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Credit & Lending

17 Posts authored by: SBC Team

If getting credit for your small business is proving to be an uphill climb, you may want to look into a secured credit card. Not only can it help you build or reestablish the credit you need now, but also possibly provide a stepping stone toward an unsecured credit card or bank loan in the future.

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Click here to download a PDF of this infographic.

How to repair business credit When it comes to your small business, better credit could mean bigger possibilities. Improving your company’s credit score — and in some cases, repairing it — could help you take full advantage of opportunities that may fuel your business growth.

 

Learn the ins and outs of building a solid foundation of good business credit with our new guide.

 

Click here to download the guide "Eight Ways to Maintain and Repair Good Business Credit" (PDF).

Now that you’ve gotten familiar with the loan choices the SBA offers with, you may be ready to apply. Here, we give you a step-by-step checklist of everything you need to do to complete and present the necessary paperwork and cover all your bases.

 

You can also read Part 1: "An Overview of  SBA Loans" here and Part 2: "Types of SBA Loans" here.

 

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Click here to download a PDF version of this infographic.

Need a loan? Consider one from the Small Business Administration. In our three-part series, you can explore all your SBA options to make a more informed decision and get the loan that fits your business needs best.

 

SBA-Loans-Overview-Thumb.gifPart 1 provides an overview of what SBA loans are and how they can benefit your business. You can read about the different types of SBA loans in Part 2 by clicking here.

 

Click here to download the SBA Loans Overview guide (PDF).

There are several types of loans available from the Small Business Administration. In part 2 of our 3 part series, discover all the loan choices at your fingertips, so you can do your due diligence and select the one that’s perfect for your business.  You can also read Part 1: "An Overview of  SBA Loans" by clicking here.

 

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Click here to download a PDF version of this infographic.

 


 

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Watch the video below to see a brief comparison of the different lending products and features, to help you understand how credit options can support every stage of your business journey.

 

SBC Team

The 5 Cs of Business Credit

Posted by SBC Team Jul 12, 2016

When it comes time to secure financing for your small business, it’s important to know going in what lenders are looking for. And while it’s true that many lenders have their own unique underwriting requirements, most follow “The 5 Cs.”

 

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Click here to download a PDF of this content.

Better credit means bigger possibilities. Improving your company’s credit score can help you take full advantage of the opportunities that arise as your business grows.  Learn the ins and outs of building a solid foundation of good credit history with our infographic, Building Credit for Your Small Business.

 

Building-Business-Credit-Infographic.gif

 

Click here to download a PDF version of this infographic.

Choosing_the_right_CreditCard_Infographic_Thumbnail.jpgGive your business some credit. When it comes to credit cards, the right choice can make a big difference, and can play a very important part of the successful growth of any small business. Understanding the different features, benefits and trade-offs of all the options available is key. Our new infographic will help you get started.


Click here to view the Best Credit Card for Your Business infographic.


Buy_or_Rent_Thumb.gifTo buy or to rent? That is the question. At some point in the life of nearly all businesses, owners eventually face this simple, yet complex, question.

 

Our buy or rent guide will give you an overview of factors to consider when deciding how to acquire property for your business.

 

Click here to download our guide "Buy or Rent: Securing property for your business."


SBC Team

Small Business Lending Guide

Posted by SBC Team Dec 12, 2013

Lending_GuideThumb.jpgMore and more banks are loosening up and lending again. And as a small business owner, you are constantly under pressure to make sure your business has the financial backing it needs. This new guide will provide a refresher of the most traditional and creative financing options available.


Click here to download our Small Business Lending Guide: An Overview of the Different Types of Lending Options Available for Small Businesses


The-Right-Financing-Thumbnail.jpgVirtually all businesses need access to capital beyond the cash flow generated by continuing operations at different points throughout their lifecycle. The range of financing alternatives is expansive: personal savings, family and friends, grants, loans, lines of credit, credit cards, supplier credit, crowd funding, angel investors, venture capital, and more. Following is a general depiction of the stages of business growth, financial benchmarks typically associated with them, and potential financing sources for each.

 

Click here to view our infographic titled "The Right Financing at the Right Time".

Infographic_Thumb.gifBack in business: banks are lending again. The recent upswing in the economy is great news for small business owners.

 

From start-up funds to investors, loans and credit cards, you need to be familiar with the current lending landscape. Our infographic will give you a great overview of benefits and key considerations when making a lending decision for your business.

 

Click here to view our infographic about the current Small Business Lending Landscape


Small-Business-Loans-Infographic-Thumbnail.jpgU.S. Small Business Administration (SBA) loan programs have been an essential source of start-up, working, and growth capital for the nation’s small and midsize businesses for more than 60 years. Established in 1953, the SBA’s philosophy and mission spring from agencies created in the 1930s and ’40s in response to the Great Depression and World War II. The SBA provides direct funding through some programs and functions as a guarantor of loans in others. The agency supported $30.25 billion in loans to small businesses in 2012, its second-largest total ever.

 

The SBA programs most relevant to small businesses are the MicroLoan Program and the 7(a) Loan Program. MicroLoans are small ($50,000 or less), short-term loans to small businesses and certain types of not-for-profit childcare centers. The 7(a) Loan Program provides start-up and existing small businesses with access to capital when they might not be eligible for business loans through other channels. Most U.S. banks and some non-bank lenders participate in this program, with the SBA generally guaranteeing up to 85 percent of loans up to $150,000 and 75 percent on larger loans. The maximum amount of a 7(a) loan is $5 million.

 

Click here to view our infographic titled "Navigating the Right Pathway to a Small Business Loan".

by David Tremblay.


There is no silver bullet when it comes to getting a loan to fund your business.  With Small Business lending on the rise, knowing how to approach the process can help you secure a loan more quickly than others in your industry. When it comes down to it, it’s all about Ability, Stability, and Willingness to Pay, limiting uncertainty on the lender’s side by providing a very detailed plan.

 

Respondents were split when asked by our Fall Small Business Owners Report what they believe is the most important factor in receiving a loan.

Small Business Owner Report Graphic

The funny thing is that none of them are wrong.  Most financial institutions look at ALL those things, but in reality, less-than-perfect credit scores or a lack of a previous business borrowing history won’t carry the same weight individually that cash flow does. It’s also important to have a good relationship with your banker, who can provide context if one of those factors comes up short. Figuring out how much to ask for when applying for a business loan is part and parcel of the factors above. Here are a few thoughts on how financial institutions look at those different factors:

 

Cash flow:  Cash flow is typically considered the primary source of repayment for credit. It is important because that’s what repays the lines of credit and loans that banks extend to clients.  Does your business have the financial capacity to support debt and expenses?  Do your assets outweigh your liabilities? Typically a business needs to have between $1.15 and $1.35 of income to support every $1 of debt service, including the new debt being requested. The extra $0.15 to $0.35 provides a cushion for your business to absorb unexpected expenses or a downturn in the economy. It is important for the business to demonstrate more than one year of adequate cash flow history to show consistency in the ability to service debts. The ability to use projected cash flows as opposed to historical cash flows is uncommon.  Inadequate cash flow is a frequent reason why banks are unable to extend new credit to businesses.

 

Image of David TremblayCredit score:  Banks often look at multiple credit scores – business scores, consumer scores of the owners who will act as personal guarantors, and other internal scores based on bank risk factors and relationships. The credit scores of the business and individual owners in and of itself aren’t nearly as important as what is driving them, but the scores still play an important role in predicting creditworthiness.  As Jeannie Kelly also notes in a post running today on the MasterCard Small Business site, important drivers of credit scores are payment history, amounts owed, length of credit history, types of credit used and new credit opened.

 

Track record of ability to repay previous loans:  Relationships are important to banks, whether new or existing. An established borrowing and/or deposit relationship with their bank is often beneficial to the applicant requesting new credit. An existing borrowing and/or deposit relationship can offer immediate insight into the potential creditworthiness of the applicant based on the bank’s established risk guidelines.  When applicants have a proven track record of adequate repayment of previous loans, the decision to extend new credit is often an easier or quicker one to make.  The length of time for a bank to consider a small business to have a proven repayment track record can vary. Two years would be considered a minimum but 5+ years is preferred in order to establish trends that cross different economic cycles. Business borrowing history is less important than credit scores or cash flows but it brings an additional positive factor to the lending decision.

 

Annual revenues:  The gross annual revenues of a business is one factor that helps banks size potential credit needs and guide applicants to the most appropriate products available.  Annual revenue size is an indicator of how marketable the product or service is.  After our established revenue minimum of $250,000 for lines/loans, revenue trends over several years become far more important than the number itself.  Banks also care more about client base diversification to provide cushions in volatile markets. 

 

Personal finances:  Work experience, experience in your industry, and personal credit history are all “character traits” banks will consider. Your personal integrity and good standing—and the integrity and standing of those closely tied to the success of the business—are critically important. Business owners who have demonstrated challenges in managing their personal finances will have higher hurdles to obtaining new credit for their business. Related to this, many banks will ask how much stake the owners have in their business. If leadership is heavily invested monetarily in their own business, the bank sees this as a higher commitment to success, and therefore a higher chance of repaying the loan. To be further prepared for the loan application process, the Small Business Administration website has a Business Loan checklist that goes in more detail.

 

Again, it’s important to develop a strong relationship with your business banker – before you ever ask for credit. If that person understands the story behind the factors above, she can make the process much easier and help you get a yes to your loan request.

 

This month, I’ll be part of a Google Hangout on this very topic, so feel free to revisit this post for an updated start time. Top small business influencers from around the country will be discussing what drives credit decisions.

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