Traditionally bankers look at what are called the 3 “C”s – character, credit and collateral. Character means more than not having a criminal record. It means that the banker feels confident that you are not going to suddenly disappear if the business runs into trouble.
Specifically bankers like to see ties to the community such as long residence, family ties, and home ownership. A clean credit history is important. A couple of late credit card payments shouldn’t be a factor, but missing mortgage payments for three months in a row will require a good explanation.
Bankers like good character and good credit, but they live for solid collateral. Land, buildings, plant and machineries – that’s the kind of stuff that bankers really like for collateral – solid value and likely to be worth a lot even if the business goes bust. Inventory, raw material, and goods are second choices for collateral – they will lose their value more quickly than fixed assets but still be worth something.
Banks have much more lenient standards for lending to consumers than to businesses. So what you can do is borrow the money from the bank as a consumer and then turn around and personally invest the funds in your business.
Just make sure that you never lie about how you are going to use the proceeds on a loan application. For example, you could refinance your home loan to tap any appreciation in your house value. Then take the funds and invest them in your business. The bank feels safer because their statistics show that home loans are much more likely to be repaid than loans for brand new businesses. Can’t refinance your home? Maybe you can refinance your car.
Most owners of small businesses believe that banks only lend money to companies that don’t need it. This is not true. However, what is true is that bankers and the banks they represent will not typically make an effort to understand a business when an owner has not made a concerted effort to explain, in an organized and concise manner:
You don’t have to be Muslim to be eligible for Islamic finance. Cia Manes, an attorney at law firm Howard Kennedy, looks at how businesses could benefit from a growing pot of money.
Every year, misinformed homebuyers, often first-time purchasers or seniors, become victims of predatory lending or loan fraud. Below you’ll find the top ten ways to avoid becoming a victim yourself.
Banks are the major source of finance for small business. When applying for finance from you bank it helps if you follow these procedures…
As the economy struggles to rebound, unemployment rates remain at historical highs and millions of Americans are still looking for work. As a result, many have considered following their entrepreneurial dreams and “creating” their own job rather than relying on corporate America to see them through. While hard times have kept demand for small businesses high and a wide selection of options are on the market, most business buyers are facing one major challenge: accessing the capital required to purchase one.