your business applies for a loan with a business lender.   The lender is considering a 6 month loan to your and asks you for payback months.

A 6 month loan will have a payback from March 2021 through August 2021.   You will give the lender payback months bank statements from March 2020 through August 2020.

They want to see what your business revenues were for the same months last year.    This forecasts what they expect your business to do in revenues during those same months this year.

Seasonal businesses are very susceptible to large swings in revenue during the year and can expect lenders to ask for bank statements from the previous year to compare.

2. How to analyze your payback months statements.

For 6 month loan requests, take the same 6 months from the previous year.   Add up the total revenues and divide by 6.

Example:

From March through August of 2020, your company had a total of $120,000 in revenues.   The average monthly revenues are $120,000 % 6 = $20,000 per month.  Lenders offer 50% to 100% of average monthly revenues for most offers.  $20,000 x .5 (50%)= $10,000.  $20,000 x 1 (100%) = $20,000.

Offers should be $10,000 to $20,000, but may be less.

3. Evaluate your requested amount

Match your request closely with your business revenues.  Do not ask for more than you can qualify for because it could cause an unnecessary decline or delay.

Ask for $20,000 if 50% of your company’s average monthly revenues = $20,000.  Don’t ask for $100,000 unless you have assets to leverage for the request.

Do not state any amount and let the lender make an offer as an alternative.   Lenders usually make the maximum offer regardless of your request.

4. Negotiate

Maybe your business qualifies for $20,000, but you need $25,000.  Should you accept the $20,000?  No!  Ask for $25,000.

How? Get 2 or 3 offers from different lenders and leverage those offers with each to extract the maximum.  Take the offer from 1 lender and show it to the other two.

This way, you are greatly increasing your chances of a better offer.  Because 3  lenders have proof of a competing offer, they have more incentive to match and exceed their competitors.


FAQ:  Bank Statement Payback Months.

<What are statement Payback Months? 

Bank statements for the exact same months last year that lenders are considering a business loan to your company for this year.

Why am I being asked for Payback Months?

Lenders look your sales last year to help them understand if your business could make a new loan payment this year with the same sales.

Can they decline me for low revenue a year ago?

They may.   The lender can decide that your business cannot afford the new payments with similar sales from last year.   Explain why your sales will be higher for the same period this year, if so. 

Conclusion

Understanding and reviewing your bank statement payback months from last year will pay off.  Why?  First of all, you can help avoid a decline by reviewing last year’s statements.  If they are very low, go to another lender.

Also because you will have a better idea how much you qualify for,  should ask for, and how to negotiate.

 

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PPP Loan Was Not Forgiven? 4 Options and Funding Alternatives


You complied  with the rules.  Now you have been told you did not meet the conditions and your PPP loan was not forgiven.

Consider 4 ways below to deal with this along with other funding options if needed. Apply Below Now for Alternative Funding Solutions!

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Call 919-771-4177 for more info.

How to Deal a Repayment Demand when your PPP loan was not forgiven:

Was your ppp loan not forgiven?

1. First Look For Mistakes.

The government and large bureaucratic processes often make mistakes.  Look through all of the guidelines and rules.   Try to pinpoint how they came to their decision, and if it was correct.

Read their own official rules in detail since analysts make mistakes.   But don’t just claim a mistake.   Find their mistake, detail it, and also state why it does not apply to your case.

2. Appeal the Decision. 

Appeal the decision regardless of whether you find a mistake or not.   This also applies even when you are not likely to win.     Many times  having another representative review your case results in a different decision.

Find out the details of the appeals process and follow it precisely.   Also followup during the process to make sure all your borrower rights are being met per legal requirements.    Backed up government processors often cannot meet certain time requirements.   Failure on their part may be a basis for a reversal in the decision.

Basis for Appealing an unforgiven PPP loan 

Minor violation

Lack of proper documentation is the easiest problem to fix.  Provide the proper payroll expenses, rent roll, utility and other statements. Submit any missing information as part of the appeal.

Incorrect Decision

Funds not used as intended is a common denial reason.   As mentioned above, look for errors in their process.   People do not find mistakes when they do not look, so review their response in detail.

Look for mistakes in the rational for why your ppp loan was not forgiven and then attack denials that are weak.

Did not fully understand

This basis for appeal is not a strong reason. However, it may be enough to a reversal of the decision in some cases.

3. Gather All Documentation to Support your Appeal.

Documentation is key, so gather and review all you information.   Take a second look at your PPP expenses such as Payroll, Rent and Utilities.

Appeal Denied

Confirm whether appeals that are denied can also be appealed.  Ask for time to respond to any denial in writing and also request an in person hearing.

Settlements

Make a formal counter offer in writing for a settlement and also document why your business cannot pay a forgivable debt. Provide cash flow statements such as tax returns, bank statements, Profit and Loss statements and Balance Sheet supporting your argument.

4. Find other Funding Alternatives

Look for alternative funding options to shore up cash flow shortfalls from unforgiven PPP business loans.

A business’ cash flow is impacted because they did not expect to have to repay a forgivable loan.   Many other small business loans can be a good fit.

Asset based loans are also a great choice to assist with cash flow until the business adjusts to the partial repayment of their ppp loan.


FAQ:  Why did they not forgive my ppp loan? 

Why was my PPP loan not forgiven?

PPP loan forgiveness is not granted when you do not meet the usage conditions of the ppp loan stated in the contract.     The most common reasons are incorrect use of funds and time deadlines for usage.

What can I do about it? 

Carefully review the reason for the decline.  Read the rules for ppp funds use and check for mistakes in the decision.   Sometimes decisions are flawed or not clear cut.

How can I get the decision reversed? 

Appeal the decision.   Prepare all the documentation needed and submit a formal appeal.

Conclusion

A decline of forgiveness for your PPP loan may be a shock.  Take action to challenge the decision that may lead to at least a partial reversal.

Since these loans can be for large amounts, it is worth the time to see if you can change the outcome.     Look for mistakes in the process, prepare your paperwork and request an appeal.


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What is MCA Percent Of Monthly Revenues?

MCA lenders look at percent of monthly revenue to decide if your business can afford a cash advance, and for how much.

Apply below for programs that offer the highest cash advance percentage of monthly revenue. This means the largest approval amounts because the highest percent of your business revenue is allowed for an mca.

MCA Percent of Monthly Revenue

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Call 919-771-4177.  More info & program details.
Programs above offer the maximum approvals for mca’s as a percentage of your monthly business revenues.

  1. How it Affects Your MCA.
  2. Why it is Critical.
  3. How it is Calculated.
  4. Should You Care?
What is an mca percent of monthly revenue?

1. How it affects your MCA:

The percent of monthly revenues that an mca merchant cash advance can be is what drives the amount of the advance offer much more compared to other qualifiers.

It also tells you the maximum amount in advance that a specific lender allows for cash advances.    Businesses that have an existing mca with a balance will therefore know how much more that lender can offer them.

Example:

An existing advance has a daily payment of $100 per day.   The cash advance company you apply with allows businesses to have a maximum 30% of their monthly gross business revenue in cash advance payments.

Further, your business has monthly revenues of $25,000.   So the total amount the lender allows your business in advance payments  is $25,000 X .25 = $7,500 per month in payments.   $7,500 per month % 21 days = $357 day.
An approval for 9 months should therefore render a maximum $48,000 offer by that lender.

While telling the mca company about advances with a few payments left seems like a risky thing to do, they will probably not include existing advance in their calculations.

2. How it is calculated.

Example # 1:

Your business has average monthly deposits in the last 3 months of $50,000 per month.    The lender you apply with allows the total monthly amount
you pay on MCA advances to be a maximum of 25% of your monthly revenues.

As a result, they calculate the maximum approval as follows:
$50,000 x .25 = $12,500 per month and there are 21 daily payments or
4 weekly payments per month.   So using daily payments, $12,500 % 21  = $591 / daily payment at 5 business days per week.

Another critical step in the offer amount will be how long that lender will make an offer for.   Longer terms result in higher offers, so a lender that offers a 9 month term can issue an approval of approximately $80,000.

This is because the math calculated to arrive at this approval amount is as follows:
$591 x 21 = $12,411 x 9 = $111,699, so a rate factor of 1.4 means that
$111,600 % 1.4 = $79,785.

3. Should you care? 

You should care because it allows you to do 2  important things:

1. Calculate what percent of your monthly business revenue any mca will be before you apply.    Also calculate whether you can afford the mca based the percent of monthly sales it totals.  You will also better understand what your affordability limits are for this transaction and for all future borrowing.

2.  Ask the lender before applying what the maximum is they allow.   You may exceed the maximum and therefore do not need to apply.    Also, the maximum amount they will approve you for may be too low.    This will save you time,  credit inquiries, and direct you to the best small business loan options.


FAQ on mca percent of monthly revenue for an advance.

What does percent of monthly revenue for an mca mean? 

It means the maximum percent of your monthly business revenue
that can be allowed for a cash advance.    Most lenders cap it between
20% and 30% of your monthly business revenue.

How do I know what my maximum approval will be for?

Take the average of your last 3 months total deposits.  Multiply it times .25.  This is the maximum amount per month many lenders  allow you to pay for a cash advance.

What if I already have an advance ?

Calculate the maximum your business can afford per month.   Deduct the monthly amount you already pay from that figure.   That is the difference you can still afford on a new cash advance with many programs.

Conclusion

Calculating the percent of monthly revenues an mca will be as a percentage of your monthly business cash flow helps you make several important decisions.

You know in advance if you are applying with a lender that can help and approve you for the entire amount needed.   You can ask lenders before you apply what their maximum percentage is and go to another lender if it is not high enough.

Another benefit is it helps you get the highest offers and saves maximum time by applying with the right funders.


For these reasons, know the maximum percentage of your business’s gross monthly revenue  lenders generally will allow in mca cash advances.   Also check back here on how to calculate approval and offer amounts needed to qualify for using the lenders maximum percentages allowed.

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4 Top Ways To Get a Better Business Loan Offer

Learn the Top 4 ways to get a better business loan offer.   Use this current program to max out the most favorable terms and conditions.   Apply below now.

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Call 919-771-4177 for more info.

DocuSign 30 Second Application here.

How to leverage a higher quality business loan offer.

    • Give your preferred lender a copy of any competing offer.  
    • Ask for better terms.
    • Leverage your broader relationship with the lender.
    • Find out why any offer made was not better.  
Get better business loan offers now!

1. Show the lender a competing offer. 

Use existing offers to your advantage by giving the funding source info on the offers to negotiate what they have on the table.

Example:

You are approved for $25,000 cash flow loan, but you wanted more money and a longer term.  You have requested better terms but are turned down.

However,  you have existing offers from other funders.  Show your preferred lender the actual offer from another institution if it matches or beats theirs.  This can be an email offer you received or pdf file.

Effectiveness:  This is often highly effective because it proves that you have other offers.   You have more negotiating power when other lenders know you have options.  Provide documentation on multiple offers to increase the pressure on your preferred lender to make the concessions you want.

Rarely Done:  Very few people think to show one lender a competing offer from another lender.   One investor does not know that you have offers from other investors.   Stand out above other applicants and show competing offers.

Confidentiality:   Is this confidential information?  It is the same you gave the other lenders, so there isn’t anything confidential you are giving away.  Your current lender already has the information, so it is not confidential.

2. Ask for better terms.

The key terms and conditions of the business loan offer are:

Amount:  You can ask for approximately a 10% increase since some loan programs have the discretion to increase the approval by a small amount.  Give a relevant reason why your business is asking for the higher amount.

Term (Number of Months): The number of months often has some room for negotiation.   Ask for a 3-6 month bump in the terms instead of 12.

Rates:  Better rates are often hard to negotiate.   The funding source will generally give you the rate that matches your risk profile.  Negotiating rates may be easier when it is a brokered transaction and there are points or fees in the deal.

Check to see if there is a different loan program with the same loan provider that would be a better fit.  Doing so may give your business better terms automatically just by switching to another program.

Also ask the representative about loan features and benefits.  There may be incentives and benefits in the existing approval that are already available just by asking for them.

3. Leverage any broader relationship with lender. 

Applicants often have an existing relationship with the lender they apply with.

Deposit Relationship:  Make sure the funding source considers any deposit accounts into their loan decision because automated business loan programs skip this review in their loan processing.

Borrowing History: Any good previous borrowing history should factor into the approval decision.

4. Find out why the offer was not stronger. 

Lenders automatically give decline reasons but do not tell you how approval terms could be improved.

Contact a loan officer and ask them what prevented your loan from having more favorable terms such a higher loan amount, number of months and rate.  Take a close look at those reasons and decide if you can overcome them right away rather than taking more time to fix them.

Example:
A higher credit score for better loan terms probably will take too long.   Getting updated financials showing your business in a stronger financial situation is faster and therefore could be used to get an improved business loan offer quickly.

For more ways to get the most out of your offers, check out 7 ways to boost your borrowing power.


FAQ: Frequently asked Questions on getting a superior business loan approval:

How can I get a better offer?

You may get better terms if you have multiple offers and show them to the lender you want.  Tell them they need to beat the other offers in order for your business to close with them.

Will the Lender negotiate?

They are most likely to negotiate if they are given an incentive to do so.   Applicants who prove they can close with another funding source and are prepared to do so will often get a negotiated closing.

What if I don’t get better terms from the lender?

Apply with other programs if you are likely to get multiple offers.    After getting 2 other offers, go back to the lender you want to close with and negotiate their offer.

Conclusion: Take advantage of easy ways to get a better  business loan approval.

Most applicants do not push for improved offers from lenders and as a result, miss easy ways to get a stronger deal.

Taking other approvals and asking your favorite lender to beat them always gives you a strong chance of getting concessions.   Ask for better terms and use any existing and previous relationships when negotiating. You will probably greatly increase your chances of getting an improvement on the original approval!

 



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Business Ownership Percentage For Loans

Business ownership percentage is very important for obtaining business loans.  If one owner has less than 80% ownership in a business, they usually cannot close the loan by themselves.  Many lenders want 100% ownership.

Apply below for programs that allow less than 100% ownership to close a business loan.

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Call 919-771-4177 for more info.

DocuSign 30 Second Application here.

Get a business loan that does NOT require 100% ownership in your business.

  1. 100% Ownership is not needed for business loans.
  2. Ownership as low as 25% for some bank statement loan programs.
  3. 1 Owner can sign in many cases.
  4. Other owners do not need to sign.
Business Funding with low ownership of the business

Top 7 Benefits:

1. Business loan programs that fund with less than 100% business ownership.

Get approved and also be able to close the loan with less than all the owners applying and signing on the note.

2.  1 owner may be able to close without other owners

Another benefit is the other owners do not need to sign. Therefore, you don’t have to negotiate with them and convince them to sign on the loan.

3.  1 Owner can make decisions on amounts, terms and closing conditions.

You can make all the decisions on the company loan even though you are only one of the owners. Decide how much to borrow, for how long and any other options offered by the lender.

4.  The other owners do not provide a personal guarantee.

The personal assets of the non signing owners are protected. Many business owners are not spouses or family members and their assets are separate when applying.

The personal assets of other owners will not be at risk under the loan. This is significant. Other owners often hold Real Estate and other assets separately.

Related Business Ownership percentage issues

Decision making.

When there are several owners with similar ownership percentages, it is difficult to do many basic business transactions such as sales with vendors, contracts and contract changes.

Ownership share of assets in a business.

Assets that are in the business name are owned by all owners of the business.  As a result, decide which new assets should be added to the business.

Selling, negotiating, or transferring joint business assets

Assets in a business name with multiple owners must have the approval of all owners for any changes. All owners must agree and sign for the sale, transfer and any loan against an asset.

Any owner excluded from the sale invalidates the sale.

Selling the business with multiple owners.

All owners must approve and sign any sales contract when the business is sold.   One owner cannot sell the business alone.

Ownership control of Checking and savings accounts

Checking, savings and other business accounts can be opened without all owners.  Authorized signer information is keep on file by financial institutions.

One signer also cannot remove another signer from a business account. Other signers must agree to their own removal. Owners should check what the banks’ rules are for making changes.  Changes such as closing an account, withdrawing money are difficult later without specific documentation.

Changing ownership percentage.

Update the articles of incorporation or organization to increase or decrease ownership percentages. The articles may vary by state.
Many times, corporate articles do not list percent ownership or percentage shares owned. Most articles list principals such as President, Vice president, CEO and officers.   The lender does not know the ownership breakdown.

A big reason businesses fail is disputes between owners, including who has the authority to make decisions and transact business. Including specific ownership percentages and shares owned eliminates many future disputes.  New corporations should include this information in their paperwork.

Use addendums and corporate change paperwork to add this information.  Another option is to add a notarized corporate change resolution or additional information page.  File these with the Secretary of State.


FAQ: Frequently asked Questions:

Do I need 100% ownership to get a business loan?

100% ownership is not always needed to get a small business loan. Programs are available with percent ownership below 80% and as low as 25 in some cases.%.

Does my business partner have to sign if they don’t want to?

Business partners do not have to sign when the other owners have enough ownership.  Ask the lender what is required to close the loan.

Can I remove my partner from the business to get a loan?
You can remove your partner from the business without their approval.  Consider removing other owners from the business if allowed by the lender.  Lenders do not want quick changes just to get the funding.

Conclusion: Business loans closed with one owner have major advantages

As described, one owner with the authority to close a business loan has many advantages. They can make all the decisions on their own. They do not have to discuss and get agreement from other owners, which is often a major hurdle.  This  includes financing and applying for business loans.

Choose a small business loans that funds and closes with one owner. Find out the requirements from the lender and make changes to your company profile for insufficient ownership, if needed.

 



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How To Reverse a Business Loan Decline Fast

There are several ways to reverse a business loan decline into an approval fast.  A lot depends on the decline reasons.   Some can be handled in days and you can change a business loan decline into an approval with these easy fixes.

Apply below now for business loan programs such as bank statement loans that specialize in dealing with common decline reasons.

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Reverse a Business Loan Decline: 7 common denial reasons

    • Derogatory Credit 
    • Debt to Income Ratio too high, or cannot afford new payment 
    • Insufficient Cash Flow 
    • Too many recent inquiries
    • Ownership percentage not enough
    • Unacceptable or no Financial Statements and Tax Returns
    • Recent overdrafts or low bank balances

Turn these Denials into Approvals now

Denied? How to change that into approved!

1. Derogatory Credit .

Derogatory credit and credit bureau scores that are too low are among the most common decline reasons.    Many people believe it takes years to improve their credit file and that they have to pay a credit repair agency to fix their credit.

Incorrectly Reported Credit Bureau Information:

Many times, information reported by the credit bureau is incorrect.    Review your credit report and look for inaccuracies.   You can often get corrections and deletions updated within weeks.   Once you have identified the incorrect information, you can dispute it yourself with the credit reporting agencies, or hire a credit repair agency.

You will have already done much of the work just by reviewing your credit file in detail.    Doing the rest yourself lets you follow up faster and dispute it again if the credit agency puts the same derogatory information back on your file.

Outdated Credit Bureau Information

Sometimes outdated information hurts your credit.   A debt may still be showing on your credit that has been paid.   A balance on a current account can be much higher on the bureau than the true balance.    Some creditors do not report every month. Disputing or updating outdated information can often increase your credit scores.   Lenders can see your level of debt is less than what the bureau shows.   That improves your ability to pay new debt.

Scores Too Low:

Often, your current scores are too low.   Taking the actions above should increase your score because less derogatory and outdated information will be on your file.    Your credit scores will jump quickly and may trigger the lender to reverse a business loan decline.   Other funders may approve your business with higher scores as well.

2. Debt to Income ratio too high or cannot afford new payment.

Debt to income ratio is the percentage of fixed monthly debt divided by monthly gross income.    Lenders often calculate this percentage as part of their review.

For example:   A borrower has monthly income of $5,000 and fixed debt of $2,000.  Their debt to income ratio is $2,000 % $5,000 = 40%.

If a borrower’s percentage is too high, they may be declined.  Debt to income ratios only look at this percentage.   Businesses with higher gross sales are more likely to have disposable income with the exact same debt ratio.    If you can afford the payment, then document your cash flow.   Contact the lender and show them your disposable income figures for the business.  Prove that you can make the payment and ask to appeal the decline.

3. Insufficient Cash Flow 

Lenders may look at your overall cash flow.    Many require a minimum amount of annual business sales to even be considered for financing.  Many lenders calculate the maximum loan or mca as a percent of your monthly revenue.

Funding sources that decline for this reason often do so in part on the most recent year’s tax return figures.    Your most recent business tax return is old information.   Provide a year to date YTD Profit & Loss statement and Balance Sheet when the current year is stronger than the previous year.   Doing so may also allow the lender to justify approving a request they originally declined.

If your current year is about the same as the previous years, then your business would need to identify other debt or income information that could potentially reverse the decline.   For example, large new customers that have been added in the current year will increase revenues substantially.

4. Too many recent inquiries. 

This decline reason may still happen if the owner(s) have recently been making purchases that require loans, or new services that require a credit check.  Lenders have become more savvy at assessing these, but their automated reviews are not perfect and may not account for credit inquiries that should not be counted.

Many financing programs use a soft pull instead of a hard pull.   However,  some programs use a soft pull initially to make an offer but still do a hard pull later before closing.

If a lot of your credit inquiries are from shopping for consumer goods, or related to living expenses such as utilities, then document these.   Contact the lender and show them what the inquires were for, and they may re-consider their original decision.

5. Ownership percentage not enough. 

Applicants must have at least 80% or higher ownership to be able to close most business loans on their own.   Many lenders require a higher  percentage such as 95%, and often full 100% ownership.

Discuss the decline with the other owners.    100% ownership is required for many business loans so they may be required to sign.   Your business will eliminate itself from good business loan options if one owner with less than 100% ownership wants to get funding on their own.

There are exceptions for owners with very strong credit and assets. Owners with credit score over 700  and a strong personal financial statement may be able to guarantee a business loan by themselves with less than 100% ownership.  However, many lenders will not consider any request with less than 100% of the owners applying, no matter how strong any one owner is.

6. Unacceptable or No Financial Statements or Tax Returns.

Some business loans require financial statements that the applicant does not have and is declined for as a result.    This usually includes the most recent 2 to 3 years personal and business tax returns and current years’ interim financial statements.

Gather and provide the missing information and request the lender re-consider the application.
In other cases, the lender determines that the financial statements were not acceptable.   This normally means the gross or net business income was not high enough, or not enough the cover the new loan payment.   Some lenders will decline just for having one lower sales year out of the last three years.    They want to see steady or increasing revenues each year or they will decline the request.

Alternative Options: Your business should look for other loan programs and lenders if this is required.

7. Recent Low Bank Balances or Overdrafts. 

Even with a strong business and personal profile, your business may be declined just for recently having lower bank balances or overdrafts.

Your business may need the loan because of a recent slow period.  Many lenders are not forgiving to recent slow cash flow and overdrafts.  Applicants believe this is a good reason why they should get the loan. Lenders believe is it a good reason why a borrower cannot pay and therefore decline the request.

Alternative Option:   Look for another lending program, or wait 30 to 60 days for your cash flow to rebound some, then apply.     If you can wait, first ask the lender if it will make a difference with them.   Consider other programs when the lender does not commit to seriously reconsidering your request later.

Discuss your recent cash flow or overdraft issues in depth with the lender that declined you.  Too often they tell you they will reconsider it, but are still very unlikely to change their original decline to an approval.   Many lenders must consider all requests, whenever made.   Talk to the lender about fixes to previous issues before re-applying.


FAQ: Frequently asked Questions on how to reverse a business loan decline fast:

How can a decline be reversed?
Decline reasons can very often be quickly corrected or improved by making relatively easy updates or changes, such as ownership percentage.  Ask the lender if the changes you make may cause them to reverse their decline before you re-apply.
Can they be reversed fast?

Many changes can be made within days that allow a lender to reconsider the request.   Other changes will take longer but may still be accomplished within 30 or 60 days.

What if I can’t wait?

If you do not have the time to make corrections, then the best approach is to consider another type of funding that will not decline you for the same reasons.    Talk to other lenders in advance to address the decline reasons before applying.

Conclusion: Change a business loan decline into an approval

Do not believe that nothing can be done after your business is declined.   This is not true, so turn declines into approvals today.  Having documentation, a strong rationale and persistence are key to turning a no into a yes.

Sometimes the wait may be weeks, but the decline can be reversed in the end.

Your business will understanding what can be corrected and this is information to use in your favor to get the funding needed!



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What Counts as an Existing MCA Position?

When applying for a merchant cash advance, funding sources look at the current loans you have to see if you already have an existing advance.  But what counts as an existing mca position?

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Other loan types that may be considered an existing position by lenders:

  1. Daily repayment advances
  2. Weekly payment loans
  3. Monthly payments loans from certain lenders.

 Apply for these Max Approval programs with existing positions

 Multiple existing positions O.K. 
 No penalty for other loans that are not mca’s.

Business loans NOT count as an existing mca position.   

1. Installment loans:

Monthly or weekly installment loans should not count as an existing position when applying for a cash advance.

Example:  Monthly payment personal loans, car loans and finance company loans are almost never included in the approval process.

2. Monthly repayment loans

Anything that is repaid monthly is almost always considered a separate type of financing.

Most installment loans are also monthly repayment loans, but not all.  These will not be counted against your existing debt on an mca application.

3. Secured loans

Secured loans are not considered in your businesses’ ability to repay a short term unsecured advance.    It is a different type of debt and not calculated in the analysis.

Real estate loans, equipment loans, accounts receivable financing are not counted against you.   As a result, they will not affect your ability to get an advance, nor affect the amount of the advance.

4. Unsecured Revolving Lines

Unsecured lines such as credit cards and personal lines of credit are not included.     You can have multiple credit cards or lines of credit because they don’t affect your ability to get an advance against future receivables.

Different terms between the two are a main reason they are separated because  unsecured revolving lines usually remain open for years.

Short term advances are paid off in 3 to 9 months.    Underwriting knows that you will continue to have that unsecured debt with a minimal monthly payment that is low compared to the advance.

Make sure the new lender is not counting loans or advances you have already paid off.    Provide them with payoff letter on all loans that do not have a balance.

What counts as an existing mca position?

FAQ: Frequently asked Questions on an existing mca position.

What is an existing mca position?

An existing mca position is business financing that is considered the same type as a cash advance.   This is usually any financing with a daily or weekly payment.  Some monthly payment options may count as an advance, depending on who the lender is.

What business loans count against me when applying for an mca ?

Any business financing that has a once per business day repayment is almost always considered an existing cash advance position.

Do other monthly payment loans count against me?

Other monthly payment business loans do not count against your mca loan application.

Why does it matter if my business already has cash advances?

New lenders need to know if your business will have the cash flow to pay the new debt.   They also consider if you are a habitual cash advance borrower.  Lenders probably consider you may take another advance behind theirs.

Conclusion

Short term daily, weekly and sometimes monthly business financing do count as an existing mca position and therefore, your business may not be approved or for lower amounts.

Know the types of loans you already have when applying for cash advances and which one will count against.    This will help you understand which type of business loan to apply for and what to expect.

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Too Much Collateral! 4 Ways to Stop Lender Asset Hoarding

A lender has approved a business loan, but they want too much collateral.

Consider 4 ways to push back.  Make your case and keep as much as you can.

Apply below for either bank statement loans that do not need your assets or only take the minimum amount required.

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Make sure you’re covered, not just the lender!

How to keep a lender from taking too much collateral:

    • Ask about collateral requirements.
    • Don’t offer all of your assets upfront.
    • Negotiate the requirements. 
    • Negotiate lien releases during the loan.

1. Ask for all collateral requirements the lender has before  you apply

Finding out during the loan process that the lender wants collateral you don’t have or don’t want to offer is too late, and a waste of time.   Ask before you apply.

2.  Don’t offer all of your Assets up front. 

Do not voluntarily give the lender a full asset listing without their request.  You may be required to provide a listing of you assets later.   First give a general description and total valuation such as on a short form personal financial statement.

This prevents the lender from automatically asking for, then taking all of your assets as security for the transaction.      Don’t give the lender something valuable they did not ask for and require upfront.   If you do, then there is a good chance you gave away assets to them.   Compare their loan offer to the value of your assets.   Calculate the loan to value, or LTV.

3. Negotiate the assets required 

Many lenders will automatically take the most and best collateral you have, even if it may not be required to cover the lender’s money.   Banks, Savings and Loans, and the SBA do this commonly.   Many will take 5 to 10 times as much collateral as they need just because they said they wanted it.  This contradicts what is expected with ethical business loans, but is standing in traditional banking.

After you have gotten an approval, push lenders to take only the collateral they need.   They may refuse, but you should ask anyway.   Calculate the dollar amount of the principal + interest.   Figure out how much in assets they need to cover the loan and how much more they are requiring.   Check if assets are jointly owned if you have less than 100% ownership percentage in the business.

If their request far exceeds what they need to protect themselves, then present them with your calculations and valuations.    This will be your proof, best case, and put the most pressure on them to lower their requirements.

4. Negotiate a release of lien during pay down.

You pay down the balance during the term of the loan, beginning with the first payment.     The loan balance usually goes down much faster than the value of the assets.   Sometimes, asset values go up instead of down.

If the lender has multiple pieces of Real Estate, then negotiate before the loan closes.  Try to get them to agree in writing to release pieces after the balance has been paid down enough to still cover their loan.    A condition may be timely payments of your loan and no other violations of the loan requirements on your part.

Another option is to getting a lender to subordinate their debt to a new lender. If your business is approved, the new lender may not want to take a lien position behind some existing lenders.    If you want to close the loan, you can approach the existing lenders and ask them to let the new lender prioritize their lien position higher than the existing lender.    The existing lender will need to complete a subordination agreement.

Equipment transactions can be handled the same way.   Agree ahead of time with the lender that they will release equipment pieces as you continue to pay the loan down.   It is not likely the lender will do this if you have not negotiated this ahead of time.   If the lender refuses, push them on this point.

Since the balance will go down faster than the value of the collateral,  show them that their collateral position should not get better than when the loan was first closed.


FAQ:  Keeping a Lender from taking too much Collateral:

What is too much collateral?

When lenders approve a loan and take more collateral than they need to safely cover the loan balance if you default on their loan.  Banks routinely take far more collateral than they need to secure a loan.

Can the lender take as much collateral as they want?

Lenders take as much collateral as they want and as you are willing to give them.   Do not offer all of your assets in advance and without negotiating to offer less.

How can I keep the lender from taking all my assets for the loan?

Find out program collateral requirements from the lender ahead of time.  Negotiate collateral terms right after an approval.  This is when you have the most leverage to get any changes you want.

Conclusion

Many lenders often ask for all the collateral you have available.

Most people and businesses believe they do not have any say, influence or choice in this decision.   They do.   The borrower may not get the lender to lower their collateral requirements much, but they sometimes have success.  It depends on the lender, the transaction, and how you negotiate.

Ask for reasonable concessions and justify your request.   This may include calculations, valuations and other proof.    You will get some of what you want more often than you think.


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Loan To Value: 7 Ways To Boost Your Borrowing Power

Understanding Loan to Value and how to use it helps you borrow more money with better terms.

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Consider 7  ways, detailed further below to maximize your borrowing strength.

1.  Understand Loan To Value – LTV.
2.  How to use the value in your assets.
3.  Negotiate.
4.  Know the risk of loss.
5.  Get the highest % loan against assets.
6.  How does credit affect the percentage?
7.  How can an asset appraisal help?

Apply below:  Business loans to maximize the value on loans you can get!

Get the most out of your assets

7  ways to use loan to value to help get the loan you want.

1. Loan to value or  LTV.   How it works:

Loan to value is the loan amount a lender offers as a percent of the value of any asset they take as collateral.

Example #1:

Your business applies for a loan.   The lender wants collateral as security and tells you real estate is required.   Because you need a large business loan, you agree and offer residential real estate.

Your home is worth $300,000.   The lender has a maximum LTV policy of 75% against real estate.

In this example, the maximum loan amount would be $300,000 X .75%
= $225,000.    If your home is free and clear and the lender agrees to a 75% loan to value, then the raw loan amount will be $225,000.

Example # 2

Instead of real estate, you offer equipment or vehicles.   The loan to value offered will be much lower.    35% to 60% is the most common range, depending on the lender and only based on the equipment they choose to accept.   Lenders rarely are interested in all of the equipment available but may take a blanket lien anyway.

You provided an equipment list with $100,000 in equipment.   The maximum Loan to value, LTV is $30% but you are only being offered  $15,000.    What happened?   The lender likely only is interested in $50,000 of the $100,000 in equipment.   As a result  $50,000 X .30% = $15,000.

2. Use valued assets to boost your offer. 

Example # 1:

A business loan applicant qualifies for $25,000 unsecured, but they really need $75,000.    The borrower offers their vehicles and construction equipment to try to get more.

The retail value on the equipment is $150,000 and the lender offers a 40% LTV loan to value against that equipment.   This equals $60,000 combined with the $25,000 the lender offered unsecured.    Combining the two, the lender agrees to offer up to $85,000.    By using the 40% loan to value offered against the equipment, the borrower is able to boost the offer by $60,000.

Knowing this, applicants can estimate what lenders will offer in advance for the collateral they have.    The borrower can use that information to decide if they should apply for an unsecured line, or secured with assets.

3. Negotiate

Almost all borrowers think they cannot negotiate and do not have any power when it comes to the loan process.    The borrower does not have the upper hand, but they can get a lot by taking the right steps at the right time.

Negotiate during the request.    Even if they decline what you are negotiating for,  you may still get other improved terms if you had only asked for them.

Ask for higher amounts,  longer terms, better rates and early payoff terms.  The lenders is not going to give you better terms unless you ask for them.

4. Risk – You can lose your valued assets! 

First decide if it is worth it to use your assets to get money?

If you must have more money, then you must use your assets.    Strong cash flow and credit are the best ways to avoid having to use assets for either a business or personal loan.

The borrower has to decide if the risk they go past due is high and whether they can afford to lose the asset.    If the borrower cannot run the business without the asset, they should carefully consider whether they should put it on the line or not.

5. How to get the highest % Loan  against the value of assets.

Listed stocks, certificate of deposits and any other liquid asset usually brings the highest loan amount.   This can be up to 100% since the balance of the loan goes down, but the value of the asset does not.

Real Estate also brings a high loan amount as a percent of the asset’s market value.  Most real estate backed loan offers are in the 65% to 85% of the market value of the asset.

After real estate, percentages drop down a lot.   Equipment usually brings between 35% and 50%.   Traditional banks rarely makes these types of loans and usually only offer 10% to 15%.

6. How credit affects LTV Loan to value

Credit scores do affect loan to value.    The same applicant with a 700 credit score may get a higher loan to value offer than a 575 credit score with the exact same profile.

Lenders will offer more on secured transactions for borrowers with a higher credit score.     Lower credit scores are always considered a higher risk and tend to bring a lower loan to value.

Example:

An applicant with a 725 bureau score uses their free and clear commercial property to get a business loan.   The property is worth $1,000,000.    They go to a bank that offers a maximum 75% loan to value against real estate.

This applicant that has a 725 credit score gets a loan offer with a 75% LTV, which equals $750,000.

An applicant with a 600 credit score gets a 60% LTV offer, which equals $600,000.    This is common in practice.   In this case, an applicant can get $125,000 more or less, depending on their credit score.

7. Valuations:   How appraisals fit in 

Many asset based loan offers use asset valuation tables and market estimates to arrive at the offer amount.

Provide any asset appraisals you have that are less than  6 months old.  Doing so should protect you from getting a low ball offer.    Consider ordering an appraisal of your assets when you get an offer you think is too far below market value.     Lenders tend to make conservative estimates that help them, not you.

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FAQ on Loan to Value.

What is Loan to Value? 

The amount a lender will offer as a percentage of the market value of  assets.   An asset valued at $100,000 with a 60% loan to value may result in a loan offer of up to $60,000.   

How can loan to value help me?

It helps borrowers decide whether to apply for a secured or unsecured loan.  It also helps them decide what types and how much  collateral  to offer to the lender.    The biggest  benefit is that is brings larger loan offers.

What can I do to get a higher loan to value offer?

Call the lender and ask what types of collateral they will accept and what percentage they will loan against it.     Real Estate will bring the highest loan offers and should be provided to get higher offers.

Why is the lender offering a low amount compared to the value of my asset?

It is usually because they only offer a certain percent of the value of the asset.  They want to get their money in case of a default and can recover all of it by offering a low amount compared to the market value of your asset.

Conclusion

Negotiating after you have been approved may get you some concessions in terms from the lender.     Ask for a higher amount when you know the offer is too low compared to the market value.

Understanding what loan to value is and how to use it can help you get loan approvals for higher amounts and terms more favorable to you!

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How to Use an Asset With a Lien to Get a Business Loan

Do you want to get a business loan using assets with a lien?

How to unlock your Assets!  Here are 3 ways to use an asset that has a loan on it now as collateral for a new business loan.

Apply below:  Expert programs that include guidance getting the maximum out of your collateral.   Even if you still owe on it right now!

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1. Request a lien release. 
2. Lender takes a 2nd lien position
3. Payoff the lien with proceeds. 

3 Ways to use an asset with a loan on it as collateral for a new loan. 

1. Ask for a release of lien:

Call the existing lien holder and ask them to release the UCC lien.   Read here for more about what UCC Liens are.    Lenders often take much more collateral than they need because they want to cover any losses on defaults.  They sometimes even take all of a business’ assets instead of only they need.  They over collateralize the loan and improve their loan to value position.  Most borrowers think that is only way it will be and do not object.   The lender wins by default just by asking for more than they deserve.   

The lender may agree to release a certain piece or more of the collateral they are holding.  This works best when they have many pieces of collateral and you have already paid a lot of the loan down with timely payments. 

Push the lender hard on loans you have paid down significantly as agreed.   

Negotiation Example:  2 years ago, you took out a 4 year business loan for $100,000 and your current balance is $40,000.   The lender took 4 pieces of construction equipment worth $25,000 each and all payments have been on time. 

Telling the loan company they still have enough collateral  and maybe more than when the loan was originally closed.

The loan to value, LTV, may now be lower than when the loan closed.    In those cases, you have paid the loan loan down faster than the equipment depreciated during that time.

If they agree, follow up to verify your asset has been released at the Secretary of State, also known as the SOS.    Push hard to get a release as you may need the extra collateral, especially for a larger business loan.

2. New lender takes a second position. 

They can take a 2nd position lien on the collateral.

This works best with real estate that has a lot of equity in it.  The new loan provider can be the 2nd lien holder against the Real Estate.

Example:  A first position lender has a lien on commercial real estate.   The property is worth $500,000 and the current balance is $100,000.   The new lender makes a loan for $50,000 and then takes a 2nd lien on the property behind the 1st lien holder.   2nd and even 3rd positions are usually limited to real estate or cash flow financing.

3. New loan proceeds are used to payoff the loan

The existing loan balance on the asset is paid off.   This happens most often when the balance on the loan is very low.  As part of closing, the 1st lien is paid off and that amount is debited from the proceeds of the new loan. 

For Example:  Your business is closing a loan for $50,000 using equipment as collateral.    There is a first lien holder on the equipment and that loan has a payoff balance of $10,000.  At closing, the new lender sends a check for the payoff amount to the first lien holder and takes a 1st position on the collateral.
 

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FAQ on getting a business loan using assets with a lien .

Can I use equipment with a loan on it as collateral?

Lenders may take a 2nd position on the collateral.  In most cases, they will not make a loan if there is a lien on the asset and it is not paid off.

Do I have to payoff the loan first?

You will have to payoff the loan in many cases.   Some real estate and cash flow loans may not require a payoff of the 1st lien holder.   This will vary by lender depending on their guidelines.

Can a lender payoff the loan on my collateral?

Lenders can payoff the loan on your collateral.   The process is faster when the lender pays off the loan because they will verify and also handle the payoff. 

Can I get a loan before I have the title in hand?

Ask the lender if they are willing to close the loan and request payoff and title from the lender holding the title as part of closing.    You will have to have the title in hand if they are not willing to do that.

Conclusion

Getting a business loan using assets with a lien is possible.

Find out the lender’s requirements early in the process.   If allowed, there may be extra steps that can take a few days.   Start right away and you can close a few days sooner.

Between a release of lien, a 2nd position, or payoff, there are several creative ways you may be able to use collateral that has a loan on it right now to get a new loan.

If not, find out if other lenders have different criteria that will allow you to use encumbered collateral.    Checking into these options often lets borrowers get loans they never would have gotten otherwise.