Personal Finance Tips

7 SBA Loan Myths

Most small business owners have considered financing at some point in the life of their business. You may have considered expansion, buying new equipment, more inventories, purchasing real estate, or just looking for a new capital infusion. But the confusion surrounding SBA loans may perplex or frustrate even the most astute entrepreneur. Conflicting information from your trusted advisors or the internet may not help to bring you closer to separating fact from fiction.

There are many myths surrounding SBA loans. Some of these myths are substantial and strong enough to discourage a small business owner from expanding, getting out from under onerous debt, or even staying in business. Understanding how an SBA loan works and how to successfully get one for your business is a matter of separating the facts from the myths. You may recognize yourself in some of the following misconceptions of SBA loans. You will finish this article more informed and in possession of the facts. The facts regarding SBA loans can help you to be a better, more successful small business owner.

The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation. The SBA recognizes that small business is critical to America’s economic recovery and strength, to building America’s future, and to helping the United States compete in today’s global marketplace. Although SBA has grown and evolved in the years since it was established in 1953, the bottom line mission remains the same. The SBA helps Americans start, build and grow businesses. Through an extensive network of field offices and partnerships with public and private organizations, SBA delivers its services to people throughout the United States, Puerto Rico, the U. S. Virgin Islands and Guam.

THE 7 MYTHS

Myth #1- All banks evaluate the risks of a SBA loan request with the same viewpoint.

Financial Fact- Although all banks are subject to the same SBA Guidelines, the rules are subject to different interpretations with respect to analyzing a particular loan request. Some banks may be willing to take greater risks. Some banks will take a more optimistic evaluation of the facts and your business’ future success. Therefore, choosing the best bank for your SBA loan needs can make the difference between loan approval and denial.

Myth #2- All banks offer the exact same types of financing for SBA loans.

Financial Fact- Loan pricing and structure can vary substantially at different banks. Interest rates on SBA loans are based on the prime rate plus a margin. Some banks are more competitive in price to be leaders in SBA lending. Some banks will carve-out a provision for accounts receivable and inventory financing from their loan agreement to permit additional third party commercial financing in addition to the SBA loan. For the same loan, some banks will require additional collateral guarantees, such as a lien on your house. Evaluating the adequacy of such additional collateral guarantees is also subject to interpretation.

Myth #3- It takes too long to get through the red tape of SBA loans.

Financial Fact- This may be true if the bank has to deal through the SBA bureaucracy. Many lenders have “delegated authority” to directly approve a SBA loan. They can provide a full written loan proposal within 48 hours, and some provide a loan commitment within a week of receiving a full loan package. Closing the loan depends on the specific requirements of each transaction, but takes no longer than closing a conventional commercial loan. If the loan requires an appraisal, this may add several weeks to the process.

Myth # 4- SBA loans are only for start-ups or small companies, and not for “big” companies.

Financial Fact- The SBA defines a qualifying small business as “one that is independently owned and operated and which is not dominant in its’ field of operation.” The SBA does not discriminate between start-ups or established businesses, and company size requirements are not the same across the board. The actual standard used in determining qualification is calculated by number of employees or average annual receipts and varies by industry. For example, in the manufacturing and mining industries, a business can have no more than 500 employees to qualify. Average receipts in most retail and service industries can total no more than $5.5 million. The SBA size regulations are located at sba.gov. Most lenders can tell you immediately if your business qualifies regarding income and number of employees.

Myth #5- SBA loans require a lot of collateral

Financial Fact- SBA lenders do consider collateral when reviewing a loan application, but they also look at several other factors. Your character, your creditworthiness with respect to you history of paying your debts, your management capabilities, and your equity contribution are just as important as having collateral. SBA lenders.look at your business as a whole, and although they will not deny you loan solely due to lack of collateral, it can be a contributing factor if there are other weak spots in you application. Ultimately, your ability to repay the loan from your business’s cash flow is the most important consideration.

Myth #6– SBA loans are loans from the Federal Government.

Financial Fact – SBA loans come from commercial lenders who participate with the SBA in SBA lending. The Small Business Administration is an agency of the executive branch of the Federal Government. It establishes guidelines that lenders must follow when giving SBA loans and the SBA backs each loan with a guarantee that eliminates some of the risk to the lender. The actual funds for each loan will come directly from the financial institution. The SBA loans are backed, up to the amount of the guarantee, by the SBA.

Myth # 7- SBA loans are a loan of last resort.

Financial Fact- Lenders that offer SBA financing should be one of the first places a start-up or small business owner goes when seeking a business loan (unless you have a friend or relative willing to invest in your business). The express purpose of the SBA is to help Americans start, build, and grow businesses in order to promote a healthy economy. SBA loans are structured with longer terms, lower down payments, and can have lower rates than conventional commercial loans so small business owners have increased cash flow. Going to a lender for a SBA loan is especially valuable for business owners seeking loans who may not have collateral required with typical commercial loans. There is a reason the SBA is the largest single financial backer of U.S. businesses in the nation.

You need to assess your business’s current health and growth potential. Would it benefit your company if you refinanced old debt? Could you increase business with more equipment? Would a facelift bring in more customers? Would a combination of SBA financing with commercial financing for accounts receivable and inventory help you succeed?

It is critical to your business that you know not only when to seek financing, but how much you will need, and what is available. Many businesses suffer of even fail because their owners do not take out loans when they need to; or they fail because their owners do not borrow enough. Understanding your options will help you determine these things, which can in turn help your business flourish.

Conclusion: An experienced Commercial Finance Broker can help you separate the myths from the financial facts. They can find the best SBA loans. They can evaluate the best overall financing structure for your particular situation with lower interest rates, longer payback times and lower upfront costs. They can help you understand the big picture and create new opportunities for your consideration.

Copyright © 2007 Gregg Financial Services

www.greggfinancialservices.com

Have you received before a pre-approved credit card offer that sent to you through your email address? If you are not, then you are the lucky one. Most of people who have access to email are receiving dozens of “good offer” from credit card companies. Low-internet rate and higher credit limit are among the good deals in the offers and the best part is: it has been pre-approved to you. Sound good? Well, before you go ahead and accept one. Ask yourself whether you really need it or not. According to the credit card site CardWeb.com, average American household are holding a $10,000 credit card debt. Don’t let you be one of the statistics.

The best way to keep credit card debt down is not to use a credit card. But if you do receive a pre-approved card that intrigues you, at least know what you are getting into before signing on the bottom line:

What interest are you paying? Make sure you understand the interest rate you will be paying for. There are two types of interest rates, fixed-rate annual percentage rate (APR) and variable rates that swing according to the market rate. A better option would be APR because credit card companies have to notify you before raising rates.

The low interest rate being offered is usually only an “introductory rate” which means the rate can – and probably will – increase significantly at the end of the introductory period. This means that balances transferred from higher interest rate credit cards to the new, low introductory rate card could, over the long run, actually cost you more in interest payments. So, be aware of the terms and conditions before you sign to accept the card.

Know that a credit card may carry more than one rate. You may not aware that most of credit cards carry more than one rate. The balance transfer and cash advance normally have higher interest rate. Interest rate shows in the offer normally is the interest rate of your purchases with credit card. Hence, at the end you probably pay higher interest rate if you have balance transfer or withdraw any cash advance with your credit card.

Credit card companies may raise the interest rate if you have late payment. Some credit card companies will immediately raise your interest rate from introductory teaser rate to the regular rate if you are late just one time.

Don’t accept the new credit card offer if fee involved. If there is fee involved with your new credit card, don’t accept the offer. Why pay a fee for a credit card when, with good credit, you don’t have to? If you have good credit, there are many other better offers which you can choose from.

Many of these cards are just preliminarily approved. This means that when you actually apply, the credit card company will reviewing your credit report in full as well as verifying information provided on your application. Terms and conditions may change according to your qualification, such as higher interest rate or smaller credit line. And if your application is rejected, it could cause at least minimal damage to your credit report.

So, in order to protect yourself, you need to carefully read all of the fine print in the offer and, if you don’t fully understand and like everything you read, throw the credit card offer away. Even if you fully agree with the stated terms and conditions, do some calculations to be sure that the lower introductory rate, especially in the case of balance transfers, will actually save you money over the long run.

Searching for the best equipment financing deal can be a harrowing process, but identifying five key factors can help you set apart the good from the bad. Since every company is different, there is not a ‘one size fits all’ solution. Finding the right company can make a huge difference in how your business operates and how successful it can be. The only way to know if you have truly found the best equipment leasing deal is by carefully examining the company and the finance options presented.

Upfront Service

The equipment financing option can sound like the most inexpensive, but without quality service, it isn’t worth the paper it is written on. The equipment financing expert you are working with needs to be upfront and honest about your situation and what they have available to help you. In order to do this, he or she needs to be interested in learning about your particular situation and individual needs.

Efficient Process

The equipment leasing expert should be willing to do what he or she can to make the process go as smoothly and quickly as possible. The finance professional should work with you to tackle each step and each piece of paperwork. You should also be able to negotiate the equipment financing to ensure you get the best deal. To make sure your expert is the best choice to work with, don’t be afraid to request references.

A Changeable Equipment Leasing Plan

Even if you compare two businesses in the same industry, in the same location, of the same size, they will each need their own unique plan. The equipment leasing plan you choose needs to match the needs of your company, including your cash flow, capital, and tax situation. To ensure this delicate balance remains long after signing the initial contract, select a plan that allows the payments and terms to change with the ups and downs of your business.

The option to lengthen the term or pay the loan out early should also be available to you. In addition, be sure the finance company does not charge you a fee or penalty for doing so. This will allow you to open your cash flow when times get tight and make extra payments when you have the additional income to save money on interest and pay the term out faster. You also want to watch that the purchase plan does not lock up the capital and assets in your company to the point that it interferes with the operation of the business.

Freedom Of Selection

The payment option you select has to allow you to choose the tools your business requires to run at optimum productivity. This often means the newest or next to the newest technologies to avoid wasting money on outdated items. If the plan restricts the items you can acquire, it can cut down on your company’s output, often costing more in the long term than a higher interest rate.

This is where a finance expert in your industry comes in handy. They can help you decide which tools suit your business best. An equipment leasing expert needs to be proficient in asset management in order to keep your business heading in the right direction with the right choices. This eases the pressure of making the right decisions, allowing you to focus on the actual running of the business.

Replacing Tools

Whether you are replacing items you already have or need to replace the tools you purchased through a payment plan, find an equipment financing business that will help you get rid of the old items, either by selling or salvaging them. This eliminates the time spent on items you don’t need and gives you more time using the newly acquired tools to make profits.

It doesn’t matter whether you are starting an IT company in Idaho or are replacing items for a construction company in Colorado, equipment leasing needs to be approached cautiously. While there isn’t a single solution that fits every company, everyone needs equipment financing that is flexible, affordable, and with an expert finance company to ensure operating with optimum profitability.

Only three things are certain in life – death, taxes, and rising gas prices. Reducing household expenses can be easy enough. Just make do without certain things that you do not need. Reducing gas expenses, on the other hand, can be a little more complicated. Your car will always require the same amount of gas to run and you can’t change that, unless you walk, commute, or ride a bike. Inviting as these alternatives might be, it defeats the purpose of having a car in the first place.

Because of stiff competition, credit card companies have collaborated with gas stations to come up with the best gas reward credit card. The best gas reward credit cards on the market today are forever competing to come up with the best incentives for consumers. By choosing the best gas reward credit card most suited to your lifestyle, you can reduce the costs of your gas expenses considerably.

Match Made in Heaven

The best gas reward credit cards allow consumers to accumulate points for every gas purchase they charge in certain gas stations. This is a partnership that is beneficial to both the credit card and gas companies. Affiliate gas companies pay credit card providers what we call merchant charges for the use of credit card facilities. And since the best gas reward credit cards are specific to certain gas brands, gas companies gain the advantage of being set apart from the competition.

As a consumer, you benefit every time you use the best gas reward credit cards. You earn points simply by frequently charging your gas purchases in affiliate gas. Once you have reached a certain point threshold, you are rewarded with free gas.

Make Your Credit Card Work for You

Many credit cards claim to be the best gas reward credit card. Before settling on a specific credit card, however, research your options and find the best gas reward credit card that fits your needs. Remember that the best gas reward credit cards only award points for gas purchases made in affiliate gas stations. If you have a specific gas brand of choice, it is best to apply for the best gas reward credit card it is affiliated to. If sticking to one gas brand does not appeal to you, however, there are also gas credit cards that allow you to earn points from any station, like the Chase PerfectCard Mastercard and the Discover Gas Card.

Apart from earning points for gas purchases, the best gas reward credit cards also offer other perks to consumers. Some of the best gas reward credit cards offer a 0% annual percentage rate, or APR, on purchases and balance transfers for an introductory first year. Cards of this type include the Chase Freedom Cash Visa Card and Chase BP Visa Rewards Card.

Another feature common among the best gas reward credit cards is the ability to earn rebates when used in restaurants, retailers, drugstores, and supermarkets. Cards like the Citibank Drivers Edge Platinum Select Card and Blue Cash from American Express let you do this. There are even gas credit cards that earn points not only with gas companies, but also with most leading car manufacturers throughout the world. Examples of these cards are Volkswagen Platinum Visa, Chase Subaru Mastercard, and GM Flexible Earnings Card.

With the variety of privileges offered by credit card companies, no credit card can singularly lay claim to being the best gas reward credit card. Compare and find out which one can save you the most money. Finally, choose not only the best gas reward credit, but the one that gives you the best value for the long gas-ups ahead.

Secured credit cards are special type of credit cards which are issued against a collateral. Generally a checking account or some other collateral comes into picture while issuing of a secured credit card. The credit limit of a secured credit card is equal to the value or amount available in the collateral. It is particularly rare to get a credit greater than this amount with a secured credit card.

Secured credit cards option are exercised generally by those with bad credit history and poor credit score to get themselves back on track. Credit card issuing companies, ask for collateral because they find providing credit cards to such people too risky. A good use of secured credit card can give the credit card issuer enough confidence to issue an unsecured credit card in your name.

A good thing to have with secured credit cards is that they should report your spending habits to the three major credit reporting agencies. Strange but true, not all secured credit card holders do that. Unless this feature is present in a secured credit card, it will be of little use for those trying to use it for rebuilding their credit history.

Though secured credit cards are linked with a collateral, they still have some fees and terms associated with them. Before going for a secured credit card, a person must check the various APR’s associated with the credit card. If the secured credit card charges an annual fee, the applicant should try to get one with the lowest amount of interest rates and annual fees. The billing period and grace period allowed for repayments should also be considered. Already suffering with a bad credit situation, the last thing to do with a secured credit card is to take a cash advance with it, simply because the cash advance attracts high interest rates and a cash advance fees.

Care should be taken that the secured credit card is actually used in a way that rebuilds credit history. Sticking to repayment schedule like a religion, and not over indulging with the credit card will help a lot in getting the most out of your secured credit card.