Tag: Unsecured

Unsecured Business Loans to Gain Success in the World of Business

The word “success” is defined differently by different people. Success for some means money while for others it could be the name and fame factor. For an entrepreneur, success would mean maximization of profits and gaining recognition. An entrepreneur must be creative and confident; must have the passion, vision and mission to achieve set objectives. You may possess all these qualities, but do you have the necessary capital needed to start up or expand the business. If not, then unsecured loans can work as a significant source of finance for you.

Unsecured business loans do not require a borrower to put collateral against the loan. An unsecured business loan is an ideal source of funds for tenants who do not have a property to put against the loan. Homeowners who do not want to put their property at risk can also apply for an unsecured business loan.

Business is filled with uncertainty; you may earn huge profits one year or big losses the other month. In such circumstances, when returns are uncertain, an unsecured business loan is the best alternative. Unsecured business loan can be used to purchase fixed assets which involve huge investment for starting up a new venture or to expand the existing business. Unsecured business loan can also be used to meet the working capital requirement of a business.

Amount that borrowers can borrow with an unsecured business loan depends on their credit history and the lender they choose to borrow from. Usually, loan providers offer an unsecured business loan within a range of £30,000 to £250,000.

Unsecured business loan does not involve the lengthy process of verifying the value of collateral as it does not engage one. Thus, it makes the money available sooner as compared to secured business loan.

Unsecured business loans are offered at a high rate of interest as the loan is not secured by any collateral. Lenders try to cover the risk of lending by charging a high interest rate.

If you are starting up a new business then you need to make a little more effort as you don’t have business financial statement which can pose to be a proof of your capability to repay the loan. You need to design a business plan to prove that there is no risk involved in lending money to you and you will be paying the monthly installment and the loan amount in full and on time. A well organized business plan makes it easier to borrow money from lenders.

Entrepreneurs who are running established business and need funds for expansion can borrow unsecured business loans. Entrepreneurs can continue using the property or the equipment against which the loan is borrowed.

Credit score is an important factor considered by loan providers while lending unsecured business loan. Higher the credit score, higher is the possibility of getting a large amount of loan quickly and that too at comparative low interest rate. A borrower can get his credit score evaluated from any of the credit rating agencies namely Experian, Equifax and TransUnion. Credit score is popularly known as a FICO score. It gives complete picture of an individual’s payment history, amounts owed by him, length of the credit history, types of credit used and new credit. A FICO score of 650 and above is considered to be a good score.

Unsecured business loan can be borrowed from banks or financial institutions. But, in case you are looking for a fast and hassle free loan, you can borrow it from online lenders. With internet, you can access number of online lenders. It is very easy to apply for an online unsecured business loan; a borrower has to fill a simple online application form with some personal details such as name, loan amount and period for which you need the loan. Loan quotes are offered free or for nominal charges by most of the lenders. Collect loan quotes from several lenders and compare them to find the most appropriate unsecured business loan.

Success of any business in term of management involves proper planning, organizing, team work and coordination among the various tasks in an organization. Adequate capital with a well defined business strategy gives birth to big business tycoons.

Unsecured Small Business Loans – Good News – Stimulus Bill Allows SBA 90 Percent Guarantee For Loans

Anyone remotely involved with small businesses, whether as a consultant, lender, supplier, leasing specialist, trade association, or simply as a consumer who is tired of driving by sections of town and wondering why your favorite business unceremoniously threw in the towel, would very much like to hear some good news. Not to mention the small business owner itself. After all, there are 27 million small businesses that deserve to be thriving in this nation, but too often were ignored by the Bush administration. Classically non-complainers by nature, they just want a scrap of hope thrown their way. And I’m not talking about wide-eyed idealists looking for handouts-in all due respect to Emily Dickinson, they’re not looking for the”thing with feathers that perches in the soul”. Just give us a few bucks and we will run with it. This is a continuing article (20 in all) on the subject: Help. Is anyone out there loaning to small businesses anymore?

Fortunately there is a loan program out there and SBA lenders are actually making loans currently: the Community Express Loan Program. This gives unsecured small business loans between $5,000 and $50,000 with very little paperwork, answers typically in two days, interest rates presently at 7.75%, funding and two weeks, and monies wired directly to your business account. There are still lenders participating in this program, although Congress has failed to make the program permanent and still has a 10% cap on the number of loans.

Enter the Obama stimulus bill. Let us look how it affects this program and small business lending as a whole.

If you have tried to wade through the 1,100 or so pages of the new stimulus bill (American Recovery and Reinvestment Act of 2009), you know its like chipping through granite. But let me pull out a little gem. It now allows the U.S. Small Business Administration (SBA to you) to guarantee up to 90% of loans made by private lenders under their program. Let me explain. This is great for Community Express.

When the Small Business Act was enacted in 1958, it had a very simple mission. Find a way to get loans to small businesses that couldn’t get them through traditional channels. It did this in an ingenious way. They knew banks where reluctant to loan to small businesses, especially startups, because of fear of failure. So the SBA collected a fee on each loan and used this as a fund to pay banks if there was a default. Bingo, there was invented the SBA guarantee fee. It doesn’t take a degree in rocket science from MIT and an MBA from Harvard to know this gives incentives to the banks to make more loans.

SBA loan programs have guarantees from 50% to 85%. Specifically, the SBA currently has an 85% guarantee on loans up to $150,000 and up to 75% on loans above $150,000. On the other hand, there are some programs that only go as high as 50%, including the Express Loan program (for those types of loans the new guarantee will not change). With the new stimulus bill, the SBA has the right to increase these fees to 90%.

Think about this for a moment. Simple math tells us more guarantee, the greater the likelihood of the bank making the loan. For goodness sakes, 90% is tapping on the door of a 100% guarantee! Also note the guaranteed portion is typically sold on the secondary market (which has recently shut down to almost nothing) so there is more chance for loans to be sold and more money to go back into the coffers of the banks for further lending.

Notice I said the SBA has the right to increase it to 90%. It can pick which program. And it has not occurred yet. But if I was a betting person, I would say they would be seriously looking at most of the programs because everyone is scraping for ideas to revive the economy.

For those addicted to primary source documents, this is what the new statute, in relevant part (my attorney wanted me to add that) says:

SEC. 502. ECONOMIC STIMULUS LENDING PROGRAM FOR SMALL BUSINESSES. (a) PURPOSE- The purpose of this section is to permit the Small Business Administration to guarantee up to 90 percent of qualifying small business loans made by eligible lenders.

(b) DEFINITIONS- For purposes of this section:

(1) The term ‘Administrator’ means the Administrator of the Small Business Administration.

(2) The term ‘qualifying small business loan’ means any loan to a small business concern pursuant to section 7(a) of the Small Business Act (15 U.S.C. 636) or title V of the Small Business Investment Act of 1958 (15 U.S.C. 695 and following) except for such loans made under section 7(a)(31).

There is also a sunset provision under Subparagraph (f) that the guarantees are only good for one year after enactment of the bill, unless extended by Congress.

So what does it do for me now as a small business owner? Well now the not so good news. I predict the SBA will be increasing many of its programs to 90%. But to get the banks in the lending mood again, there has to be a secondary market. There is also new legislation on that, which we will discuss in another article. But once we have a secondary market, I predict that they banks will not only loan, but do so in a big way. For three reasons:

First, history tells us when there is economic inactivity due primarily to depressed conditions, when the cycle changes for the better, like a sling shot affect, it changes dramatically. Remember when people were unable to refinance or purchase their homes because of tight markets and high interest rates? The rates went down and many jumped at the chance to refinance, improve their homes, and purchase (some say too precipitously) with abundance. Although this is an overstatement and also depends upon other factors such as employment, standards of living, etc., the analogy holds that when things loosen up, there will be a substantial number of business loans.

Secondly, banks are in large part in the business of making loans and they have not been doing so for some time. They will be anxious to make profits again.

Lastly, simple economics tells us when there is a vacuum in the market; capital will rush in and take advantage of that open market and initial lack of competition. Large banks are not making business loans so small community banks are starting to rush in to take over the arena. Give them a secondary market and they will explode.

So for the small business owner, I think this news of 90 % guarantees is favorable. Why did it take them so long?

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