Tag: Lenders

Why do Lenders Prefer Using a Personal Credit Score to Approve a Business Loan?

Your Personal Credit Score Can Make a Difference When You Apply for a Business Loan

If you’re a small business owner, don’t assume your business credit is separate from your personal. If you apply for a loan, lenders will consider it on your personal credit, not your business credit. Your business credit score is considered on its own only if your company generates millions in annual income. Otherwise, assume that your personal credit score will matter.

Solid personal credit is a necessity.  The need to build and maintain it never goes away for most small company owners.

Some lenders (like banks) place more importance on personal scores. This is for checking business loan applications.

To establish your business’ creditworthiness, most lenders first analyze your personal credit score. This happens with organizations in operation for only a few years. It also happens with businesses seeking their first business loan.

So, small business owners must focus on creating a solid business credit profile. This is along with building a good personal credit score.

What is the Difference Between Business Credit Score and Personal Credit Score?

Here are the main variations between company personal credit scores:

  •       Business credit reports use Employer Identification Numbers (EINs). Personal credit reports use Social Security numbers (SSNs).
  •       The ranges of personal and business credit scores are very different. Business scores tend to vary from 0 to 100. The range of personal credit scores is 300 to 850.
  •     Experian manages both business and personal credit. They use separate databases and departments if you have both kinds of credit.
  •       You can freeze or lock personal credit reports. But business credit reports cannot be locked or go under security freeze.
  •       Different rules apply to data used in business and personal credit reports.
  •       Anyone can examine your business scores (they must buy the report and scores). But only you and others who have your authorization can access your personal scores.

When do Lenders Consider a Personal Credit Score for Approving Business Loans?

When reviewing creditworthiness for a business loan, most lenders  check personal credit history.

But some lenders will give your personal credit score less weight than others. Lenders may pay less attention to a poor personal credit score if you already have a track record of solid business credit.

Your personal credit will matter more for a business loan when any (or all) of the following are true:

a. If You’re Seeking a Loan from a Bank or Other Conventional Lender

You should assume banks have strict lending rules and often aren’t too flexible. But private lenders offer financial help. It’s in the form of business loans with low credit requirements. They provide funds considering a business owners’ personal score. This is even if the business score is low. Here, conventional lenders may check personal credit scores to offer you a business loan with flexible terms.

b. If Your Business is a Startup or Small in Nature

If your business score does not have enough info for lenders to check credibility, they will place a higher value on personal scores.

This can be the case with sole proprietorships or small businesses with few employees. Here, it may be hard for a conventional lender to distinguish between your business credit report and personal credit reports.

c. Your Personal Credit Score is Relatively Low

Even if you have a few old negative entries on your personal credit report, getting a business loan shouldn’t be tough. If your business’s credit history is excellent, then it shouldn’t be a problem.

But too many negative items on your personal credit history may damage your score. A low personal credit score is something a lender will notice and consider as a risk.

Your personal credit score reflects how you manage your personal credit liabilities. But some may argue that your personal credit score has nothing to do with how your business operates its business credit liabilities.

As a business owner, understand how your credit score is calculated, and how it’s used when you apply for a credit. And understand what you should do to improve it.

How is a Personal Credit Score Calculated?

The Federal Government improved credit reporting quality with the Fair Credit Reporting Act in 1970.

The consumer credit bureaus collect information from a consumer’s credit profiles to create FICO scores. Experian, Transunion, and Equifax are the three largest credit bureaus. These three major credit bureaus maintain the same basic formula to rate your credit. A personal credit score ranges from 300 to 850 and is rarely identical.

They calculate your FICO score using this basic, widely used formula:

Payment History (35%)

Late payments, judgments, and bankruptcies are problematic. So are debt settlements, repossessions, charge-offs, and liens in your credit report. They will lower your personal credit score.

Debt Owed (30%)

Your personal credit score also depends on your debt-to-credit limit ratio. And it depends on the number of credit accounts, the total amount of credit balances, and the amount paid off on installment loans.

Credit History (15%)

Your credit history plays an integral part in building your credit score. The average age of the accounts and the length of your oldest credit account are the two most important criteria. The longer (or older) the file is, the better. This is because the score tries to forecast future creditworthiness based on past credit history.

Credit Types (10%)

Having different types of credit shows your ability to handle many credit accounts. These types include revolving, installment, and mortgage credit. It will definitely have a positive impact on your credit score.

New Credit Accounts (10%)

Each new “hard” inquiry on your credit report may have an adverse effect and may lower your score by 10%. Per Experian, these inquiries may stay on your report for a few years. But they  will have no impact on your credit score after the initial year.

How Does This Information Build Your Credit Score?

Credit bureaus collect personal information like your name, date of birth, location, occupation, and more. They’ll also prepare a list of information that the creditors provide. Other information, like judgments or bankruptcy, will appear on your credit reports. It becomes part of your personal credit score. When you apply for new credit, your creditor will see all that info in your credit report and check your score.

If you find any inaccurate data reported, the credit bureaus have procedures in place to correct verifiable mistakes. Amendments to the Fair Credit Reporting Act in 1996 allow you to put a 100-word statement on any report that includes an item you dispute.

A range of factors can drive a bad credit score, including a divorce, severe illness, or loss of employment. This allows you to ensure that potential creditors are aware of the information.

Here’s what a potential creditor sees when they look at your score:

800-850 (Exceptional)

You should expect lenders to treat you like a king! With a credit score above 800, you can choose the best credit alternatives for your needs, and the best interest rates, from any lender you choose..

740-799 (Very Good)

If you have a credit score inside this range, lenders will treat you as a low-risk borrower. You can get a loan from almost any big lender with affordable rates. With this credit score, you can choose the best business loan that fits your business needs.

670-739 (Good)

This is a good score, and many people in the United States fall into this category. With this score, a borrower can hope to have more choices and approvals from various lenders.

580-669 (Fair)

This is a score that indicates a significant level of risk. A small business loan is feasible, but the interest rates will often be higher. If your score is in this range, you will have fewer possibilities than those with a higher level.

Most conventional lenders will not consider borrowers in this group for a small business loan. A personal credit score of 660 is the lowest that the SBA will typically consider.

300-579 (Very Poor)

Borrowers with this credit score can access some credit. But it’s considered a high-risk credit score. So there will likely be fewer possibilities and higher interest rates. If your score falls in this range and you want to get a business loan, consider offering some collateral.

How To Improve Your Personal Credit Score?

There is no simple solution to fix your personal credit score issues. But that doesn’t imply you can’t increase your score with time and effort. Here are six strategies to improve your personal credit score:

Analyze Your Score

You are entitled to get a free credit report once a year from annualcreditreport.com. You can get your credit report as many times as you want from all three major credit reporting agencies. These bureaus provide credit monitoring services for an affordable fee. Get your report from them and analyze it properly.

Make Good Use of Credit

This may sound oversimplified, but it’s critical. Resist the urge to use all your credit limits all the time. This is so even if you pay off the total outstanding debt balance every month through credit card debt consolidation. Using all the available credit further can damage your credit score.

Keep credit usage to roughly 15% of your available credit limit to increase your credit score.

Make Your Payments On Time

This is most likely the best and most successful strategy to improve your score. How fast you make payments and satisfy your liabilities makes up 35% of your score. A single late payment can significantly reduce your credit score.

Do Not Apply for Excess Credit

Applying for unnecessary credit reduces your credit score. So if you’re attempting to raise your score, it’s not a good idea.

Don’t Transfer Balances Too Often

Transferring balances from one credit card to another does not affect your credit score. But, it’s generally known as a wrong financial move that could harm your personal credit. Frequently transferring balances can put a bad impression on your future creditors.

Have Patience and Keep Trying

Improving your credit score requires strong determination and hard work. Your constant effort over six months or even a year can make a significant difference. But missing a payment or two will almost certainly lower your credit score fast.

About the Author: 

Lyle Solomon has considerable litigation experience. He has substantial hands-on knowledge and expertise in legal analysis and writing. Since 2003, he has been a member of the State Bar of California. In 1998, he graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California. He now serves as a principal attorney for the Oak View Law Group in California.

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Why do Lenders Prefer Using a Personal Credit Score to Approve a Business Loan?

Your Personal Credit Score Can Make a Difference When You Apply for a Business Loan If you’re a small business owner, don’t assume your business credit is separate from your personal. If you apply for a loan, lenders will consider it on your personal credit, not your business credit. Your business credit score is considered … Continue reading Why do Lenders Prefer Using a Personal Credit Score to Approve a Business Loan?

Why do Lenders Prefer Using a Personal Credit Score to Approve a Business Loan?

Your Personal Credit Score Can Make a Difference When You Apply for a Business Loan

If you’re a small business owner, don’t assume your business credit is separate from your personal. If you apply for a loan, lenders will consider it on your personal credit, not your business credit. Your business credit score is considered on its own only if your company generates millions in annual income. Otherwise, assume that your personal credit score will matter.

Solid personal credit is a necessity.  The need to build and maintain it never goes away for most small company owners.

Some lenders (like banks) place more importance on personal scores. This is for checking business loan applications.

To establish your business’ creditworthiness, most lenders first analyze your personal credit score. This happens with organizations in operation for only a few years. It also happens with businesses seeking their first business loan.

So, small business owners must focus on creating a solid business credit profile. This is along with building a good personal credit score.

What is the Difference Between Business Credit Score and Personal Credit Score?

Here are the main variations between company personal credit scores:

  •       Business credit reports use Employer Identification Numbers (EINs). Personal credit reports use Social Security numbers (SSNs).
  •       The ranges of personal and business credit scores are very different. Business scores tend to vary from 0 to 100. The range of personal credit scores is 300 to 850.
  •     Experian manages both business and personal credit. They use separate databases and departments if you have both kinds of credit.
  •       You can freeze or lock personal credit reports. But business credit reports cannot be locked or go under security freeze.
  •       Different rules apply to data used in business and personal credit reports.
  •       Anyone can examine your business scores (they must buy the report and scores). But only you and others who have your authorization can access your personal scores.

Demolish your funding problems with 27 killer ways to get cash for your business.

When do Lenders Consider a Personal Credit Score for Approving Business Loans?

When reviewing creditworthiness for a business loan, most lenders  check personal credit history.

But some lenders will give your personal credit score less weight than others. Lenders may pay less attention to a poor personal credit score if you already have a track record of solid business credit.

Your personal credit will matter more for a business loan when any (or all) of the following are true:

a. If You’re Seeking a Loan from a Bank or Other Conventional Lender

You should assume banks have strict lending rules and often aren’t too flexible. But private lenders offer financial help. It’s in the form of business loans with low credit requirements. They provide funds considering a business owners’ personal score. This is even if the business score is low. Here, conventional lenders may check personal credit scores to offer you a business loan with flexible terms.

b. If Your Business is a Startup or Small in Nature

If your business score does not have enough info for lenders to check credibility, they will place a higher value on personal scores.

This can be the case with sole proprietorships or small businesses with few employees. Here, it may be hard for a conventional lender to distinguish between your business credit report and personal credit reports.

c. Your Personal Credit Score is Relatively Low

Even if you have a few old negative entries on your personal credit report, getting a business loan shouldn’t be tough. If your business’s credit history is excellent, then it shouldn’t be a problem.

But too many negative items on your personal credit history may damage your score. A low personal credit score is something a lender will notice and consider as a risk.

Your personal credit score reflects how you manage your personal credit liabilities. But some may argue that your personal credit score has nothing to do with how your business operates its business credit liabilities.

As a business owner, understand how your credit score is calculated, and how it’s used when you apply for a credit. And understand what you should do to improve it.

Demolish your funding problems with 27 killer ways to get cash for your business.

How is a Personal Credit Score Calculated?

The Federal Government improved credit reporting quality with the Fair Credit Reporting Act in 1970.

The consumer credit bureaus collect information from a consumer’s credit profiles to create FICO scores. Experian, Transunion, and Equifax are the three largest credit bureaus. These three major credit bureaus maintain the same basic formula to rate your credit. A personal credit score ranges from 300 to 850 and is rarely identical.

They calculate your FICO score using this basic, widely used formula:

Payment History (35%)

Late payments, judgments, and bankruptcies are problematic. So are debt settlements, repossessions, charge-offs, and liens in your credit report. They will lower your personal credit score.

Debt Owed (30%)

Your personal credit score also depends on your debt-to-credit limit ratio. And it depends on the number of credit accounts, the total amount of credit balances, and the amount paid off on installment loans.

Credit History (15%)

Your credit history plays an integral part in building your credit score. The average age of the accounts and the length of your oldest credit account are the two most important criteria. The longer (or older) the file is, the better. This is because the score tries to forecast future creditworthiness based on past credit history.

Credit Types (10%)

Having different types of credit shows your ability to handle many credit accounts. These types include revolving, installment, and mortgage credit. It will definitely have a positive impact on your credit score.

New Credit Accounts (10%)

Each new “hard” inquiry on your credit report may have an adverse effect and may lower your score by 10%. Per Experian, these inquiries may stay on your report for a few years. But they  will have no impact on your credit score after the initial year.

How Does This Information Build Your Credit Score?

Credit bureaus collect personal information like your name, date of birth, location, occupation, and more. They’ll also prepare a list of information that the creditors provide. Other information, like judgments or bankruptcy, will appear on your credit reports. It becomes part of your personal credit score. When you apply for new credit, your creditor will see all that info in your credit report and check your score.

If you find any inaccurate data reported, the credit bureaus have procedures in place to correct verifiable mistakes. Amendments to the Fair Credit Reporting Act in 1996 allow you to put a 100-word statement on any report that includes an item you dispute.

A range of factors can drive a bad credit score, including a divorce, severe illness, or loss of employment. This allows you to ensure that potential creditors are aware of the information.

Here’s what a potential creditor sees when they look at your score:

800-850 (Exceptional)

You should expect lenders to treat you like a king! With a credit score above 800, you can choose the best credit alternatives for your needs, and the best interest rates, from any lender you choose..

740-799 (Very Good)

If you have a credit score inside this range, lenders will treat you as a low-risk borrower. You can get a loan from almost any big lender with affordable rates. With this credit score, you can choose the best business loan that fits your business needs.

670-739 (Good)

This is a good score, and many people in the United States fall into this category. With this score, a borrower can hope to have more choices and approvals from various lenders.

580-669 (Fair)

This is a score that indicates a significant level of risk. A small business loan is feasible, but the interest rates will often be higher. If your score is in this range, you will have fewer possibilities than those with a higher level.

Most conventional lenders will not consider borrowers in this group for a small business loan. A personal credit score of 660 is the lowest that the SBA will typically consider.

300-579 (Very Poor)

Borrowers with this credit score can access some credit. But it’s considered a high-risk credit score. So there will likely be fewer possibilities and higher interest rates. If your score falls in this range and you want to get a business loan, consider offering some collateral.

Demolish your funding problems with 27 killer ways to get cash for your business.

How To Improve Your Personal Credit Score?

There is no simple solution to fix your personal credit score issues. But that doesn’t imply you can’t increase your score with time and effort. Here are six strategies to improve your personal credit score:

Analyze Your Score

You are entitled to get a free credit report once a year from annualcreditreport.com. You can get your credit report as many times as you want from all three major credit reporting agencies. These bureaus provide credit monitoring services for an affordable fee. Get your report from them and analyze it properly.

Make Good Use of Credit

This may sound oversimplified, but it’s critical. Resist the urge to use all your credit limits all the time. This is so even if you pay off the total outstanding debt balance every month through credit card debt consolidation. Using all the available credit further can damage your credit score.

Keep credit usage to roughly 15% of your available credit limit to increase your credit score.

Make Your Payments On Time

This is most likely the best and most successful strategy to improve your score. How fast you make payments and satisfy your liabilities makes up 35% of your score. A single late payment can significantly reduce your credit score.

Do Not Apply for Excess Credit

Applying for unnecessary credit reduces your credit score. So if you’re attempting to raise your score, it’s not a good idea.

Don’t Transfer Balances Too Often

Transferring balances from one credit card to another does not affect your credit score. But, it’s generally known as a wrong financial move that could harm your personal credit. Frequently transferring balances can put a bad impression on your future creditors.

Have Patience and Keep Trying

Improving your credit score requires strong determination and hard work. Your constant effort over six months or even a year can make a significant difference. But missing a payment or two will almost certainly lower your credit score fast.

About the Author: 

Personal Credit Score Credit SuiteLyle Solomon has considerable litigation experience. He has substantial hands-on knowledge and expertise in legal analysis and writing. Since 2003, he has been a member of the State Bar of California. In 1998, he graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California. He now serves as a principal attorney for the Oak View Law Group in California.

The post Why do Lenders Prefer Using a Personal Credit Score to Approve a Business Loan? appeared first on Credit Suite.

5 Alternative Funding Secrets Traditional Lenders Don’t Want You to Know

Traditional lenders are large banks and small community banks.  They offer term loans based on your personal credit score.  The problem is, if you do not meet their requirements, you can’t get a loan with them.  Many small businesses do not meet the minimum credit score requirements to get terms they can afford, or sometimes any funding at all.  

This is even true of SBA loans. They are typically processed through traditional lenders. If you cannot get one, you need to find SBA loan alternatives. This is where alternative funding options enter the scene. 

Here’s What Traditional Lenders Don’t Want You to Know About Alternative Funding

There are plenty of alternative business financing options available. There are alternative business lenders that offer term loans and lines of credit similar to what traditional banks offer.  However, they determine creditworthiness based factors other than credit score. This can make them a good option for those that do not have good credit. 

Some of them even offer alternative types of financing that many business owners have not heard of.  Due to this, most business owners can find options that will work for them. 

Find out why so many companies use our proven methods to get business loans.

1. Alternative Financing Options May Consider More than Just Credit Score

This is the crux of why many businesses do not qualify for financing at traditional banks. The credit score is the main indicator of creditworthiness. However, with alternative funding, often the lenders understand that a bad credit score does not necessarily mean that a borrower is a bad credit risk. They take other factors into consideration. 

Fundbox 

Fundbox  is one such lender. At Fundbox, they consider business merit as opposed to personal credit.  For application purposes, they will do a soft pull on your personal credit. This will not affect your credit score.  When you make your first draw, they will do a one time hard pull that could affect your score, but the minimum is only 550.

2. Many Alternative Lenders for Small business Use Innovative Technology

There is really no reason for a lender to not use the technology available today to help them make better lending decisions. Some lenders believe they could miss out on some good borrowers if they look only at credit scores.  They use technology to help them do better. 

Upstart

Upstart uses a completely innovative platform for loans.  They choose to use a combination of artificial intelligence (AI) and machine learning to gather alternative data for use in making credit decisions.

This may include such things as mobile phone bills, rent, deposits, withdrawals, and even other information less directly tied to finances.  The software they use learns and improves on its own. You can use their online quote tool to play with different amounts and terms to see the various interest rate possibilities.  

3. Some Alternative Funding Options Can Help You Build Business Credit

A separate business credit profile can help you get more business funding, while at the same time protecting your personal credit from your business debt. However, there are not a lot of creditors that will report payments to you business credit profile. That makes it hard to build a score. Some alternative lenders will report, which is a huge bonus. 

Grameen 

Grameen offers microloans to women business owners.  The loan amounts range from $2,000 to $15,000, and they also offer financial training and support.  In addition, they do report payments are reported to Equifax and Experian, meaning these loans help borrowers build their credit.  

4. Alternative Lenders Often Show Preference to Women, Minorities, Veterans, and Others 

If you fall into a specific category as a business owner, you may have some special options available to you. Like Grameen, there are other lenders that focus on helping specific groups. 

Streetshares 

 Streetshares  offers a variety of financing and investment products with fast application processes and funds deposited almost immediately. Lending products never have a prepay penalty, and the credit check is a soft one.  There is never any impact on your credit score for applying.

They lend to various types of businesses and business owners.  Still, their early mission was to help veteran business owners, and they remain true to that mission today.

Find out why so many companies use our proven methods to get business loans.

Accion 

Accion is a nonprofit lending network dedicated to helping small businesses.  They offer small business loans, some grant opportunities, and other resources designed to help both startups and established small businesses grow and thrive. 

They lend to small business owners in general, from all backgrounds and most industries. However, they specialize in underserved populations like minorities. 

5. Some Alternative Business Financing Options Offer 0% Interest

This is a secret that almost no one knows.  It is actually possible to get 0% financing on alternative funding and it is not a scam. 

Kiva 

Kiva is an online lender that is a little different. The interest rate is 0%.  That means even though you have to pay it back, it is absolutely free money. They do not check credit at all. Here’s the catch. You have to get at least 5 family members or friends to give to the cause.Furthermore, you have to pitch in a $25 loan to another business on the platform. 

Credit Line Hybrid

This is a form of alternative business financing rather than a specific alternative lender.  The Credit Line Hybrid is a flexible product that can serve your business needs in many ways. First, you can fund your business without putting up collateral.  Then, you only pay back what you use.  

Your personal credit score needs to be at least 680.  In addition, you can’t have any liens, judgments, bankruptcies or late payments. Also, in the past 6 months you should have less than 6 credit inquiries, and you should have less than a 45% balance on all business and personal credit cards.  There are some other requirements as well.

However, If you do not meet all of the requirements you can take on a credit partner that does meet each of these requirements.  Many business owners work with a friend or relative to fund their business.  If a relative or a friend meets all of these requirements, they can partner with you to allow you to tap into their credit to access funding. 

Other Types of Alternative Funding for Small Business

In addition to the Credit Line Hybrid program, here are some other alternative funding options that Credit Suite can help you with. 

Retirement Account Financing

This Credit Suite program offers a unique and powerful way for a new or existing business to leverage assets that are in a 401(k) plan or IRA. 

In as little as 3 weeks you can invest a portion of these funds into your own business. Then, you not only have more control over the performance of your retirement plan assets, but you also have the working capital you need.

It has to be a plan that you are no longer contributing to, and you can no longer work for the employer that it was opened with.  Lastly, it has to have at least a $35,000 balance. 

Business Revenue Lending

If a business has revenue of at least $120,000 per year, it may qualify for this type of funding. Lenders verify revenue using bank statements.  There can be no recent bankruptcies, but the minimum credit score to qualify is 500.  

The business must also be in operation for a year or more, and it must do over 5 small transactions each month to get business revenue financing. 

Find out why so many companies use our proven methods to get business loans.

AR Financing

Outstanding account receivables can be a source of funding for your business.You can get as much as 80% of receivables advanced.  Not only that, but you can have the funds in less than 24 hours. You get the rest of the accounts receivable amount once you collect full payment for the invoice. Closing takes 2 weeks or less. 

Receivables should be with the government or another business. 

Merchant Cash Advance

A business that accepts credit card payments and has at least a 500 FICO can get up to $750,000 in a merchant cash advance. There must be $100,000 or more per year in credit card sales, and typical approval equals one month’s credit card financing volume. 

Wait! Don’t Apply With an Alternative Lender Before You Read This

Nothing is perfect. That includes financing alternatives for small businesses. Even top alternative lending companies sometimes get a bad rap because of the prevalence of predatory lenders in the industry. Do your research and make sure you are working with a company that is trustworthy. 

The best way to do this is to work with a business credit expert like the ones at Credit Suite.  This is someone who has a relationship with many reputable lenders and can help not only find the best lender for you, but also the best funding options for your business right now. They specialize in options like the Credit LIne Hybrid, lines of credit, merchant cash advances, accounts receivable Financing and more.

In addition, they can help you analyze your current fundability, and walk you through the process of improving it so that you can qualify for even more funding and better terms in the future.

The post 5 Alternative Funding Secrets Traditional Lenders Don’t Want You to Know appeared first on Credit Suite.

Improve Your Chances of Getting a Loan with Small Business Lenders

Small Business Lenders Have the Money You Want

Can you improve your chances of getting a loan from small business lenders?

Small Business Lenders, Business Loans, and Funding

Of course you know your business needs money. But business lending doesn’t just come from banks. Still, working to make your business more attractive to lending institutions isn’t just an end unto itself. It will also help your company also become more attractive to nontraditional lenders. It may even help make your business more attractive to prospects. There are factors which are within your control and you can help your business right now.

Start Making it Easier to Get Money from Small Business Lenders

Once you understand what banks and lenders are looking for, you can address their concerns directly. Many of these are actions you only need to take one time, and many of them will also help you to convince prospects to buy from you, thereby helping you recoup any incurred costs.

Working to More Easily Get Money from Small Business Lenders: It All Starts with Fundability

Fundability is the ability of your business to get funding. When lenders consider funding your business, does it appear to them to be a good idea to make the loan? What do they look at to make that determination? Fundability means recognizing what’s important to lenders, and then giving them what they want.

How Does a Business Become Fundable?

You probably already know that a great business credit score is important. But many of the aspects necessary for a strong business credit score work for fundability as well. A potential creditor or lender needs to see your business is legitimate and profitable. Many loan applications get denials due to fraud concerns. Others, simply because something didn’t match up and threw up a red flag.

Your Business Setup

A business must be set up to appear to be a fundable entity separate from you, the owner. The first step is to ensure your business has its own phone number and address. That doesn’t mean you must get a separate phone line, or even a separate location. You can still run your business from your house or on your computer.

Business Phone Numbers

You can get a business phone number that will work over the internet instead of phone lines. This is called a VoIP (voice over internet protocol). The phone number will forward to any phone you want it too so you can use your personal cell phone or landline if you want. Whenever someone calls your business number it will ring straight to you.

Virtual Offices

Use a virtual office for a business address. A virtual office is a business that offers a physical address for a fee. They sometimes they even offer mail service and live receptionist services. There are some that offer meeting spaces for those times you may need to meet a client or customer in person.

But not every vendor will accept a virtual address.

Business Website and Email

A business website can affect your ability to get funding. But a poorly put together website that appears unprofessional will not help you with customers or potential lenders. Spend the time and money necessary to ensure your website is professionally designed and works well.

Along these same lines, your business needs a dedicated business email address. Make sure it has the same URL as your website. Don’t use a free service like Yahoo or Gmail.

Demolish your funding problems with 27 killer ways to get cash for your business.

Improve Your Chances of Getting Money from Small Business Lenders with Business Information and Consistency

All your business information should be the same everywhere you use it. But when you start changing things up like adding a business phone number and address or incorporating, you may find that some things slip through the cracks. This is a problem because many loan applications fail each year due to fraud concerns simply because things do not match up.

Consider all the places where this information could be.

Credit providers won’t stop to consider all the ways you could list your business. If you write Incorporated in one place, and Inc. in another, it can be enough to trigger a denial. Consistent and congruent information makes it fast and easy for credit providers and lenders to find your business and its payment history.

Fix Inconsistent Information by Getting Organized

Consider all the places where your business has a listing. It’s your website, credit applications, even places like Yelp and Google Reviews. Take the time to keep records of all of these places, so Google your business often. Claim your profile on review sites to better control how your business name, address, and other particulars are presented. Copy and paste your information. Don’t chance an error with typing it out. This also means updating info whenever it changes.

Get an EIN

An EIN is an identifying number for your business that works like how your SSN works for you personally. Many sole proprietorships and partnership use their SSN for their business. But it can cause your personal and business credit to get mixed up. When you are looking to increase fundability, you need to apply for and use an EIN. Get one for free from the IRS.

Demolish your funding problems with 27 killer ways to get cash for your business.

Incorporate Your Business

A lot of businesses start off as sole proprietorships. But there’s no separation between the owner and the business with this setup. Partnerships are another entity where the ownership and the business are more intimately connected. With either entity, any other efforts at separating business and personal credit could be all for naught.

Why Incorporate?

A corporate structure truly separates business and personal credit and finances. This is because a corporation is considered to be its own entity. Should you choose a C-corporation, an S-corporation, or a limited liability corporation? That’s up to you to decide. We highly recommend working with a corporate lawyer or an accountant to determine what’s best for your particular situation.

Why Should You Incorporate Quickly?

When you incorporate, you become a new entity. Hence if you haven’t incorporated ASAP, you lose the time in business that you have and must start over. You also lose any positive payment history you may have accumulated.

Hence you must incorporate as soon as possible. It’s not just necessary for fundability and for building business credit. Time in business is also vital. The longer you have been in business the more fundable you appear. That starts on the date of incorporation. This is regardless of when you actually started doing business.

Improve Your Chances of Getting Funding from Small Business Lenders with a Separate Business Bank Account

There are business owners who pay for business expenses with personal credit cards and checks. But a business’s credit file is only supposed to reflect the financial performance of the company itself. Using personal payment methods can muddy the waters. Resist the temptation to pay for any business expenses with personal credit or checks.

Separate Your Business and Personal Finances

Your business must stand or fall on its own financially. Once you get credit from starter vendors or any other business or lender, use it on your business, and stop floating what are essentially interest-free loans to your business.

Get a Merchant Account

Another way to assure your finances get and stay separate is separate bank accounts. Often, a starter vendor will want for your business to have its own bank account anyway. While you’re at it, open a merchant account so you can take credit cards from your customers. Customers will spend more if they can pay with plastic.

Improve Your Chances with Small Business Lenders and Get all Required Licenses

Fundability means being a legitimate business. For a business to be legitimate it must have all of the necessary licenses it needs to run. If it doesn’t, red flags will fly up all over the place. Do  research to ensure you have all the licenses necessary to legitimately run your business at the federal, state, and local levels. Being properly licensed can help assure skittish prospects that you and your business are legit.

Get a D-U-N-S Number

In addition to the EIN, there are identifying numbers that go along with your business credit reports. Some are assigned by the agency, like the Experian BIN. Dun & Bradstreet is the largest and most commonly used business credit reporting agency. Every credit file in their database has a D-U-N-S number. To get a D-U-N-S number, you must apply for one through the D&B website.

Demolish your funding problems with 27 killer ways to get cash for your business.

Business Credit Monitoring

The key to keeping records consistent is to monitor your reports frequently. Monitoring your credit means you know what’s going on with it. You can pounce on errors quickly. Yes, the business CRAs make them, but they are all committed to accuracy and want to correct those mistakes ASAP.

When it comes to business credit reports, you can monitor through the reporting agencies directly. But that’s expensive! Or you can save 90% and monitor through Credit Suite.

Improve Your Chances with Small Business Lenders with a Good Business Credit History

Your credit history has a lot to do with your credit score. It is a huge factor in the fundability of your business. The more accounts you have reporting on-time payments, the stronger your credit score will be.

Your credit history consists of a number of things including:

  • How many accounts are reporting payments?
  • How long have you had each account?
  • What type of accounts are they?
  • How much credit are you using on each account versus how much is available?
  • Are you making your payments on these accounts consistently on time?

Personal credit scores come from several metrics. But business credit mainly depends on one thing, how early or late you pay your credit bills. Paying late will damage your business credit scores at all three of the major CRAs.

Improving Your Business’s Payment History

Here are a few suggestions on how to improve your company’s payment history:

  • Set up reminders to pay – your phone or your business calendar are both fine
  • Set aside money for your credit bills as a part of your budget so you’re not caught short
  • Shop around for better deals and spend less if you can
  • Repurpose older equipment or the like to avoid spending in the first place

Improve Your Chances with Small Business Lenders by Building Business Credit

Business credit is credit in the name of the business, not its owner(s). It’s a measure of how well your business (not you) pays its bills. Properly created business credit separates personal and business credit completely. So if your business defaults on payments or goes bankrupt, it protects your personal assets.

Good business credit is the way to qualify for funding without good personal credit, collateral, cash, or a guarantor. Here are some tips on building business credit to improve your chances for financing from small business lenders.

Buy from Vendors and Other Credit Providers Which Report

While many vendors and credit providers don’t report all payment experiences, they have no problem reporting late and missing payments. So, seek out and mainly (if not 100%) work with vendors which report. These are called starter vendors. Their requirements change all the time. Fortunately, we know which vendors report, and we keep up with their ever-changing requirements.

Spread Out Your Credit Applications Over Time

Asking for too many lines of credit at once signals that you’re desperate and could be overextending yourself. Building a successful business takes time. In the same way, so does building a good business credit profile. As a result, spread your applications for additional lines of credit over time.

Applying for a lot of credit at once also means you’ll have a number of brand-new accounts, which will bring the average age down. Not using your credit can result in credit providers closing inactive accounts. This, too, brings the average age down.

Use Your Credit

Business credit isn’t going to be built if you get cards and then forget about them and never use them. The business credit reporting agencies are calculating your scores based on the credit you use. Using your credit, and paying on time, is positive fodder from business credit scores and reports. You can’t control the passage of time, but you can control card usage and not apply for every credit card you see all at once.

Finally, Apply for the Right Loan

Do you need a traditional loan or a line of credit? Would a working capital loan or expansion loan work best for your needs?  Choosing the right product to apply for can make all the difference. Don’t waste yours and the lender’s time by not considering the best loan product to apply for.

Improve Your Chances for Approvals from Small Business Lenders: Some Takeaways

There are steps you can take to make it more likely your business will get a loan. These steps may also help your business become more appealing to prospects. They also help with building business credit. And applying for the right loan product will also help improve your chances of getting a business loan from small business lenders.

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Can the Best Hard Money Lenders Make this Form of Business Funding Worthwhile?

What are the Best Hard Money Lenders, and is Hard Money Lending Worth It?

Even the best hard money lenders can be problematic. Read on to find out more.

Hard Money Lenders and Hard Money Funding

If you’re looking to flip houses, you may have heard these terms. But what is hard money funding, and can it work for you?

Hard Money Funding: What Is It?

Hard money loans are asset-based loans that can fund any real estate investment. These loans are based on the property value. There is no need for background checks or credit scores. Some lenders even offer hard money loans based on the after-repair value of a building. Hard money lenders make finance house flipping with their asset-based loans.

Hard Money Funding: Positives

Since it’s based on the real estate value (before or after repair), a borrower with poor credit can get these loans. Hard money loans are fast, sometimes even within 24 hours of application.

Hard Money Funding: Negatives

Interest rates can be very high, as in three times that of banks. Terms can be very short, as in 6 – 18 months, versus a standard 30-year mortgage.

Plus a hard money lender wants you to have some skin in the game, typically at least 10% of your own money. That way the lender knows their interests are protected, because you don’t want to lose your money. Hard money loans also tend to not be subject to consumer lending regulations. So, caveat emptor.

How is Hard Money Funding Used?

If you go ahead with hard money funding, its use is virtually always for real estate projects. These are either house flipping, or real estate investments.

Fix and Flip Loans

House flipping consists of buying a property, repairing it, and selling it for a profit. Fix and Flip loans are one of the most common types of hard money loans. For house flippers, having fast funds for their flips is a necessity. These hard money loans are made for house flippers looking to flip a property by making some upgrades and selling it for a profit.

Fix and flip loans are short term loans (6 – 12 months) covering almost all the house flipping costs. Hard money funding is not only used to cover the property value of the building. It also pays for a portion of the repairs needed to flip. For example, some hard money lenders even offer to base the loan on the after-repair value of the flip. This gives the house flipper more funds to flip with from fix and flip lenders.

Demolish your funding problems with 27 killer ways to get cash for your business.

Long Term Rentals

House flippers don’t always sell the buildings they repair. Many make passive income by renting their properties. For those looking to acquire and upgrade large rentals, hard money funding is essential. This type of flipper financing lends on the underlying asset of the property.

To make the most of long-term rentals, upgrading and repairing the property is necessary. Here, hard money loans are based on the after-repair value of the property. House flipper funding for large one-time repairs to a property helps improve the property for higher rents. It also helps to offset the cost of the repairs.

Vacation Rental Flips

With alternative rental sites like Airbnb becoming more and more popular, house flippers are looking into flipping vacation rentals with hard money loan lenders. Vacation rentals can turn over large profits but many will require large repairs to get more bookings. These repairs and modern upgrades are necessary to ensure solid bookings throughout the year. Using hard money funding to make upgrades is faster than using a traditional lender. Like all flipper financing, the loan is based on property value and not the applicant’s credit history.

Home Rehabs

Paying cash for a property is a great way to lower costs for a property. But it leaves gaps for funding repairs. Home rehabs are ideal for one-time large repairs. This can be for a flip that they bought in cash, a rental, or anything in between.

Often when looking to charge more in rent, house flippers will add amenities and upgrades to their properties. Home rehabs can also be for investors looking to sell off property and maximize their return by adding a few upgrades. With only using flipper financing for the repairs, the house flipper can save money on down payments. This means a larger profit margin via hard money lending. Hard money funding can be a way to make sure projects finish on time.

Hard Money and Bridge Loans

Sometimes house flippers need to refinance properties to prevent foreclosures, get better rates, or get more cash to finish their flip. Bridge loans, a special type of flipper funding, can help flippers complete their projects to save them from foreclosure. Bridge loans work to ‘bridge’ cash gaps for a property. This cash is used to finish the flip, sell the property, or prevent foreclosure.

Hard Money, Bridge Loans, and Foreclosures

Sometimes, house flippers will use hard money loans to buy foreclosed properties. This makes them a great option for someone looking to pounce on a great deal in the fast-moving real estate market. Sometimes bridge loans fund short sale loans, or even the acquisition of off-market properties. They can help you get a hard money loan for auction property.

Hard Money and Refinancing

Reasons for refinancing include to prevent foreclosure, fill in cash flow, or make sure a project is done on time. Hard money funding can help with all of these issues. This type of funding works for house flippers who need a one-time influx of capital.

Hard Money Funding: Beyond the Flip

Hard money funding can be used for more than flips. It can also be used for commercial real estate financing. This is for commercial properties such as retail stores. Note: hard money loan rates will vary.

Demolish your funding problems with 27 killer ways to get cash for your business.

Options Beyond Hard Money Lenders and Funding

Flippers and commercial real estate investors have choices beyond hard money loans. They can try a home equity loan for flipping, or an investment property line of credit for real estate investments. Another option is a business line of credit.

Yet another option is a cash out refinance loan, or a permanent bank loan/online mortgage. Rates and terms will vary. But for great rates, have you checked out what Credit Suite has to offer?

Check Out Commercial Real Estate Financing from Credit Suite and Connect to Hard Money Lenders

Amounts range from $100,000 – $20,000,000. This financing can be used for refinancing a property, even if you are doing a cash-out refinance. Maximum LTV 70%.

Loan-to-values range from 55 – 65%, depending on the purpose of the loan. Plus your clients can also get SBA loans. Renovations get loan to value of up to 60%.

Credit Suite has funding programs available including conventional property financing, money for investment properties and hard money loans, bridge loans and loans for the purchase of commercial real estate.

Commercial Real Estate Financing for All Types of Buildings

Credit Suite offers financing for many different, even unique property types. Get funding for industrial offices (general or medical/dental), light manufacturing buildings, self-storage facilities, and more.

Demolish your funding problems with 27 killer ways to get cash for your business.

Details on Credit Suite’s Commercial Real Estate Financing Program

Approval amounts go up to $20,000,000. Bad credit is accepted. Use the real estate as collateral. You will need to provide bank statements. House reseller financing or a commercial real estate loan can be a big step, let’s take it together.

The Best Hard Money Lenders? The Jury is Still Out on Whether This Form of Funding is the Best Idea

Hard money funding can be a good choice for house flippers and commercial real estate investors who have bad credit or want/need to get money fast. But interest rates can be high, and terms can be short. Plus there is little regulation. Credit Suite can help you get funding for commercial real estate or house flipping, with better rates and terms than you would expect.

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Alternative Lenders: Pros and Cons

There is a time and place for traditional business lenders, otherwise known as banks.  However, they are not always the right option.  Sometimes is takes too long to get funding from a bank. Maybe you do not qualify for a loan from a bank. This can be the case even if you are perfectly capable of repaying your debt.  If business borrowing from a bank isn’t going to work for you, your next option is alternative lenders.  

What Are The Pros and Cons of Using Alternative Lenders?

Alternative lenders are a totally legitimate option.  They are exactly what their name implies, an alternative to traditional banks. However, just like banks, they have both pros and cons. You need to know and understand each when looking for financing alternatives for small businesses. 

What Are the Pros of Alternative Lenders? 

First, with alternative lenders, you typically get your funds much faster. So, if you need fast cash, this could be the way to go. 

Also, the application process is usually faster and easier. Often you can apply online in a matter of minutes. Repayment terms are usually more flexible as well. 

Find out why so many companies use our proven methods to get business loans.

Even better, these lenders will often take more into account that just credit score when it comes to approval. If there is a minimum credit score requirement, it is usually much lower than what traditional lenders require. 

As a result, they have other eligibility requirements.  These may include minimum revenue over a certain period of time, a minimum amount of time in business, minimum average balance in a business bank account, or all three.  Other requirements may apply as well. 

What Are the Cons of Alternative Lenders?

One of the biggest drawbacks of alternative lenders is that their interest rates are almost always higher, though rates vary based on perceived risk.  

Also, the industry is a breeding ground for scammers.  It’s important to know how to recognize predatory lending practices to avoid being taken advantage of if you are looking for an alternative lender.

Best Options for Alternative Lending: Top Alternative Lending Companies

Despite the risk of running into a predatory lender when it comes to alternative loans for businesses, there are some good companies out there. To give you a start, here are some alternative business financing options that we know and trust. 

Fundbox 

Fundbox makes it easier to get approval for financing.  The minimum credit score is 500.  Comparatively, this is much lower than with other lenders.  Here are some things you need to know about Fundbox.  First, they consider business merit as opposed to personal credit.  For application purposes, they will do a soft pull on your personal credit. This will not affect your credit score.  When you make your first draw, they will do a one time hard pull that could affect your score.  Keep that in mind. 

Kiva 

Kiva is an online lender that is a little different. For example, the interest rate is 0%.  That means even though you have to pay it back, it is absolutely free money. They don’t even check your credit. Still, there is one catch.  You have to get at least 5 family members or friends to give to the cause as well. In addition, you have to pitch in a $25 loan to another business on the platform. 

Accion 

Accion is a nonprofit lending network dedicated to helping small businesses.  They offer small business loans, some grant opportunities, and other resources designed to help both startups and established small businesses grow and thrive. 

Globally they have been working their magic for 55 years across 4 continents.  Tens of millions of entrepreneurs have been helped by them.  They came to the United States in 1991. 

They lend to small business owners in general, from all backgrounds and most industries. However, they specialize in underserved populations like minorities. 

They do not rely as heavily on credit as traditional lenders. Yet, they do require a minimum personal credit score of 575. The one exception is the Community Advantage program which requires a minimum of 525.  

Other restrictions may apply based on a number of factors. 

Streetshares 

 Streetshares  offers a variety of financing and investment products with fast application processes and funds deposited almost immediately. Lending products never have a prepay penalty, and the credit check is a soft one.  There is never any impact on your credit score for applying.

They lend to various types of businesses and business owners.  Still, their early mission was to help veteran business owners, and they remain true to that mission today.

Find out why so many companies use our proven methods to get business loans.

Credit Line Hybrid

This is alternative business financing rather than a specific alternative lender.  The Credit Line Hybrid is a unique and powerful product that can serve your business needs in many ways. It allows you to fund your business without putting up collateral, and you only pay back what you use.  

Your personal credit score needs to be at least 680.  In addition, you can’t have any liens, judgments, bankruptcies or late payments.  Furthermore, in the past 6 months you should have less than 4 credit inquiries, and you should have less than a 45% balance on all business and personal credit cards.  It’s also preferred that you have established business credit as well as personal credit. 

If you do not meet all of the requirements, it’s okay. You can take on a credit partner that meets each of these requirements.  Many business owners work with a friend or relative to fund their business.  If a relative or a friend meets all of these requirements, they can partner with you to allow you to tap into their credit to access funding. 

What are the Benefits of a Credit Line Hybrid? 

As alternative funding sources go, this is one of the most flexible.  There are many benefits to using a credit line hybrid.  First, it is unsecured, meaning you do not have to have any collateral to put up.  Next, the funding is “no-doc.”  This means you do not have to provide any bank statements or financials.  

Not only that, but typically approval is up to 5x that of the highest credit limit on the personal credit report. Additionally, often you can get interest rates as low as 0% for the first few months.  This allows you to put more money back into your business. 

The process is fast, especially with a qualified expert to walk you through it.  Also, approval for multiple credit cards creates competition.  This makes it easier, and even likely if you handle the credit responsibly, that you can get interest rates lowered and limits raised every few months.

Find out why so many companies use our proven methods to get business loans.

Alternative Lenders Are a Viable Option, But Be Careful

You can’t be too careful when looking for alternative financing methods for your business.  The safest way to ensure you don’t fall prey to a scammer is to work with a business credit expert.  They will not only have relationships with credible lenders, but they will also be able to help you find those with products and requirements that best fit your needs. CreditSuite has business credit experts ready to help.  They  have the skills and expertise necessary to help you navigate the business funding world. They can guide you toward products and lenders that will work best for your needs, and help you improve your fundability in the process. With strong fundability, you can access all types of business financing, alternative or not.

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Private Business Lenders

What are Private Business Lenders and Private Business Funding?

Real estate investing is big money. But not every entrepreneur qualifies for loans from big banks, and other traditional sources. Not to worry, there are private lenders out there, willing to lend money. Private money business loans just might be the solution you’re looking for – from private business lenders.

What are Private Business Lenders?

Private business lenders are generally funded by investors, or by banks, or both. Private lenders are in the business of taking funds from private investors. They make private business purpose loans with those funds.

Investors expect a decent return from their investments, and interest rates from money borrowed from banks is significantly higher, than the banks are being charged for the funds. These factors raise the private lender’s expenses. Those expenses are then passed on to the ultimate borrower. Unlike with angel investing or venture capital, the borrower isn’t giving away a percentage of ownership.

Why Work with Private Business Lenders?

Apart from possibly not qualifying for traditional lending, there are other reasons why it may be better to work with a private lender. Banks are often tougher to deal with than private lenders. Banks are subject to significant state and federal regulations. They must work within governmental and quasi-governmental agency programs, like Fannie Mae, Freddie Mac, the VA, and HUD. These regulations often dictate which businesses a bank can lend to, and what borrower profiles should look like.

Private business lenders, while still subject to state and federal laws, are significantly less regulated. They can be more flexible in the types of loans they make, and who their customers are.

Hence is it generally easier to get approval from a private lender, versus a traditional bank. Private lenders can customize each loan based on a set of internally set criteria, like credit scores, loan to value ratio, and debt to income levels.

Learn business loan secrets and get money for your business.

Bank Approvals are Different

In contrast, bank approvals are program or computer driven. The lender only has a little discretion. Private lenders tend to take a more common sense approach, to understanding borrower issues and overcoming them.

Banks tend to look at financial histories and credit through easily traceable and documented income sources. This makes it very difficult for self-employed borrowers, for example, to qualify for bank loans.

Private lenders will be more creative, and investigative in qualifying income. They may be willing to overlook background flaws upon explanation. See rehabfinancial.com/real-estate-investment-strategy/financing-real-estate-investments/private-lender-vs-a-bank-mortgage.

Consider Private Lenders and Hard Money LoansPrivate Money for Business Credit Suite

A hard money loan is a type of real estate loan. It is issued by a private lender for non-owner occupied property. Hard money loans are usually short term. They tend to be between six and 36 months. They have a higher interest rate than traditional bank loans.

Let’s look at Hard Money Loan Approvals

You get approval for hard money loans based on the value of the real estate, rather than the creditworthiness of the borrower. These loans are often used because they have an exceptionally fast approval time. They are often closed within two to four weeks.

What is the Difference Between Hard Money Loans and Bank Loans?

The main difference is the lender. Hard money loans are almost always given by a private lender. This is so whether that’s an individual or a private lending company. These loans are used for non-owner occupied real estate. So they aren’t regulated like consumer mortgages. As a result, hard money lenders can charge higher interest rates and fees, and they can get away with terms that wouldn’t be allowed with traditional loans.

The Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) don’t often apply to commercial mortgages. But there are still regulations traditional financial institutions must follow. Federally insured banks are still regulated by the FDIC. Credit unions are regulated by the National Credit Union Administration (NCUA). But hard money lenders don’t have any regulations placed on them.

What Sorts of Real Estate is Covered by Private Money Financing?

A hard money lender may loan on any type of non-owner occupied real estate. This includes all sorts of real estate investments. But they’re often looking for situations with a fairly quick exit strategy, so they know they’ll get paid by the end of the loan term.

Let’s look at Private Small Business Loans for Fix and Flip Properties

Hard money loans are very common with fix and flip properties. In fact, many lenders will even finance the repairs. These types of deals are ideal for the lender because flips tend to be completed within six months.

If the lender is also financing the repairs, they will estimate the cost of the repairs, and issue draws as the borrower needs them to pay for the work being done. This ensures the funds are being used for the repairs. It also limits the lender’s exposure, since they’re only giving out a small amount of money at a time.

Learn business loan secrets and get money for your business.

Check out Hard Money for Repairs

Many hard money lenders prefer to finance the repairs. This way, they know the project will be completed. If the borrower gets through the demolition and runs out of money, the value may become less than the purchase price. By financing the project, they don’t have to worry about the borrower not being able to finish the job due to a lack of funds.

Consider Hard Money for Rentals

Hard money lenders will also provide short-term loans for residential real estate investment properties. The goal here is often to refinance the property in 12 to 36 months, to be able to pay off the hard money loan. Investors may use a hard money loan for a rental property if they need to be able to close the deal quickly, and don’t have the time to go to a bank. Or they may need a private loan if the rental property needs repairs before a bank will finance the deal.

Let’s look at Hard Money for Multifamily Properties

Like loans for rental properties, investors may need capital quickly to close on a multifamily property. This is the case if there’s not enough time to go through the traditional lending process. Private money lending is just plain faster.

An investor may also be buying a multifamily property with little to no tenants that needs a lot of repairs. This type of property would be hard to get financed with a bank, so they may seek out a hard money loan. Investors can get the necessary work done. And they can lease the property before refinancing it with a long term loan.

Consider Hard Money for Commercial Real Estate

A common situation with commercial real estate is an investor having a tenant to lease space to, but no property to put them in. The investor will find a vacant property that the tenant will lease out, but they have to buy the property and get it ready for the tenant first.

A bank may not want to finance a vacant property intended for use as an investment if the borrower doesn’t have the assets to secure the loan. A hard money loan can be useful in this situation to get the deal done. The investors can accomplish the tenant improvements and get the property leased. Once the tenant is in place and paying rent, a bank will be more willing to finance the real estate.

Check out Interest and Fees on Hard Money Loans

The convenience and easy approval with a hard money loan comes at a cost. Lenders will charge higher interest on hard money loans. This is because they are higher risk loans. It is also because these loans are short term.

Longer term loans will earn interest for several years from processing one loan. But the money invested in hard money loans must be reinvested every six to 36 months. There’s added cost and new risks each time that money is invested in a loan. Interest rates for these loans tend to be a few percentage points higher than traditional bank loans.

Learn business loan secrets and get money for your business.

Check out Hard Money Fees

The lender will charge upfront fees to cover the cost of processing the loan, plus any commissions being paid. This also ensures they still earn a profit; in case the borrower pays off the loan before the end of the term.

Common fees for a hard money loan include origination fee, broker fee, application fee, underwriting fee, document prep fee, processing fee, and funding fee. These fees can add up to thousands of dollars.

Consider Credit Checks and Property Values

In general, private lenders are going to be all right with average credit. Their main concern is the value of the property. Plus a lender wants to know the market the property is in. This is due to higher risk. The lender wants to be able to recover their costs in case of foreclosure. See fool.com/millionacres/real-estate-financing/hard-money-loans/5-best-hard-money-lenders.

More Details on Private Small Business Loans and Hard Money Loans

There is a balloon payment at the end of the short term. For fix and flip, the lender knows the borrower can afford the balloon payment. But in the case of a borrower looking to refinance the property by the end of the term, the may not be as willing to lend to someone with bad credit. They will look closer at the borrower’s credit and personal finances in this case. The lender may also require a higher down payment to limit their risk in case the borrower can’t pay the lender off at the end of the term.

Private lenders for business loans will look into a borrower’s experience. For a fix and flip, private business lenders will want borrowers who have completed at least a few other deals. Smaller lenders usually stick to markets they know and states that have a strong real estate market. They often don’t like rural properties and provide a lower loan to value for them.

Private Money Financing: Takeaways

Private money financing is a way for real estate investors and house flippers to get funding. Also called hard money loans, private money financing tends to have fast approvals, but higher interest rates and no regulation to speak of. Experienced flippers in urban areas with good real estate markets are more likely to get approval.

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Various Types of Lenders

Various Types of Lenders

According to Carrier Reeder, financial obligation consultant: The most vital kind of funding is mortgage and also as in various other instances the option of loan providers are tremendous. She evaluations the different kinds of fundings offered as well as the alternatives provided by them. The numerous kinds of loan providers are a. Mortgage Banker, b. Mortgage broker c. Credit Unions, d. Savings and also Loans as well as e. Government Loans.

According to Reeder, in situation of Mortgage Banker one individual is accountable for the consumer from starting to finish, that overviews with the different procedure of finance centers, the different deals, picking the fundings which ideal matches one, the time duration etc he additionally adheres to on the payment elements, rate of interest included as well as till the end when the financing is all paid up. Federal government does not themselves use financings yet back some of the lendings currently in offering.

According to Kevin Stith, a financial debt advisor, monetary establishments, financial institutions as well as personal lending institutions provide home mortgages or fundings. The exclusive loan provider below takes a danger by providing financing to a person that has a poor credit report ranking, for this reason to minimize his danger he asks for a greater charges and also home as safety and security.

The distinction in between obtaining a car loan online and also via a broker is that the interest rates are repaired in situation of an on the internet car loan center and also in instance of a broker the interest rate can be worked out as well as numerous centers which match the debtor can be supplied by the broker. It is stated that in situation of a home loan broker, if a transaction is dealt with as well as the lending institution appears to get benefit after that he might supply might centers to the debtor. According to Stith the market is complete of debtors as well as for this reason going shopping around for one that provides far better bargain is certainly useful to the consumer.

According to Carrier Reeder, financial debt consultant: The most vital kind of funding is house car loan and also as in various other situations the option of lending institutions are tremendous. According to Reeder, in situation of Mortgage Banker one individual is liable for the customer from starting to finish, that overviews via the different procedure of financing centers, the numerous deals, selecting the financings which ideal matches one, the time duration etc he likewise adheres to on the payment variables, passion included and also till the end when the car loan is all paid up. The distinction in between using for a funding online and also via a broker is that the prices of rate of interest are repaired in situation of an on the internet finance center as well as in situation of a broker the price of rate of interest can be discussed as well as different centers which fit the debtor can be provided by the broker.

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Various Types of Lenders

Various Types of Lenders

According to Carrier Reeder, financial obligation consultant: The most vital kind of funding is mortgage and also as in various other instances the option of loan providers are tremendous. She evaluations the different kinds of fundings offered as well as the alternatives provided by them. The numerous kinds of loan providers are a. Mortgage Banker, b. Mortgage broker c. Credit Unions, d. Savings and also Loans as well as e. Government Loans.

According to Reeder, in situation of Mortgage Banker one individual is accountable for the consumer from starting to finish, that overviews with the different procedure of finance centers, the different deals, picking the fundings which ideal matches one, the time duration etc he additionally adheres to on the payment elements, rate of interest included as well as till the end when the financing is all paid up. Federal government does not themselves use financings yet back some of the lendings currently in offering.

According to Kevin Stith, a financial debt advisor, monetary establishments, financial institutions as well as personal lending institutions provide home mortgages or fundings. The exclusive loan provider below takes a danger by providing financing to a person that has a poor credit report ranking, for this reason to minimize his danger he asks for a greater charges and also home as safety and security.

The distinction in between obtaining a car loan online and also via a broker is that the interest rates are repaired in situation of an on the internet car loan center and also in instance of a broker the interest rate can be worked out as well as numerous centers which match the debtor can be supplied by the broker. It is stated that in situation of a home loan broker, if a transaction is dealt with as well as the lending institution appears to get benefit after that he might supply might centers to the debtor. According to Stith the market is complete of debtors as well as for this reason going shopping around for one that provides far better bargain is certainly useful to the consumer.

According to Carrier Reeder, financial debt consultant: The most vital kind of funding is house car loan and also as in various other situations the option of lending institutions are tremendous. According to Reeder, in situation of Mortgage Banker one individual is liable for the customer from starting to finish, that overviews via the different procedure of financing centers, the numerous deals, selecting the financings which ideal matches one, the time duration etc he likewise adheres to on the payment variables, passion included and also till the end when the car loan is all paid up. The distinction in between using for a funding online and also via a broker is that the prices of rate of interest are repaired in situation of an on the internet finance center as well as in situation of a broker the price of rate of interest can be discussed as well as different centers which fit the debtor can be provided by the broker.

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