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Best Proven Uses of a Business Loan

Running your own business is rewarding but not without its challenges. Upgrading tech equipment, cover when key personnel have medical crises or getting the staff and supplies to fulfill new orders require cash up front.

At this point, most businesses acquire loans. Even Apple has taken on $148 billion in corporate debt since May 2013. America’s corporate borrowers have $900 billion in cash but $6 trillion of debt, putting big business cash-to-debt ratio at 12%. Most small businesses wouldn’t risk that kind of cash to debt ratio, but they must keep in mind their eventual valuation when making financial decisions.

There are a myriad of proven uses for a low-cost business loan, some of which many business owners never even considered. Here is a list of the best proven uses of a business loan that can help your company sail into the future successfully.

  1. Relocation needs

Fast growth can be both a blessing and a curse. Increased demand may mean a move to a larger facility or storefront to serve your customers. Few businesses expand without business loans. A business loan can definitely cover these expenses, so that you can extend your company’s services as needed to increase profits.

  1. Updating your operating systems

As technology continues to improve and change at a rapid pace, so too does your company also need to keep itself on the cutting edge of the latest operating needs. Otherwise, your business won’t stay competitive with the competition that is enlisting these updates, and your earnings will ultimately suffer. It can be costly to constantly keep your operating systems up to date with what the market requires, and this is exactly where a business loan can help. So don’t neglect to purchase the latest operating machinery or IT tools that your business needs to keep itself viable in the marketplace.

  1. Hiring more employees

In the early stages of running your own business, you most likely handled every task, from whether it was accounting, sales, marketing, or production. But in order to grow successfully and keep up with the demand, you inevitably have to dole out these duties to new employees. You also may need to hire on specialized experts in your field, or even pay for sales and marketing professionals who can ultimately increase your customer base even more as it continues to expand. A business loan will come in handy when you realize you have to increase your staff.

  1. Develop your Available Credit

If your business is still in its infancy, then it’s possible you haven’t yet achieved a long credit history yet. Getting a business loan is perfect, especially if it’s a short term loan, because it can build up your business credit history. If you can prove you can make payments on a smaller loan, it is easier for your business to get a larger business loan amount in the future. Baby steps are sometimes necessary to get to the more grand scale financing that can handle the major business funding your operation will most assuredly need further down the road.

  1. Increase your inventory

If your product or service output cannot currently keep up with the demand, that is a lot of lost profit! Don’t lose any more sales simply because you don’t have the funds to increase your inventory. A business loan will enable you to easily increase your inventory output, and satisfy your growing market. Your customer base deserves access to what your business is offering, without any delays, or even worse, a without a “cannot satisfy order” response!

  1. Rainy day funds

Unexpected business expenses are always a possibility. With Murphy’s Law in effect, what can go wrong will go wrong. If your business is barely making ends meet month-to-month, some unexpected expense, such as equipment failure, rewiring issues, or even computer virus malfunctions, can cut into your earnings. A business loan can be made available to handle these emergencies, and keep your company afloat and profitable.

A+ Rated First Financial Gets You Great Business Loan Rates, Longer Terms and Robust Security

First Financial is pleased to work with you and your company, and provide business loans that will maximize your ultimate profit earnings. We understand the trials and tribulations with running your own operation, and we can help you out almost immediately. Once your loan is approved, you reap the rewards that a First Financial loan offers, such as an easy and fast application process, helpful loan advisors available to assist you 24/7, and low credit rates. Apply today!

All the Docs You Need to Impress a Commercial Lender

 

Understanding the documents needed to secure a commercial loan and understanding the terms found in those documents will help you negotiate a loan agreement with the best terms.  

When it comes time to negotiate the terms of the loan, it’s important to recognize that borrowers and lenders have opposite objectives. Borrowers want loose conditions in order to have flexibility; lenders want the terms in which they must distribute funds to be as strict as possible. Borrowers want to provide as little documentation as possible, and lenders want as much as possible.

Going into the negotiation you should be knowledgeable about the loan approval process, have your documents ready and know what’s in those documents.

Here are the basics of what you need to know:

General Commercial Loan Concepts

Secured vs Unsecured Loan: An unsecured loan is a loan that is paid for by the borrower’s creditworthiness, such as their cash flow and assets. Under this type of loan, property cannot be used as collateral and borrowers must have a very high credit score to secure. A secure loan is similar in that it can be supported by the borrower’s cash flow and assets, but the borrower must also pledge an asset (such as a car or house) as collateral for the loan and the lender has ownership of the asset if the borrower forecloses.

Negative Pledge: Mainly uses in unsecured loans, this prevents the borrower from promising certain types of assets or cash amounts to other lenders. The purpose of the negative pledge is to prevent other creditors from having a superior claim to the assets of the borrower for future loans.  

Letter of credit: A letter of credit is a promise by the party issuing it (usually a bank) that ensures that a buyer’s payment to a third party will be received on time and in the specified amount. If the buyer is unable to make the payment, then the bank is required to step in and cover the full or remaining cost.

Term Loan: This type of loan features a repayment schedule and a fixed amount of interest. It can be for any amount of money and the term length is generally between 1 – 25 years.

Demand Loan: A loan that is due at the time in which the lender demands payment. These are not common in commercial loans, but lenders may attempt to add provisions in other loans that allow them to do so so in certain cases, such as a change in the borrower’s finances or an economic recessions.

Revolving Loans: Under this agreement, funds can be given out and paid back at any time during the life of the loan. The amount of money owed cannot surpass the lenders commitment owed under the loan.

Bullet vs Amortizing When Negotiating a Commercial Loan

Bullet loans are loans where the principal is to be paid in one lump sum at the maturity date. Amortizing loans having the borrower pay off the principal according to agreed upon schedule. It is important for borrowers to way the specific pros and cons of both deals. Due to the interest rates used, it is possible for a 15 year fully amortizing loan to have a shorter duration 25 year amortization, 10 year term loan.

A Promissory Note: This is a signed document that contains a written promise for the borrower to pay a specific sum to a specific person on specific date in the future or on demand. A promissory note allows a company to obtain funding from a source that isn’t a bank. The terms differ from a typical loan agreement because only the borrower has to agree to the terms, the lender does not.  This means that the lender is not obligated to act reasonably or give you any notice of their future actions toward you. However, a promissory note can also be used as a liquid asset (unlike a loan) that can be transferred or sold by the lender.  

The Loan Agreement: This outlines a majority of the obligations of the creditor and borrower. Included is the following:

  1. Definitions;
  2. Conditions Precedents;
  3. Representations and Warranties;
  4. Affirmative Covenants;
  5. Negative Covenants; and
  6. Events of Default;

Other Documents: Besides the above mentioned documents, lenders may include any of the following documents depending on the nature of the financing and the agreements made:

  1. Corporate Resolution;
  2. Subordination Agreement;
  3. Intercreditor Agreement;
  4. Assignment Agreement;
  5. Pledge Agreement;
  6. Guaranty;
  7. Security Agreement;
  8. Deposit Account Control Agreement;
  9. Mortgage or Deed-of-Trust;
  10. Error and Omission Agreement;
  11. Disclosure and Authorization forms;

Being familiar with the loan process and having a foundation of knowledge regarding the documents used and what is in them will help you negotiate a better agreement for yourself. The more knowledgeable you are going into the negotiations, the better off you will be.

3 Common Situations When a Cash Advance is a Good Idea

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woman with money problems

A cash advance or payday loan relieves financial emergencies

When an unanticipated expense hits, financial institutions exist to make sure that families limit their losses. Cash advance and payday loans, which are short term, unsecured (no car or home collateral needed) and fast, keep people solvent until unsettling times pass.

Unexpected financial glitches happen to all of us. Stress and shame send some into freeze mode, but denial only causes late fees and creditor phone calls to mount. The cash advance option or easier cash advance app makes sense in several situations.

  1. You’re trying to avoid a credit check that impacts your credit score. When bills are due but funds are insufficient, some turn to the new credit card offers that come in the mail regularly. If you’re working to build your credit, however, you know that every credit inquiry lowers your score. A cash advance or payday loan doesn’t require a credit check. The requirements do include:
    • proof of employment
    • employment income of $800 per month
    • U.S. Citizenship
    • proof of a checking account
    • a short telephone call

This is gathered in a short, online application you can easily fill out on your phone anywhere. Once the lender gets that information, it’s typically a matter of hours before you’re approved. The lender knows you’re probably in a dicey situation and works hard to provide an answer as soon as possible.

2.     Late payment penalties are more than the cost of the payday loan.  If your mortgage is $2,000 and you have a 5% late payment penalty, you’ll be out $100 if you don’t pay the loan on time. Many fees for non-payment are higher than the charges that come with a payday loan or cash advance.

3.     The loan is required for you to earn an income.  A broken down car or crucial computer malfunction can interrupt your earning hours dramatically. To keep income steady, getting both into working order is crucial. The payday loan or cash advance helps get you back to work fast.

Payday Loan Cash Advance Information

While home and car loans are amortized over years, typically the cash advance loan is repaid within a month, when a consumer’s next paycheck is deposited.   After you fill out the application and sign forms, the money arrives in your checking account within one to two days. Similarly, the money plus the loan fees are then withdrawn at the end of the month when you are paid. It is also possible to extend the loan for another month if you need to. It’s smart, however, to have a plan to pay off the loan when it is due.

First Financial: Your Source for Fast, Trustworthy Emergency Credit

First Financial is a nationwide retailer of financial services. We provide home, auto and personal loans to applicants from every state. With an A+ rating from the Better Business Bureau, you can be confident that your transactions are safe every step of the way. Our system relies on trusted names like Verisign and Norton to get you money quickly with no glitches. Interested in checking us out for a while? Feel free to follow our Facebook page where we relate daily modern money tips.

 

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