The unsecured business loan

Today many people need to improve their business wit loans from the business loan. The business loans is much needed to help people increasing their business. In the business loan, they can do some act that give the advantages. People can do the infestations appropriate with their money. The bonus or the profit will be got in certain time. The profit can be as add on rate or many rewards. It is depended on their engagements. Beside that, today many public services also offer the easy process to get the loan of money. They are like bank, which can give many services in the loan and save their money. It very supports in the all of transaction the business. People can choose where they want to infestation. They can do the transaction in the bank or public service others. This can help for people get many transactions in little time. Beside that, people must be carefully to choose the provider as provide the stocks or servicing in transactions. Many business loans are that found in the business world. People must check what the types of business are.

The business loan can help many people to get the modal to improve their business. We can find the business loan in every sector of economy. Today, there is small business loan that are easy to get the loan. This business is usually done by the private or personal. The small business loan is provided the low in add on rates. Many people like to choose the loans in this firm. Beside that, now there is the unsecured business loan.

People can search the secured and unsecured business loan in the EZUnsecured.com . People can browse and know what and how to know the secured business and not. In this site, much information is that can be got by the people. They also can know who the owner from this business. Deciding the secure business must be chosen because it has the relation for the infestations. If the people do the mistakes for choosing the secured business they can get many profit, but if they are fail so they just get the a dead loss. The reason is why people choose the business loan because people want get the many profit without they worked. In the business loan rates, many companies need it to support their business. People are in the business need the business loan to help while they need the modal to make their business becomes big. 

Preparing a Loan Application

Obtaining a business loan has become more difficult as the economy, regulations, and lendig policies become more stringent.  I took the following notes during a recent staff training presentation and hope they will help you to understadn what lenders need to see in a business loan appllication. 

I. Understanding the Lender

It is much easier to find a business lender if you understand what a lender needs in order to process your loan application. I recommend starting with the lender you are already doing business with but check for the most recent bank policies and procedures. Government regulation and bank policies are frequently updated. To prepare you application it is helpful if you know the following:

Bank Policies –

Loan portfolio mix, number of and type of loans they like to make.

Loan Programs they use? (SBA or USDA programs?)

Loan requirements – Minimum Credit score, Loan to Value, Collateral, Equity, Lending Ratios -- Liquidity, Debt Coverage, others

Risk tolerance – some banks are more liberal, others more conservative.

Lender’s experience with customers in your industry?

Recent changes in the bank’s corporate structure that effect lending policies.

Banking regulations that affect the bank’s lending policies.

Average time to close a loan.

• Loan Underwriting – The lender will only know what you provide, incomplete applications get denied. Your loan officer will need to justify a loan approval based on due diligence review of you and your business. Information they are looking for includes:

Is the loan purpose consistent with the type of loan?

Credit Standing (score and credit report)

Cash Flow, is the business be profitable?

.... Are losses explained?

.... How were losses funded?

Collateral

.... Quality and value

.... Collateral value covers loan?

Equity/Net Worth

.... Has equity increased or decrease over last three years?

.... Amount of contributed equity and earned equity (retained earnings)

Financial ratios

.... Exceed lenders minimum target?

.... Ratio trends over last three years

Business condition – Strengths, Weaknesses, Issues

Other

.... Other business owned

.... Other sources of income

.... Personal Financial history

II. Preparing a loan package

Presenting the lender with a complete package is critical. Your package must demonstrate your capacity to manage the business, your capacity to produce stated outcomes, and the market place capacity to buy your service/product. Incomplete packages slow review and errors or misstated information will result in a denied application. Lenders will be examining:

1. Financial Statements – History

• Profit Loss Statements- YTD  Revenue, margins, profit

 • Cash Flow: EBITDA and Working Capital needs, Owner draws, distributions, When you spent cash, when you received cash

• Last three years of Tax records, Explain differences between tax records and Profit & Loss Statements. Explain any expenses made for tax purposes

• Balance Sheets – current liquidity, asset quality, leverage, capital structure, retained earnings, Aging of A/R and A/P

• Budget Projections with assumptions

• Break Even analysis

• Ratio analysis - Liquidity, leverage, performance over time has been consistent and is sustainable Sales to Assets, ROI, ROA, A/R Turnover, Average Collection period A/P turnover, average payment period Inventory Turnover, Inventory on hand

2. Management

Character of top management, resume of management experience, experience as management in this business/industry. Team depth, who does the tasks of CEO, CFO, A/R and A/P. Succession (who runs the business if you can’t be there?) Performance as compared to industry standards and trends

3. Business Plans

• Supports and explains how you will accomplish what you claim in your budget. How you meet the five C’s of credit. (Character, Capacity, Capital, Conditions, Collateral)

• Explains market opportunity

• Provides budget assumptions.

• Describe the business, how you make money

• Describe the service/product, provide pictures, marketing materials, samples

• Associated documents, Articles of Incorporation (Partnership), Leases, Contracts, firm estimates on major purchases, Collateral

III. Presentation Tips

• Be enthusiastic

• Be professional

• Be prepared

• Make an appointment, be early and ready

• Be organized and bring copies of all the document to leave with the lender

IV. Deal Breakers

Some issues in your history can be deal killers, there must be extenuating circumstances before a lender can consider proceeding with an application. Other problems could result in a loan application being considered as a higher risk. If a loan were to be approved, these issues could result in higher interest rates and more conditions and restrictions.

Preparing a quality loan application package will help identify potential deal breakers and provide you the opportunity to explain what happened and what you have done to correct the situation. Remember, it is safer for the lender to say no if there is any doubt or perception that your loan is a higher risk than the lender wants to accept.

What SBA Seeks In A Loan Application:

First, the Small Business Administration (SBA) is a federal agency and does not make loans, SBA guarantees loans made by financial institutions. Under the guaranty concept, the business applies to their local business lender. The lender decides if they will make the loan internally or if the application has some weaknesses which, in their opinion, will require an SBA guaranty if the loan is to be made. The guaranty assures the lender that in the event the borrower does not repay their obligation and a payment default occurs, the Government will reimburse the lender for that portion of the loan guaranteed. However, the borrower remains obligated for the full amount due.  Additional informatioon on SBA loan programs and requirements can be found at

http://www.sba.gov/

SBA 7(a) Loan Guaranty Program:  Most SBA business loan guarantees will be one of the various 7(a) guaranteed loan programs depending on the amount to be borrowed. A 7(a) loans can be used for most business purposes, up to a maximum guarantee of $1.5 million, with a typical maturity of 7 to 10 years depending on how funds are used.

504 Loan Program:  The 504 Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. Loan made under the 504 program can be A 504 Loan is made by a Certified Development Company who work with the SBA and private-sector lenders to provide financing to small businesses. 

Typically, a 504 project includes a a private-sector lender covering up to 50 percent of the project cost, with the  504 loan from the CDC covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped. The advantage of a 504 loan is a longer maturity and a lower interest rate on the 504 portion of the loan. The business/owners must contribute at least ten percent of the project total cost.

SBA Guarantee Eligibility

Repayment ability from cash flow of the business is a primary consideration in the SBA loan decision process but good character, management capability, collateral, and owner's equity contribution are also important considerations. All owners of 20 percent or more are required to personally guarantee SBA loans.

All businesses must: meet SBA size standards, be for-profit, not already have the internal resources (business or personal) to provide the financing, and be able to demonstrate repayment. Certain variations of SBA’s 7(a) loan program may also require additional eligibility criteria. Special purpose programs will identify those additional criteria.

Maturity  Maximum loan maturities have been established: twenty-five (25) years for real estate and equipment; and, generally seven (7) years for working capital.

The maximum maturity of loans used to finance fixed assets other than real estate will be limited to the economic life of those assets - but in no instance to exceed twenty-five (25) years. The 25-year maximum will generally apply to the acquisition of land and buildings

Equity Investment  Business loan applicants must have a reasonable amount invested in their business. This ensures that, when combined with borrowed funds, the business can operate on a sound basis.

Strong equity with a manageable debt level provide financial resiliency to help a firm weather periods of operational adversity.

Determining whether a company's level of debt is appropriate in relation to its equity requires analysis of the company's expected earnings and the viability and variability of these earnings. The stronger the support for projected profits, the greater the likelihood the loan will be approved. Applications with high debt, low equity, and unsupported projections will be denied.

Earnings Requirements  A company must be able to meet all its debt payments, not just its loan payments, as they come due. Applicants are generally required to provide a report on when their income will become cash and when their expenses must be paid. This report is usually in the form of a cash flow projection, broken down on a monthly basis, and covering the first annual period after the loan is received.

Applicants should write down all assumptions which went into the estimations of both revenues and expenses and provide these assumptions as part of the application. For new or expanding business with anticipated revenues and expenses exceeding past performance, the necessity for the lender to understand all the assumptions on how these revenues will be generated is paramount to loan approval.

Working Capital  Working capital is defined as the excess of current assets over current liabilities. Working capital is essential for a company to meet its continuous operational needs. Its adequacy influences the firm's ability to meet its trade and short-term debt obligations, as well as to remain financially viable.

Collateral  To the extent that worthwhile assets are available, adequate collateral is required as security on all SBA loans. However, SBA will generally not decline a loan where inadequacy of collateral is the only unfavorable factor.

For all SBA loans, personal guarantees are required of every owner with at least a 20 percent share of the business , plus others individuals who hold key management positions. Whether or not a guarantee will be secured by personal assets is based on the value of the assets already pledged and the value of the assets personally owned compared to the amount borrowed. In the event real estate is to be used as collateral, borrowers should be aware that banks and other regulated lenders are now required by law to obtain third-party valuation on real estate related transactions of $50,000 or more. SBA may require professional appraisals of business and personal assets, plus any necessary survey, and/or feasibility study.

Resource Management  Managerial capacity is an important factor involving education, experience and motivation. A proven positive ability to manage resources is also a large consideration.

Preparing A Loan Application. Obtaining loan approval is easier when the business loan application has been adequately prepared. This usually includes a current business plan, financial history with at least three years of federal income tax returns, personal financial history including credit reports and and credit scores, legal documents such as partnerships, leases, articles of incorporation, market research to support sales projections, sources of owners equity, lists of collateral and any other information the lender may require.

Do You Have Effective Internal Financial Controls in Your Business?

One of the very first private consulting jobs that I took on, several years ago was for a well-established company in the Midwest.  Day-to-day management of the company fell to the owner’s wife when he suddenly passed away. Since she was new to the daily operations, she began to scrutinize the financial information more carefully as a means of educating herself on the business financial condition. It didn’t take her too long to know that something wasn’t quite right but she couldn’t put a finger on the problem.

We worked together to analyze costs, analyze pricing and develop strategies for positioning the business to be put up for sale. Meantime, she shared with me that she had a concern that one of her employees was stealing from the company. So we turned our focus to the development of internal controls while we tried to identify whether or not her concern was valid. As it turned out, the tightening of internal controls caused the person in question to leave the company after over 20 years with the business. The owner, and her sons, were completely devastated to find out that the employee had been stealing from them consistently for many years. This employee was highly valued by the business and was considered almost like family after many years of service. The moral of the story is simply that no business is too small to institute effective internal financial controls.

How can you begin to develop controls? First you need to identify the areas that are high-risk in your business. High-risk areas may include: Cash receipts and disbursements, customer credit and collections (writing off bad debts), purchasing and storage of inventory, payroll (including worker’s compensation insurance fraud). Under no circumstances should an accountant, bookkeeper, or the Controller of the business be given check-signing authority. Fraud can easily be concealed if this person has authority to sign checks. The owner/manager should sign all checks. If there are multiple owners, at least two signatures should be required. Do not create a signature stamp that can be used in your absence.

Following are other recommendations:

• In a small company, if you cannot separate duties to provide a check and balance system, consider job-sharing through a cross-training arrangement.

• Require that employees who work in high risk areas take vacations. Pay attention as to whether employee life/styles seem to match what you may know about their salaries.

• Limit access to accounting records and year-end entries.

• Make surprise audits and inspections

• Discuss computer controls with your accountant or a computer security specialist

• Be sure that you pay attention to the legal aspects of internal controls. Be sure any controls that you put in place do not violate the privacy rights of employees or customers.

Article written by Susan Hoosier, Longview Small Business Development Center  To locate your local SBDC advisor please visit the SBDC web site http://www.wsbdc.org/