Author: HSS Capital Lending

A commercial line of credit allows a business to use up a certain amount of capped funds (like the use of a credit card). In order to use the money from the fund, all you need to do is ask for the money. It’s up to you to pay the amount you borrow back, and as long as you keep doing so, there is always money to borrow. The caveat for a commercial line of credit is that the funds must be used for business reasons.

A commercial line of credit is often something that is misunderstood as an option for businesses. While there are many loan options out there, determining whether or not a line of credit is right for your business is ultimately up to you (although the advice of your lender never hurts!). To make your decision a little easier when first researching, we’ve outlined some pros and cons to keep in mind:

Pros:
– Levels out Cash Flow

Startups and small businesses sometimes aren’t able to quite balance expenses with their profits. Commercial lines of credit allow them to keep up with their bills while they await their receivables.

– Gives Businesses Flexibility
Business owners often only have a small window of time to make very important decisions. Having a line of credit gives you the chance to capitalize on fleeting opportunities while knowing you can smooth out the details afterwards.

– Doesn’t Require Large Borrowing Amounts
When you just need a little bit of revolving cash here and there, a large lump sum loan doesn’t make much sense. Keeping a line of credit can be easier to handle and pay off when your business is able to.

Cons:
– Requires an Extensive Application

Lenders want to ensure that the people (and businesses) they loan their money out to will be able to pay them back – which is why there is typically an extensive application process for any loan. Lines of credit aren’t an exception. You can expect to provide bank statements, tax returns, business documents, P&L statements, and more.

– Credit Limitations Could be Low
Every line of credit has a limit, similar to what we see for credit cards (although typically, it’s a bit higher). Some businesses find that their limit is too low and need a different financing solution.

– Lines of Credit are Expensive
As with any loan, lines of credit also have other fees tagging along for processing, late payments, maintenance, and more. This type of option also tends to come with a higher interest rate.

Although commercial lines of credit have their downsides, they can also be a great financial resource. If you are looking at different commercial financing options and have questions about how a line of credit can benefit your business, get in touch with us today.

Businesses must look at a slew of financing options in order to choose the right one for their situation. One loan that people often don’t think about is a factoring loan – which technically, actually isn’t a loan at all.

What is a Factoring Loan?

Factoring allows businesses to sell the accounts receivable they have accumulated to outside financial companies (called factors). This lets the businesses use the funds faster than needing to wait for the customers to make their payments. In essence, they are speeding up their accounts receivable so that they are better able to move on to other things without waiting lengthy months for the money to come in. When these accounts receivable are sold to factors, not all of the money is given to your business immediately; you can usually expect about 75% of the account receivable invoices at that point, and then the rest will follow once the company is able to collect the full invoice.

The Details

In order to make some money out of the deal, factors tend to take anywhere from 2% to 6% of a cut from the total they collect from your invoices. They collect funds directly from your customers and might ask you in advance to provide proof that your customers have paid their dues in the past (this can give them a better idea of what risk they are taking on). Not only does factoring typically work faster than the approval process of a regular loan, but you won’t have any repayment terms or need to worry about debt accruing in your business.

Who Might Like to Use Factoring?

Since there are no requirements for collateral, a down payment, or a specific credit score, many businesses might benefit from using factoring. Businesses that haven’t been open for very long or those that need money fast might find factoring to be a helpful financing alternative. Another side to factoring that people forget about is that they won’t need to staff employees to continue doing the billing and payment processing for those accounts receivable. When maintaining cash flow is paramount, rather than going through the process of getting a short-term loan, factoring might be a better option.

Although factoring can have its pros and cons, thousands of businesses use it as a financing option. There are many different types of factors to choose from such as banks, small firms, or industry-specific investors. If you think factoring is something your business might be interested in using, give us a call today to see how it can impact your business!

Merchant cash advances (or MCAs) are often a hot topic in the commercial lending world. Like with any commercial financing option, however, fully understanding (and preparing for) the cost and terms of a merchant cash advance is the best way to using it to business success.

What are MCAs?

Instead of what we traditionally think of as a loan, MCAs analyze future potential credit card sales and give a cash advance on them. This type of financing option is typically fairly quick to process, although it comes with a higher interest rate than others. Repayments are based on what the business brings in during a day, which means the cash advance can be paid back faster the more sales they make. Usually, businesses use MCAs in the short term, rather than to pay for a long-term asset.

The Benefits of an MCA

While other commercial financing options can have very strict, lengthy approval processes, merchant cash advances tend to be fairly straight forward. MCAs don’t require collateral or high credit scores and won’t usually have a determined repayment length. Since you aren’t placing any of your assets within the agreement, you never have to worry about losing them if you miss a payment. Additionally, the money a business gets from this advance can be used on anything – there are no restrictions on what it can be spent on.

The Drawbacks of an MCA

Compared to other loan options, merchant cash advances can be quite expensive due to their high interest rates. MCAs should not be used for large asset purchases or in any long-term funding plan for a business, although businesses that don’t focus on a repayment plan might find themselves in a seemingly never-ending loop.

Who Should Use a Merchant Cash Advance?

It can be hard to specifically say in a broad sense what business will most benefit from an MCA without knowing exactly what that business needs. However, we can say that businesses needing a quick funding solution, don’t have assets or great credit, and need flexibility in use might find a good fit with a merchant cash advance. As always, we recommend talking with a lender experienced with this type of financing in order to determine whether this (or another) option is best for you!

Obviously, every commercial financing option has its own pros and cons. Even though an MCA might not be the best solution for one business, it could be the perfect choice for another. Get in touch with us today to compare loan types for your business!

Before you start taking the time to research all the commercial financing options out there, first think about what your business actually needs. Do you need quick cash for an opportunity that won’t last long? Maybe you’re thinking about opening a storefront and need capital for building at a certain location. Or, maybe you just need something to fall back on in case of emergencies. Once you’ve figured out the root of why you need financing, it can be easier to determine the right option for you.

Below, we’ve broken down some of the most popular commercial financing options out there. While it might be easy to choose from a list like this one, it’s always best to have your lender advise you on your specific needs!

Lines of Credit: Similar to a credit card in that you can borrow up to a certain amount but must repay it (with interest) before being able to pull out more against your limit. Typically, this option will have a higher interest rate although high business credit can qualify you for lower ones!

Microloans: Microloans are great for startups and need a smaller amount of financing (lower than $50,000 usually). Microloans can come through the SBA, traditional banks, and even some non-profits.

Working Capital Loans: In the short term, working capital loans can be a huge help for businesses needing help to cover their everyday expenses. Businesses that are seasonal often use this type of loan to settle payroll, monthly debt payments, and rent during their off season.

Traditional Bank Loans: These are the typical loans you think of when searching for commercial financing. These loans offer a wide range of options and flexibility that many businesses turn to when they are in need of capital.

Merchant Cash Advances: Quite possibly one of the fastest financing options out there, merchant cash advances analyze how much money on average the credit card transactions a business receives in a day and gives them the future capital early. In essence, the business is “selling” parts of their potential credit card sales in order to get the money now.

Cash Flow Loans: Rather than using collateral like in typical loans, cash flow loans predict expected profits and possible liquidated assets in order to determine how much risk there is. This is not a choice for startups, as they can’t usually predict their cash flow with much credibility.

Finding the right loan for your business usually isn’t a decision you make in a day – especially when you don’t have someone there to guide you through the process. Let us help you find the right option for your business (whether you’re a 1-person shop, or 7,000 employee company)!

Not only is it important to find the right commercial loan broker, but it’s crucial that you understand everything involving a loan before you request one. While there are many loan options out there, a professional broker will be able to give you a pros and cons list of each one – and recommend which one fits your business situation the best.

For those that are on the search for their first ever business loan, it can be confusing searching through all the information out there. Here’s what we would recommend that you focus on asking your lender before ever settling on a loan:

What is required as collateral?
Different loans require different types and amount of collateral, and the total funding of the loan you need will also affect this. Some loan types require a specific type of collateral, while others are more relaxed in their specifications and will accept a personal guarantee instead. Your lender can help you determine what would be good collateral up against the amount of loan you are hoping to receive.

What fees are there?
Loan approvals are not simple decisions made by lenders. In fact, many outside vendors might be called in for various reasons throughout your application process, which will increase the total costs. These might include site inspections, recording fees, credit reports, and more. However, your lender should be upfront about these fees with you and can typically give an estimate of the costs before you apply.

What’s the APR and Interest Rate?
APRs come from calculations of the interest rate and other lender fees included in the loan. Since each lender might create the APR calculation for a loan differently, be sure to ask your broker specifically how your loan will be broken down. Pay attention to how often the interest rate is adjusted and be aware that the APR of a loan is not applicable for early payoffs.

Is the loan application approval decision made in-house?
Depending on the type of loan you are interested in and whether or not your lender has an in-house underwriting team will determine if your loan can be processed by them. Government-backed loans typically have a longer approval process, which is something to be aware of if your business is looking for a quick decision. This leads into the next question:

How long does it usually take to close on this loan?
A lot can ride on the approval of the loan you are seeking, which is why understanding the length of time it takes to process a loan is important. A good lender will coordinate with you on a closing date, as well as work with you to ensure your paperwork is all in order throughout the process.

The more you understand loan offerings, the more you’ll feel comfortable applying. Let us help you determine the right loan for your business to help you grow and thrive!

Bridge loans are a unique option for those that need a quick source of capital until they can find a more long-term financing solution. While bridge loans are most widely known for their use in real estate, this type of loan is also used for buying out partners, moving business locations, or even to boost a business’s credit score. Typically, bridge loans are required to be paid back anywhere from a few months up to one year.

Who needs a bridge loan?

As we mentioned, bridge loans are often used by business owners to tide them over while they figure out other financing options better for their future. However, bridge loans are also used by investors or buyers in order purchase property fast without getting caught up in the long approval process of traditional lending. Additionally, you can find developers using this type of loan to continue their timeline of building while waiting on others to close on their properties.

Why don’t more people use bridge loans?

Bridge loans can be a great asset when businesses are in a jam and need financing fast – but they do come with some negatives. Interest rates are expected to be higher than those of traditional loans as the length of the loan is much, much shorter. You will be expected to pay any closing costs when purchasing a property along with origination fees on the loan.

How can you qualify for a bridge loan?

As with any loan, banks will look at your credit score and past payment history, along with the collateral being offered. For investors or businesses looking to acquire property, the building or property itself will often be seen as the collateral in the loan. Most bridge loans cover around 75% of the value of a property.

Where should you look for a bridge loan?

Bridge loans are offered by a multitude of lenders. Most often, banks are able to provide the best terms and rates and will probably be able to also help you find long term financing as well. However, there are also bridge loan options through the SBA and many online brokers.

In the business world, we understand how fast opportunities can fly by. Utilize a bridge loan to ensure you don’t miss out on an important chance for your business to expand and profit! We’re here to help determine whether a bridge loan is the right fit for your business. Give us a call today for a consultation about your needs!

Fix and flip loans have become much more well known in recent years as people have watched multiple TV series documenting the potential gains on “flipping” houses. This refers to someone buying a rundown property at a low cost, fixing it up, and then “flipping” it for a profit. Even though this can be a risky venture in the commercial world, it can also have a very large payoff when done well.

Fix and flip loans tend to finance from anywhere as low as $50,000 all the way up to around $2.5 million. The loan money must be specifically used for the renovation process, and nothing else. Similar to a bridge loan, fix and flip loans are typically very short in their terms, usually only about one year long. Those that go into the commercial flipping business learn to move quickly through properties so as to capitalize on the loans they have and the profits to be made. Interest rates vary per property and investor’s credit score.

Using Fix & Flip Loans

While many people think that you have to be an experienced property flipper in order to be qualified for a fix and flip loan – but the reality is that isn’t always the case. Lenders typically look for credit scores above 600 and a certain amount in down payment (this number depends on the amount of loan you are asking for).

Investors are able to choose a wide range of properties and still use a fix and flip loan like single family homes, condos, or even commercial buildings. Many banks try to go through the underwriting process as quickly as possible for fix and flip loans because of their fast nature.

Finding the Right Fix & Flip Loan Lender

Using a lender that is experienced with this type of loan is a great way for beginners to feel more comfortable with the process. While some people might push investors to go to private lenders, traditional banks can serve as a fantastic resource for not only your current financing needs, but also future loan inquiries. By establishing a relationship with a bank, you set the groundwork for larger loans with lower interest rates down the road.

Whether you’ve found the first property you’d like to flip, or it’s your 100th, we’re here to find you the right commercial loan. Not only do we have experience with commercial investors, but we can help you through the process! Give us a call to get started on your fix and flip loan today.

Real estate can have a major impact on how a business is able to bring in customers and turn a profit. As many of us have looked at how we can streamline our expenses amidst the last few months, commercial real estate investors have also reanalyzed the value of the properties they are currently in possession of (as well as those they might be interested in in the future).

Businesses that don’t have any commercial property might also be on the hunt for real estate as they see an opportunity in the market. With so many factors going into commercial properties, the process of actually finding a location, getting approved for a loan, and moving the business can take a while to decide on. Therefore, cost of the property isn’t the sole thing weighing on business owners’ minds.

Location, location, location

No matter how inexpensive a property is, you want to find something that fits your business needs and can bring you the most sales. Your property should be easily accessible and convenient for potential customers to visit – the more visible your location is, the greater the chance that more people will stop in. On the same thought, when you have prime location you can use the building itself to advertise to those passing by.

Branding

How your business looks to your customers can have an enormous impact on how much product or what services they purchase from you. With the right commercial real estate, you can elevate your business’s brand and showcase exactly what you bring to the table for potential customers. When you have property in a high-value location, you can leverage the impact your business neighbors bring as well.

Buildings & Structures

Before settling on what might seem like the perfect commercial property for your business, take notice of the building or structures on the property themselves. What condition are they in? Will you need to make changes to the building in order to make it “fit” your business? If it has any appliances or fixtures, are they energy efficient? If you need to make any changes to actually be able to use the location, it’s something you should take notice of (and weigh the pros and cons of it). You might find that a less than prime location is able to offer more in the long run in terms of cost than a high-value location.

Whether you are in the market to find a new business location to cut costs or are looking to niche down your commercial real estate investing portfolio, we are here to help you choose the right loan to get you there! Contact one of our loan officers today for a consultation.

If you’re in charge of a business, you’ve likely dabbled in the idea of loans to help with your financial needs. One of the ones you may have come across is an SBA loan, and that’s what we’re here to discuss today.

SBA Loans: What Are They?

The U.S. Small Business Administration is a federal contingent that helps small businesses receive loans to help them with their funding. They do this through many different types of loans. The SBA will back these other types of loans for disaster recovery, and they help lenders provide loans through more traditional avenues.

However, the SBA does not provide loans. They work with the lenders to help provide the loans. The SBA offers specific rules and regulations that the small business will be beholden to. These additional regulations will allow small businesses to get loans that they otherwise might not be eligible for.

SBA Loan Types

Some of the common types you might have come across when considering SBA loans are:

• 7(a) loans
• 504 loans
• Microloans

Even though SBA loans come with additional stipulations, they still tend to have decent fees and rates so that you won’t be penalized too hard for stepping one toe out of line. Many of them even have lower down payments, no need for collateral, and flexible requirements for overhead and repayment.

Eligibility

Now for what you’re here for… eligibility requirements.

When it comes to SBA loans, no matter which loan you’re going for, there are specific requirements that you’ll have to meet. These are the most basic of the basic eligibility requirements, so ensure that these apply to you at least. From there, specific loans will require other details, but this is the starting line.

Operations of Your Business

When it comes to being eligible for a business loan, you must be in charge of a business (seems obvious). Additionally, your business must be considered a “for-profit” business, and it needs to be legally registered as per all national and state guidelines. Additionally, you’ll find that certain industries just aren’t eligible, so ensure that you are not working in one of those industries.

Your business must also be a size that confirms you are a small business. There are tools on the SBA website that will help you determine if you are or aren’t considered small.

Location

To qualify for an SBA loan, your business has to exist within the continental United States or its surrounding territories.

Financing Prerequisites

Not only must you have invested significant time and/or money into your business (from your own pocket; this is called equity), but you also will need to then prove that you have:

• • Attempted to find financing through other channels before reaching out for an SBA loan.
  • You must be able to prove that you have a desperate need for additional funding.
  • You must have an extremely detailed business plan for how you expect to use the funds that include detailed information about why certain funds will be used in certain areas.

Health and Character of Your Business

If you have any outstanding debt obligations and/or if you are delinquent on any of your accounts, you will not be eligible for an SBA loan. Additionally, no one who owns more than 20% ownership in your business can be in jail, on probation, on parole, or in the midst of a criminal proceeding (as a defendant).

So long as – at least – you are eligible under these prerequisites, it’s worth it to consider getting an SBA loan if you need the money.

Links

https://www.sba.gov/funding-programs/loans

https://www.nerdwallet.com/article/small-business/sba-loan-requirements

When it comes to financing elements of your business, you might be tempted to take out one large loan that you will then apply to the whole kit and caboodle. However, it may be in your best interest to look into many smaller loans so that you can get the best rates for whatever you’re trying to finance.

All this to say, if you have expensive equipment that you need to use at your business, it’s a good idea to look into equipment financing.

What Is Equipment Financing?

As you may be able to guess, equipment financing is the financing of equipment. Many businesses will decide that they need to receive excess capital to purchase their expensive equipment. If they do this, they will be spreading out the cost of the equipment over the entire life of the item. This is a great way to help businesses that are just starting out get the necessary funds they need.

Equipment financing is also a way for businesses to free up some capital that they can then spend in other places.

When you finance something, you are – essentially – saying that you will pay x amount a month for a set number of months that will equal the total cost of the item (plus any applicable interest).

Just make sure that what you are trying to finance counts as equipment. It has to be a physical item that will be used in your business to further your sales (oven in a restaurant, tire pressure machine in an automobile garage, X-ray machine in a doctor’s office, etc.).

Importance of Equipment Financing

Many businesses that require large start-up costs and expensive equipment look at the option of equipment financing as a godsend. It can be extremely beneficial for these sorts of businesses.

Additionally, not only is it helpful to curb startup costs but financing your equipment will offer many other benefits for your business:

• Pursuing equipment financing will free up other parts of your capital.

Let’s say that the machine you need for your business is $50,000. Rather than having to pay that $50,000 upfront, you can finance the equipment and enter into an agreement that you’ll pay ~$420 a month for ten years.

This means that you’ll have the extra money that you might have spent on the machine to spend on other things.

Of course, if you will be on the hook for this money for ten years. Only take out this type of loan if you think you’ll be able to commit to a $420 a month payment (plus associated fees) for the agreed-upon time period.

• Equipment financing is a flexible option for business owners.

Each time you finance equipment, you will get a new agreement that will be tailored to your specific needs. This means that you will be able to customize your repayment plan and agreement with whoever is in charge of the finance loan to work best for you and your business at the time.

• Equipment financing can improve your credit score.

Equipment financing is a great way to increase your credit score! Your credit score is made up of details that look into how often you pay your bills on time, and how often you only pay the minimum versus paying the whole amount.

As such, if you utilize equipment financing, you’ll be adding proof to your credit history that you’re a responsible person when it comes to repayment. The more responsible you look on paper, the higher your credit score will end up being.