Broader acceptance of emissions certificates and letters of credit could relieve margin pressure
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Collateral loans can allow you to get better rates and terms on business funding. Prime assets for collateral include inventory, equipment, real estate, and investments. Often, the asset you are financing itself can be used as collateral. As a result, you can get what you need without depleting cash reserves.
According to Investopedia, collateral is:
“…an asset that a lender accepts as security for a loan. Collateral may take the form of real estate or other kinds of assets, depending on the purpose of the loan. The collateral acts as a form of protection for the lender. That is, if the borrower defaults on their loan payments, the lender can seize the collateral and sell it to recoup some or all of its losses.”
Now, here are some examples of collateral loans.
You can use the inventory you want to sell as collateral for a loan to buy the inventory!
Inventory collateral loans can be in the form of a revolving line of credit or a short-term loan. The funds can purchase products for resale. In fact, the products typically serve as the collateral for the loan.
Of course, there may be restrictions on the type of inventory you can use. For example This not allowing cannabis, alcohol, firearms, or perishable goods is common. Also, there can also be revenue requirements or a minimum FICO score.
Interestingly, Kickfurther is a combination of inventory financing and crowdfunding. With this platform, you get financing from supporters and fundraise directly to them. They buy through what’s called a Consignment Opportunity.
Consequently, your customers own the products they help fund. That is, until they are sold by the brand. As soon as the products sell, the customer earns payments. Kickfurther also offers an online store for businesses to market and sell their products. It is possible to get funding for up to $2 million in inventory.
Payback terms will vary. However, at the end of each sales period you submit sales reports and provide payment for inventory sold. Furthermore, you must provide a monthly accounting of current inventory levels.
There are several ways to use equipment to get collateral loans.
These are collateral loans you can use to purchase hard assets for your business. Terms for equipment financing through Credit Suite are as follows:
In contrast, you can also lease equipment rather than buy it outright. Often, you will put down less money than you would if you were buying. In addition, you may be able to negotiate flexible terms with an equipment lease.
Even better, it’s easy to upgrade equipment after your lease ends. Of course, this is helpful if your equipment is something like a computer which quickly becomes obsolete.
You can also use equipment you already own as collateral. Basically, you sell equipment to a lender for cash, and then lease it back from them. As a bonus, this lets you unlock Section 179 tax savings and depreciate your entire equipment purchase in the first year.
Of course, term lengths and the amount you can finance will vary. First, you need at least one larger piece of higher value equipment to qualify. Then, you can get funding in as little as 3 weeks. Generally, a lender just wants to be sure your equipment does not have any liens against it.
If you have investments, you can use them to gain access to funding for your business through collateral loans without worrying about credit scores.
IRA financing allows you to invest a portion of your retirement funds into your business. The result is, you gain more control over the performance of your retirement plan assets. At the same time, you get access to the working capital you need for business growth.
Usually, you will work with a CPA who will help you. You can cash out the lesser of half or $50,000 from an account that qualifies. If applicable, the CPA you work with will structure a self-directing IRA for the remaining funds.
Some lenders will make loans using securities as collateral. You can use the funds for almost any purpose. This includes buying real estate or investing in a business. The only restrictions to this kind of lending are other securities transactions, like buying shares or repaying a margin loan.
Also, you continue to earn interest on the stocks, and rates can be as low as 1.6%.
Typically, bonds financing is available through large financial institutions and private banks. In general, those that look for these kinds of loans want to make a large business acquisition. Or, they may want to execute large transactions like real estate purchases. In this type of funding, the borrower’s investment portfolio helps the lender determine how much to loan.
Most investment-grade corporate, treasury, municipal, and government agency bonds are fair game. You keep all the interest and appreciation from your securities. To qualify, all the lender will require is a copy of your two most recent securities statements.
If your stocks or bonds have a value over $25,000, you can get approval. Even bad personal credit isn’t an issue.
To be fair, this is not a loan. You will not have to pay an early withdrawal fee or a tax penalty. The plan, rather than the individual, owns the trade or business through its company stock investments. Since it isn’t a loan against your 401(k), there’s no interest to pay. Instead, this is actually a change of ownership.
Still, it is business funding you can get using investments, so it bears mentioning.
Officially, the name for this type of funding is a 401(k) Rollover for Working Capital program. The IRS calls it a Rollover for Business Startups (ROBS). Per the IRS, a ROBS qualified plan is a separate entity with its own set of requirements.
Credit Suite 401(k) Rollover for Working Capital program highlights:
Honestly, collateral loans open up a whole world of funding you may not be able to get otherwise. One benefit is, it’s typically available regardless of credit history. Better yet, the terms and rates can’t be beat. If you have the option, depending on the need and the situation, collateral loans may just be what you are looking for.
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Do you need business funding but lack the cash flow and collateral that most lenders require? In other words, you need a credit based loan. But, is that even a thing?
Honestly, no. Still, bear with me. When we talk about credit based funding, we are talking about funding for your business that is based on credit only.
In contrast, most traditional loans are what is called “full-doc” financing. Meaning, while creditors may take business credit or personal credit into account, other factors weigh heavily on the decision.
For example, potential borrowers are required to hand over financial statements, tax returns, check stubs, and more. As a result, the process can be much longer and more complicated.
Yet, if the idea is that any credit is, at its core, a loan, then there are credit based loan options available. Now, these funding options do not necessarily take personal credit into account, though some may. The point is, they are “no-doc” financing options. You do not have to provide documents like:
Some examples of credit based loan options include:
A credit line hybrid is a form of unsecured funding. Also, our credit line hybrid has an even better interest rate than a secured loan. The best part is, it’s a credit card stacking program, and many of the cards report to the business credit reporting agencies. As a result, you can build business credit and fund your business at the same time.
For approval, you need a good credit score or a guarantor with good credit. Consequently, the minimum personal credit score is a FICO of 680. Yet, you will not have to supply any financials, and you can get a loan of up to $150,000. It’s important to note, some of the cards in the program may report on your personal credit.
Business credit cards are universal-type credit cards, like MasterCard. In fact, they can be used pretty much anywhere. Even better, some of these cards have rewards programs as well. However, It’s important to review rewards programs thoroughly. Unfortunately, some may not be relative or attainable for your specific business.
Currently, business credit cards are the main source of credit-only based business funding. Generally, you will need to have at least 14 accounts reporting to the business CRAs. Additionally, they may require a minimum time in business or minimum number of employees. Here are a few examples, but there are many business credit card options out there.
Alpine features:
Of course, Amazon is such a versatile marketplace that this card can be useful for most any business. It features:
Sadly, limits seem to be low. Also, there are reviews of this card on the Amazon website. Certainly take the time to check them before applying.
Bank of Hope card Features include:
Chase Bank Ink Business Cash top features include:
First, you must be a Costco member to get his card. It offers:
Fortunately, credit based funding is a legitimate way to fund your business needs without the need for collateral or meeting cashflow requirements. As noted, the most common source of this type of funding is business credit cards, or programs like the Credit Suite Credit Line Hybrid. As you can see, there are plenty of possibilities. The trick is, you just have to find the one that will work best for your business.
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Seeking the best sources of funding for your business can feel complex and overwhelming. Most young entrepreneurs today feel like bootstrapping their business feels safer and perfect for their needs.
Unfortunately, most start-up businesses cannot thrive without adequate funding. Since few businesses start with a generous budget, you must seek alternative sources. Loans, sponsorships, partnerships, angel funding, co-investors, and grants are some of the options known to many.
Most of these options require collateral of some sort. Collateral is an asset that you can use to secure a personal or a business loan. In layman’s speak, it’s a promise that you can still cover your loan when you cannot make the payments.
Collaterals can be seized and resold to cover the remainder of the loan. For business loans, assets like business equipment, vehicles, buildings, and inventory can be used as business loan collateral. You can even use accounts receivables to pay off the loan if necessary.
Like any other lenders, banks put a lien on the asset pledged as collateral for the loan. If the borrower falls on hard times and cannot keep up with the payments, the lender has the right to seize the collateral. It is a guarantee that the lender still gets paid no matter what. By pledging collateral, a business owner shows that they are not a high-risk borrower. It leads to reduced interest rates and a more reasonably affordable loan plan.
Today, most business loans and credit lines do not come from conventional banks. There are alternative lenders and investors like Credit Suite who can help you with the steps needed to secure a business loan.
We have a wide array of legitimate funding solutions, each with its own different and unique terms that can match your credit profile. Credit Suite’s business loan programs manage the rates and requirements to help increase your chance of getting approved.
High-value collateral often gets matched with a higher loan value which can be beneficial for the lender. It is logical for business owners to choose a loan option that reflects their capacity to pay. However, not many are aware that they can use less popular options as business loan collateral instead of their properties.
The good news? If you own a public stock, you may use that as collateral to secure a business loan. This article explores how public stocks can be your collateral and what makes them such a good option.
Public stocks are liquid assets which makes them an acceptable form of collateral. Everyone in the industry knows that these stocks have passed compliance standards. Hence they guarantee against the unlikely event of a default. It is natural for any individual to feel a degree of protectionism on what they hold dear. It includes real estate, properties they own like vehicles or artwork, and it extends to stocks. However, in the unfortunate event of a seizure, public stocks affect you differently.
You can still operate your business, protect your image, and operate as usual. Treat your public stocks as one of the assets that can help your business continuity process. It is a lifeline that can save you when you cannot make payments without sacrificing the assets that help your business move (i.e., laptop, vehicles, house, etc.).
Overall, what matters is that you are protected from your liability against future payments—the benefit trumps, especially when the need for funding is huge. Most people are unaware that you can use public stocks as such and so the next section will guide you on how to use them so that you can feel more confident in deciding that this is the best option for you to take.
Demolish your funding problems with 27 killer ways to get cash for your business.
Lenders will assess your company’s history, business credit, balance sheet, and equity contributions. When you pass the audit, that’s the time when you submit your collateral for review.
Defaulting on a loan has dire consequences for your business and personal life. It would help if you took a realistic stance when you track your assets. Specifically, your public stocks require an exhaustive review. Consider asking for professional help to help you see how your stocks fare.
Feel more confident in your investment decisions by staying up to date on research-based information, current trends, and market analysis. When it comes to your business and money, a serious reputation is important. You can rely on professional advice from experts like Charlie Shrem, Matt McCall, David Stein, and Josh Bannerman to navigate key investing issues.
A good credit rating increases your loan approval. Using public stocks as collateral, how your stocks perform, your investment history, and your level of stock ownership can all influence your loan-to-value ratio. Look for wiggle rooms in terms of restructuring, repayment, frequency, and scheduling. These are basic areas you can cover in negotiating.
Public stocks can help you get lower interest rates because the collateral is being held. It is because of the reduced risk associated with public stocks. This reduction makes lenders more comfortable because there is little chance of default. Depending on your stock’s value and performance, lower interest rates may be warranted. It does not hurt to ask for an interest reconsideration.
Demolish your funding problems with 27 killer ways to get cash for your business.
This country is built on its fair and reasonable business practices. It extends to flexible loan repayment options. Additionally, it is beneficial to both parties as this essentially guarantees loan payment and profit based on interest.
There are common repayment flexibility schemes in the market to minimize the chances of default. These are accelerated repayment which leads to loan recalculation, step-up loans where the value matches a borrower’s growth potential, and balloon repayment scheme where the loan amount is paid in the last installment.
High-performing stocks can be your leverage for greater repayment flexibility. In the event of trouble making payments, you may adjust the rates or payments depending on your lender’s programs and assistance.
Sometimes, conventional banks are not the right fit for your business. Other start-ups claim that alternative lenders can offer funding that aligns with their goals, structure, and profitability. At Credit Suite, our contemporarily diverse strategies can help your business secure the funding you need. Our client’s testimonials prove how effective we are in our role.
Demolish your funding problems with 27 killer ways to get cash for your business.
There are no personal guarantees when you use public stocks as collateral. How your public stocks perform on the market will vary for sure. If the borrower defaults, the lender can seize and sell the business loan collateral. However, if the collateral sells for less than the debt value, the lender cannot seek that deficiency balance from the borrower.
Therefore, public stock collateral is considered as nonrecourse debt. Due to the risks, lenders generally allow only 50% to 60% loan-to-value ratios. Typically, lenders underwrite these collaterals with more care compared to full recourse loans.
Depending on the kind of loan and the value you are applying for, public stocks as collateral are primarily attractive only when you own significant ownership in the company’s stock. Owning penny stocks or junk bonds will only matter if the value is high, but until it does, you have a better chance of securing your business loans with stocks that have high market value.
When we talk of public stocks, the image and quality of the company also matter. It communicates stability which helps secure the loan. The lender communicates with a broker who tracks the daily value of the stocks.
Should the value decrease, the lender may require more money (or additional collateral). Before you decide to submit your stock portfolio as business loan collateral, ask yourself whether this is a risk you are willing to take.
Remember when Apple stocks went down? Everybody seems to know when this happened, and for good reasons. All eyes watch when the big players lose. When we talk about stocks used as collateral, only significant stocks are considered. At the most basic, this can mean market value, the number of stocks, and degree of ownership.
When your stock’s market value drops, your collateral’s value might go down as well. Though this does not immediately mean that you need to submit more collateral, there’s a line drawn to secure your lender’s threshold. If the market drops far enough, there is a risk that you may owe more than the original amount.
Most business owners who want to push forward understand these risks. Your chances of completing loan payments are significantly increased when coupled with confidence in their product or service, along with sensible market research.
Out-of-the-box thinking pays off in business. Look for additional income streams that you can integrate into your business. At Credit Suite, our Partner Program offers you a unique way to boost your sales and exceed your targets.
Whatever kind of service or product you sell, you can point your customers to our program to complete the sale. We also provide you with all the training and information you need when you become our partner. It’s a win-win situation for the both of us.
Janine Ikan is a teacher, mental health advocate, and freelance writer for The Stock Dork. She has written on psychology, digital marketing, sustainability, and new age spirituality. Her passions include arts, culture, travel, food, social sciences, and community development. She lives in the Philippines with her husband, their energetic toddler, and six cats.
The post How to Use Public Stocks as Business Loan Collateral – and Why You Want to appeared first on Credit Suite.
Do you need business funding? But maybe you don’t have good collateral? Not to worry – you can still get money. So let’s look at business credit lines unsecured by collateral.
A credit line, or line of credit (LOC), is an arrangement between a borrower and a bank or private investor which establishes a maximum loan balance that a borrower can access.
A borrower can get access to funds from their line of credit at any time, so long as they don’t go beyond the maximum set in the arrangement, and as long as they meet any other conditions of the finance institution or investor for example, making timely payments.
And business credit lines unsecured by collateral give lenders very little security in case of default. While business credit lines unsecured ed by collateral exist, they can be harder to get.
Credit lines offer many distinct advantages to borrowers which include convenience. Borrowers can utilize their line of credit and merely pay interest on what they use, unlike loans where they pay interest on the total borrowed. Credit lines can be reused, so as you acquire a balance and pay that balance off, you can use that accessible credit again, and again.
Credit lines are revolving accounts similar to credit cards, and contrast other kinds of financing such as installment loans. In many cases, lines of credit are unsecured, much the same as credit cards are. There are some credit lines that are secured, and for that reason easier to get approval for. But we’re looking for business credit lines unsecured by collateral!
Credit lines are the most routinely sought after loan type in the business world despite the fact that they are preferred, real credit lines are rare, and difficult to find. Many are also very hard to qualify for, requiring good credit, good time in business, and good financials. But there are other credit cards and lines that few people know about that are attainable for startup companies, bad credit, and even if you have no financials.
With this form of business financing, you partner with a lender who concentrates on securing business credit cards. This is a very unusual, very few know of program which few lending sources offer. They can normally get you three to five times the approvals that you can get on your own.
This is because they know the sources to apply for, the order to apply, and can time their applications so the card issuers won’t decline you for the other card inquiries. Individual approvals commonly range from $2,000 – 50,000.
The result of their services is that you commonly get up to five cards that simulate the credit limits of your highest limit accounts now. Multiple cards generate competition, and this means they will raise your limits, more often than not within 6 months or less of first approval.
While these aren’t business credit lines unsecured by collateral per se, they are rather similar. And the differences between and unsecured business credit cards are probably not going to be noticeable to most.
Approvals can go up to $150,000 per entity like a corporation. With UBF they actually get you three to five business credit cards which report just to the business credit reporting agencies. This is huge, something the majority of lenders don’t offer or advertise. Not only will you get cash, but you build your business credit also so within three to four months, you can then use your new company credit to get even more money.
You can get credit with no security, assets, or collateral. The lender has no collateral to collect in case of default. Because there is no collateral, and they don’t look or care about your cash flow, the only thing that matters is your personal credit.
With a 650 you will get only personal cards. But with a 680 credit score, you will get both company and personal cards.
The lender can also get you low introductory rates, more often than not 0% for 6-18 months. You’ll then pay normal rates after that, typically 5-21% APR with 20-25% APR for cash advances. And they’ll also get you the best cards for points. So this means you get the very best rewards.
Just like with just about anything, there are significant benefits in partnering with a source who focuses on this area. The results will be far better than if you attempt to go at it by yourself.
Learn business loan secrets with our free, sure-fire guide.
You must have excellent personal credit right now, ideally 685 or better scores, the same as with all business credit cards. You shouldn’t have any derogatory credit on your report to get approval. And you must also have open revolving credit on your consumer reports right now.
They consider your balance/limit ratios on existing revolving accounts. The lower the ratio, the higher the amount of the approval. A 30% ratio is a requirement. This looks at overall percentage, and individual percentage on each account.
Credit inquiries are a big factor tying into approval. More than six inquires in six months will be too much. Lenders do not want to see the person is applying for new credit, especially no other revolving accounts.
Learn business loan secrets with our free, sure-fire guide.
Use a guarantor or a credit partner to boost the numbers. Usually these people want a piece of the business in trade for their assistance. Creditors want to know you’ll pay them back. Most sources will charge 9 to 12% success-based fees. Only pay the fee off what you secure.
All lenders within this space charge a 9-15% success based fee and you only pay the fee off of what you secure. Keep in mind, you get a lot of extra rewards and about three to five times more money in this program than you’d get on your own, which is why there’s a fee, the same as all other lending programs.
You can get approval with a guarantor and you can even use a wide range of guarantors to get even more money. There are also other cards you can get making use of this very same program but these cards only report to the consumer reporting agencies, not the business reporting agencies. They are consumer credit cards versus business credit cards.
They deliver similar benefits including 0% intro annual percentage rates and five times the amount of approval of a solitary card but they’re much easier to qualify for.
You can get approval with a 650 score and seven inquiries (or fewer) in the most recent six months and you can have a BK on your credit and other negative items. These are a lot easier to get approval for than UBF business cards.
With all earlier cards above, you must have good consumer credit in order to get approval but what happens if your personal credit is not good, and you don’t have a guarantor?
This is the time when building company credit makes a lot of sense even if you have good personal credit, building your business credit helps you get even more money, and without having a personal guarantee.
Private investors and alternative lenders also grant credit lines. These are easier to get approval for than conventional SBA loans. They also require much less documentation for approval. These alternative SBA credit lines generally demand good personal credit for approval.
Unlike with SBA, many of them don’t necessitate good bank or business credit approval. Nearly all of these sorts of programs call for two years’ of tax returns. Tax returns need to demonstrate a profit. Rates can vary from 7% or greater and loan amounts range from $25,000 into the millions. Loan amounts are typically based upon the revenues and/or profits on tax returns. Sometimes lenders may ask for other financials including a profit and loss statement, balance sheets, and income statements.
Merchant cash advances have quickly become the most popular way to get financing, in large part because of the effortless qualification process. Businesses with $10,000 in earnings can get approval, with the business owner having scores as low as 500.
Some sources have now even begun to offer credit lines that accompany their loans. You must have at least $10,000 in revenue for approval. You should be in business for at least one year, however three years is better. Lenders typically want to see a credit score of 650 or better for approval.
Loan amounts are typically around $20,000. Lenders routinely do pull your business credit, so you need to have some credit already and in some cases lenders will want to see tax returns.
Rates vary, due to the risk for this program, and there aren’t a lot of funding sources who offer it.
These can be – in a way – business credit lines unsecured by collateral. This is because the lender gets something better than collateral – a percentage of your incoming revenue.
Credit cards frequently offer 0% intro rates for up to two years. This is also extremely useful for startups in particular. And credit lines let you take out more cash at a more affordable rate than do cards. These are the primary two differences which will have an effect on you between credit cards and credit line.
Investopedia even says that “lines of credit are potentially useful hybrids of credit cards.”
Both cards and lines are revolving credit. Credit lines are tougher to qualify for as card approvals are usually very quick, many times automated, while at the same time line require an in-depth underwriting review. Lines usually offer lower rates, per Bankrate card rates average 13% while lines average 4%.
And no matter what, business credit lines unsecured by collateral are going to be even harder to qualify for.
Learn business loan secrets with our free, sure-fire guide.
Many of these cards report to the consumer credit reporting agencies. They all demand a personal guarantee from you. You can get approval typically for one card max as they stop approving you when you have two or more inquiries on your report.
Most credit card providers feature business credit cards including Capital One, Chase, and American Express. These have rates similar to consumer rates and limits are also similar.
Some of them report to the consumer reporting agencies, some report to the business bureaus. Approval requirements are similar to consumer credit card accounts.
They are pretty similar to business credit lines unsecured by collateral.
Normally, when you apply for a credit card you put an inquiry on your consumer report. When other lenders see these, they won’t approve you for more credit for the reason that they aren’t sure how much other new credit you have recently obtained.
So they’ll only approve you if you have no more than two inquiries on your report within the most recent six months. Any more than that will get you refused.
Business credit is credit in a company name, in association with the business’s EIN number, and not the owner’s Social Security Number. When undertaken properly, you can acquire business credit without a personal credit check and no personal guarantee. This is a thing all other cards above can’t deliver.
You can get three types of business credit cards. First is vendor credit, which offers net 30 terms to start a business credit profile. Then is retail credit, where you will get credit cards with high limits at most establishments.
Next is fleet credit. It’s credit to fuel, service, and maintain company vehicles. And then there’s cash credit, which includes Visa, MasterCard, and American Express cards that you can use anywhere. You can acquire these without any credit check or guarantee. Limits are oftentimes $5,000 – $10,000 to start, and can exceed $50,000.
While these types of credit aren’t business credit lines unsecured by collateral, they can often be better. They are often easier to qualify for.
The majority of credit line types that most entrepreneurs think of come from standard banks and traditional banks use SBA loans as their principal loan product for small business owners. This is due to the fact that SBA guarantees as much as 90% of the loan in the case of default. These credit lines are the most challenging to qualify for because you must qualify with SBA and the bank.
Furthermore, you are nearly always going to need some form of collateral. So, by definition, they won’t be business credit lines unsecured by collateral.
Your business can get business credit lines unsecured by collateral, if you know where to look. Learn more here and get started toward establishing business credit.
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