Commercial Loans: 2012

Facts and Findings of Business Loans

Business loans can be the lifeline of any kind of business from small shops to large showrooms and home based manufacturing companies to large manufacturing companies can need extra cash to keep business operations moving. Normally loans for business purposes are provided by banks. Banks tend to offer loans to those who can meet their strict criterion which is basically an assessment of applicants' loan returning capacity. The banks review the applicants past records, credit history, current assets and liabilities to determine the likelihood of repayment before approving the loan amount. The bank offers a fixed loan amount irrespective of what actually maybe needed because it relies on its findings rather than the necessary commitments the funds were applied for to meet.

Business loans are also offered by various financial institutions. Numerous financial companies provide cash in hand against the businesses gross monthly sales. These institutions are also guided by a set of requirements but they are less stringent than those of the banks. Small businesses that find it difficult to get approved for money from the banks can approach these financial institutions and receive a loan with a good sum of money. These companies can tweak their rules to favor their customers because they are more aggressive in distributing loans than banks usually are. This is most likely the reason why financial institutions are preferred by businesspeople for obtaining business loans.

A quick survey of the process for obtaining business loans from financial companies as well as from the banks can reveal why people rely on them for money. The financial companies employ a user friendly loan process; however, the banks follow a cumbersome procedure which not every businessperson can understand or follow.

The time it takes for processing and approving a loan is very crucial and financial institution score high marks in this criterion. Banks may take any number of days or weeks to give a decision on approving a loan but private companies assert that they can provide loans in as little as hours. The conditions set forth by private companies are easier to meet and are reasonable while banks sometime make tough demands which many businesses can't meet.

The interest charged on the amount of the loan by private institutions and banks are similar.

These are some of the reasons why businesses are choosing companies that are providing private business loans over bank loans. Business loans are a necessity and business owners are less concerned about who is providing them the loan. They will approach the financing institution which provides them with a quick loan at reasonable interest rate. Financial institutions check the current economic health of the business before approving the loan. If the business is doing well then they find no reason to deny the quick loan.

Robert Ellenbecker has been associated with the banking industry for a long time and today he is an authority on micro finance. His articles on business loans, cash advances and credit card processing are informative and make a good read. For more information visit Business loans.

Available Business Loans

Business loans are directed towards business owners to help expand or start up a business. The banks offer loans between £1,000 and £25,000. Typical repayment periods for the loans are between 10 months to 10 years, depending on your financial situation so there is quite a lot of flexibility.

One of the biggest advantages that the banks offer is the fixed interest rates they offer for the life of the loan. This fixed rate then puts less worry to the person taking out the loan as they are not going to be paying any more back then the rate that they currently agreed with the bank to start with.

One key feature that most banks offer when the loan has been agreed is that the loan will be paid immediately into the account of the person taking out the loan, usually the loan that you agree to take out is credited to you the same day as agreeing taking out the loan.

One of the biggest assets to small businesses are business overdrafts, these overdrafts are great for short term fluctuations in cash for small businesses that may need extra cash at some time, maybe to buy stock or help expand the business

Of course shopping around to find the best loan rates is advised but beware that not all banks offer fixed rate loans, a comparison website is the best bet as it will allow you to compare all the different loans from all the different banks on one simultaneous page, a lot quicker and more efficient,

Another tip for getting a loan is to get an appointment with your current bank manager and inform him of your current need and see if he will do you a special deal or rate so that you stay with your current bank, usually they will value your custom a lot more if your already with the bank and looking to stay with the bank.

So as you can see there are many advantages to getting a business loan, advantages that most people wouldn't think are there, but finding te right deal for you is the trick, there are plenty of places to find the right deal, it's just about looking in the right place to find it.

If your after just a small amount of capital you may be entitled to help from the government, there are schemes to help businesses get through the times that are key to the growth of the business and the government like to encourage this with giving support in various ways. There are leaflets on your local council website that will explain what there is available and how to go about getting it.

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Giving Your Business a Boost

When you are the owner of a small or medium sized business, having a constant cash flow is essential. You will need this to balance your inventory, pay your suppliers and your staff as well as expand the business when it is required. Considering that the aftermath of recession still prevails, securing a business loan can be a long and tedious process. One of the ways in which to get around this problem is that of a merchant cash advance.

A merchant cash advance is an alternative source of funding for those businesses who may not have the credit rating or the collateral necessary to approach commercial banks for a loan. The merchant cash advance is based on future sales that you will make with credit cards being accepted as the mode of payment. You get a lump sum which you benefit from immensely and then repay in the form of percentages off your monthly sales figures.

There are several advantages to a cash advance and the first and foremost one is that you do not have to worry about eligibility. You do not have to have a fantastic credit history nor do you have to put forward a collateral. This way you can also save on losing your collateral should you default on payment. The next thing is that the process one has to go through is rather simple in terms of application and actually receiving the loan amount. There are only two criteria that are taken into consideration - your monthly credit card sales has to be above $5000 and you have to be in business for a minimum period. This can be 3 months to 1 year depending on the lender you approach.

Since there is a minimal amount of paperwork involved the turnaround time to actually receive the loan is rather fast. With a commercial loan you could end up waiting for more than a month in some cases, whereas with a cash advance, everything will be done in a week's time. Also, the approval rate for such loans is much higher than that of commercial loans. Any business that can prove its stability will be able to qualify for a loan. And finally, the repayment of the loan is revenue based. So when you collect your money in the form of payments, you pay back the merchant loan in percentages.

This form of a loan has come as a quite a relief to small business owners who often need cash quickly for help sustain their business.

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Major Benefits of Using Commercial Farm Loans

Farming needs numerous work hours, dealing and fighting with frequent weather changes, and the risk of the unknown is always present. It also needs a huge initial investment and additional extremely operational costs. That is the reason why it is a smart idea for existing farmers to opt for commercial agricultural loans. There is nothing as good as getting an opportunity to have the required amount to take care of your farms and its low and long-term fixed rates make it a win-win option for farmers. This way, they will get an opportunity to budget all their farming needs and requirements and fulfill farming related operations. The most significant reason behind taking a farm loan commercially is that the payment remains fixed. There are many types of financing options and loans available and a lot of companies are present that specialize in this particular sector only.

Commercial farm loans and farm land financing provided by various financial institutions include loans and finances for horse operations, commercial farms, ranches, vineyards and agricultural facilities. Some significant benefits and important aspects include:

Commercial loan providers offer lowest rates on loans with minimum fees

They give personalized and experienced loan processing, which automatically increases your borrowing potential

Various providers also give zero income verification loans beginning from $300, 000

The least amount of these loans may begin from $100, 000

There are absolutely no prepayment penalties, which makes the deal extremely beneficial for the farmers

No maximum acreage limitations makes this option pocket friendly

In order to apply for farm loans, you need to have a credit of just 620

A lot of providers also offer a farm operating line of credit up to 7.5 million, which is of huge help

Commercial farm loans are provided by a lot of top financial institutions and providers. The least loan amount is often fixed, however, maximum amount is never fixed. These loans have a time period of around 15-30 years and they can easily be amortized up to a most of 30 years with any external pre-payment penalties. Most commercial loans and financing require payments to be created either annually or in 6 months' time and the duration depends solely on the needs and requirements of the farmers. Some significant operations that qualify for these loans include:

Vineyards

Dairies

Orchards

Farms

Ranches

Other similar agricultural productions

A lot of providers are available online that deal in agricultural loans, all you have to do is make a correct choice.

Author has 5 years experience in Internet Marketing.For reliable full time and part time Commercial farm loans or agriculture loans always choose best reputed financial firm or bank.

Construction Finance Fees

Although us brokers like to save you time and money we cannot arrange finance for you that is free. At the same time we know that borrowers are not keen on paying for lender costs and certainly want to keep them to a minimum. With any construction finance application you will have to pay fees for the following:
Valuations. Any lender will need to check the figures for the current and end value of your building project. Although you will have done your own research and will have a good idea of the likely Gross Development Value of the site the lender cannot and will not take your word for it. Loan to value plays an important part in the underwriting process and so a difference in opinion of value can be a deal breaker. With this in mind it is important that your figures are realistic so that you do not waste your time searching with us, for building finance. The cost of the valuation will vary depending on the sort of property being valued but most lenders will only charge you the cost of the report, which would typically be £1 per £'000 of property value.
Specialist reports. Most lenders will employ the services of either an Engineer or a Quantity Surveyor. These professionals will carry out various reports to assist with underwriting of a project. The construction finance provider will be an expert in lending money but not necessarily in the actual build process so a helping hand is often required. Again, the borrower will need to cover this cost but it can also be of use to the client as an Engineer, for example may point out issues that are better sorted at the start than the end of a build.
Arrangement Fees. Although some bridging lenders will not have an arrangement fee the vast majority do as will all specialist development finance lenders. Typically fees will be 1.5 - 2% and is normally added to the loan, being charged on completion. Some lenders will want to take part of their fee on acceptance of offer or to progress an application beyond agreement in principle, just so they know you are serious about taking their finance. Arrangement fees are an industry standard and should just be looked at as an inevitable cost of borrowing money. You are building or converting a property to make a profit but you cannot forget that the lenders providing the money you need also want make a profit.
Exit fees.This is another industry standard. Specialist providers generally lend over a relatively short period of time and to make the exercise profitable will want to charge a fee for you to exit the facility. This is one area of finance that can vary quite widely and is a very important consideration when choosing a product. Some lenders will want to take 2% of the Gross Development Value, for example, while others will take an additional months interest. This can have a huge impact on the overall cost of finance as highlighted here. Lenders charging a percentage of G.D.V. will attract clients with lower interest rates but the cost of the facility as a whole can be the same, if not more, than a higher interest loan due to the amount of money paid out at the end of the loan period.
Fees to borrow money are not new and will not be going away, you have to remember that if you want the funding you need to pay the lenders' costs.
So, while you want to keep your construction finance costs as low as possible you should recognise that a profit of tens of thousands or even hundreds of thousands of pounds is worth paying for - that said there is no point paying unnecessarily high costs so get in touch with a broker and find out how they could save your project money and add to your profitability.

If you are looking to start your next project and need funding, get in touch with a company that can add value to your proposal, save you time and more importantly money.

Securing Development Finance

Development finance certainly saw some significant changes in the last three years when the number of development lenders dropped and funding became more difficult to obtain.

However, there are still deals to be done and still a number of lenders who are genuinely willing to lend. It's imperative to find lenders with enthusiasm. Brokers need to identify the right lender for the loan and ensure their client can meet the lender's criteria.

The development finance market is an area with growing demand for funding because the big banks still have no appetite for this type of lending at the moment. The lack of competition has led to relatively high pricing, which means there must be decent profit levels in each and every deal.

In speaking with a few of our developers, they shared that they are still very sensitive toward current pricing, whereas others have accepted that low-cost funding in this area doesn't really exist anymore. The deal can get done but at a higher cost.

Another aspect to consider is the type of development being financed. Commercial development funding for speculative builds is very difficult (if not impossible) at the moment due to limited exit routes for the lender. However, for the right deals, at sensible loan to values and where the underlying security property is good quality with good rental demand, they can still be funded at LTVs around the 65% mark, somewhat higher in tier one territories.

While some lenders are mainly biased towards the east coast or other tier one areas, the main objective is to build and sell, so it is important to build where the market is most active.

With this in mind, it's imperative that Brokers assemble a comprehensive package of information before approaching lenders. Presenting the full package to potential lenders in the right way is crucial in order to secure development finance for a client. Your package should contain the developers resume, an itemized accounting of how the loan proceeds will be utilized, financials on the business and the developer for the past 3 years, a summary of the project, rent rolls and projections.

All of our lenders emphasized that funding is very much dependent on the individual borrower's experience and circumstances. Most lenders will not consider a proposal where the client does not have good experience, and that must be of buying, developing and selling, not just of project management or building experience.

The best advice for brokers is to have relationships lined up and ready so that when they find a borrower, the deal can move forward quickly.

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Preparation For Getting Business Loan Financing

Every company needs capital to survive. Business growth lies in the ability of being able to manage finances properly as this opens the way in which businesses can venture to yet another opportunity for investment. Managing finances is to be considered as one of the most important elements in business. However, what challenges companies or any small businesses is how to acquire money and how to pay for the debt. The intervention of business loan now comes into existence.

For small businesses, preparation is the key. You already have the idea. You have everything you desired and things are falling into places, all that you have worked and planned for. But there is one more thing that is lacking. You need to be able to provide the capital needed for you to start with. You need the money to operate your business. It may be very difficult to work with banks or any business loan company. The key to a successful business loan is on how well you put things together and how prepared you are.

Many lending institutions and banks are looking at the risk factor. It is the very reason why they have to say "no" for a loan requests with any businesses. But you can still get a loan for your business by proper preparation. Now, how are you able to do this? In order to prove that you are worthy of the money, that you are a good risk, taking the necessary steps will help you alter the level of difficulty of business loan. You have to learn what you need to know. You have to prepare on a lot of things to have a good loan deal which would give you enough knowledge so as to persuade-the-lender. Some suggestions on what you will need are as follows:

Business Plan

Let the lender know what you are up to. It is easier for them to approve any request with business loan if you are transparent enough to let them see what your goals are. Showing them on how you plan to use the money is a good step.

Your Projection with Cash Flow

Lenders need to know if you are able to pay the loan. Your business cash-flow-projections give the lender a concrete basis or financial-data that they can use to somehow assess this risk. It's difficult for them to approve such loan if they don't see the potential of your business.

How Much Money You Need

You need to know the importance of being accurate on things as you don't want to invest on things you are not familiar with. Your goals should be realistic and allow yourself to predict the outcome of your venture. Know when you're able to repay the loan. Convince the lender that the loan will serve as a point of reference to your success and that you're sure to repay them through stable profit.

Having a business means having the determination, the drive and the will to become successful. Be proud and confident with your venture. Keep the positive attitude. And if somehow, your loan request gets denied, try another one.

Tips For Account Receivable Pledged As Collateral

Accounts Receivable, commonly used to secure lines of credit, are normally presented as a list of trade customers or clients that owe trade debts to an entity indicating amounts owing and the number of days they have remained unpaid.

A line of credit is generally revolving credit secured by accounts payable and inventory that are monitored constantly. If collateral shortfall occurs, other fixed assets including real estate may be taken. The primary source of repayment is debt collected in the normal course of business. If one takes accounts receivable as collateral, one should mitigate the risk by excluding some of the accounts, such as intercompany accounts, from the list and examine the possibility of the following risks;

• An insincere borrower may collect receivables and fail to remit to the lender, thus causing the line of credit to eventually max up. Lockboxes or direct remittances to the lender may tone down this risk.

• An unscrupulous borrower may concoct accounts in order to obtain more funds. Periodic random sampling of debtors by the lender, ensuring that invoices are authentic and validating balances with debtors may help

• If the borrower has mutual contra accounts with its customer, there is the likelihood of offsets to take place without the lender's knowledge. Ensure to notify such customers of the existence of your assignment of the receivables.

• Some goods may be "sold" on consignment basis, that is, the goods are placed in the hand of another, but the consignor retains ownership until the goods are sold or returned. Such goods should be identify and the terms of consignment examined carefully because unsold goods may be returned to the consignor.

• At times a customer may make counterclaims or dispute amounts owing several weeks after the receivables aging list is compiled. Consider the frequency of such occurrences and discount the loan amount accordingly.

• Look out for hidden liens arising from suppliers and other sources as liens may dilute your collateral. For example, if the borrower has a tendency of not paying taxes, an IRS lien may disrupt operations and put your loan at risk.

• Look at the frequency of returned goods and your clients policy on returned goods because a dishonest borrower can resell returned goods and fail to inform the lender.

• A borrower may invoice for goods and continue to warehouse them until the customer needs them. If such goods become the subject of a dispute subsequently, the borrower may not succeed in collecting the receivable. Establish whether there are any previous such cases.

• Analyze the receivables periodically to determine whether or not the value is maintained. In order to value eligible receivables, take the total of book value of debtors aging up to 90 days less contras, disputed amounts, intercompany, consignments, and other risky items. Then discount this estimated value by say, 25% or more to provide a cushion for the unseen risks.

• In addition to taking accounts receivable as collateral, endeavor to strengthen collateral cover by taking inventory as well.

• Review financial statements regularly to identify any signs of deterioration in performance, i.e. sales turnover, gross revenue, net income and accounts payables.

Franc Jo is a Senior Underwriter at http://www.loansunderwriting.com, the leading provider of outsourced Commercial Credit/ Underwriting support to lenders and funding solutions to small businesses throughout USA. Find similar articles and tips on money matters at http://www.loansunderwriting.com/Pages/Articles.aspx

Easy Restaurant Funding

Restaurants just like any other kind of business need funding at some time. It could be money for advertising, expansion or for inventory. In most cases, only a loan can save a restaurant yet the process of getting the loan can be quite lengthy. When getting the loans from banking institutions, you also have no approval guarantee and there could be lots of hidden charges coming with the loan.
When faced with the need to fund your restaurant, a merchant cash advance could be the solution you have been looking for. This loan is not a bank loan and neither is it a credit line. It is more of an investment by the lender into your business to help you with your restaurant needs after which you get to repay in small and fixed percentages. The cash advance gives your restaurant the chance to grow and you will of course get to repay the cash from the growth.
The cash advance is quite helpful and the best thing is that you don't get any restrictions with regards to how you use the money. Your credit card transactions are what will make everything possible and you will have access to the cash in a few days time hence making it all possible to boost your restaurant thereby getting the best out of it. This kind of business loan is free from risks and it is the method most people are using today to improve their businesses.
When you choose to go for this loan for your restaurant funding needs, you will be in a position to get a huge amount of money in relation to the average credit card monthly volume. The payback periods are quite flexible and you can even pay the amount within a year. It is definitely an easy and fast way of funding your restaurant and increasing its growth as well as productivity.
When you are going for the funding, just like any other kind of funding you will need to ensure that you choose the right lender whose terms and conditions for the funding you are comfortable with. The reputation and experience of the lender should matter as it is what will tell you just how reliable and trustworthy the funding is. There are so many fraudsters out there today hence the need to ensure that you are choosing the right people with the potential to help your restaurant grow and do better.

If you want to avoid a lengthy loan process with hidden fees and no guarantee of approval, use simple and straight-forward process for Business Loans and Restaurant Funding. You can avoid all type of Bad credit business loans.

Various Types of Promissory Notes

Promissory notes are used as a document to record the details of the loan transactions between two or more individuals. The documentation promises that the money borrowed will be paid back to the lender within a specified time. These can be created at any time of the loan for ensuring the secure payments. Any kind of loans must be documented using this note, no matter whether the loan is a simple payment to be made for a family member or a friend. The note has legal validity by which the borrower is legally tied to keep the promise of payment as per the agreements in the note.

A well written document should contain the repayment terms, repayment amount and interest charged, maturity date and in case of non-payment what action should be taken. This documentation is considered as a good idea for record-keeping and payment of tax for loans taken between individuals. Once this document is signed by both the borrower and lender, the borrower is agreeing to the terms and conditions written in the document. The borrower should pay back the amount within the timescale showed in the note or else the lender can take legal action against the debtor. Based on the loan type, there are various types of promissory notes.

1. Commercial

This kind of note is documented according to the terms agreed by the lender and the debtor. In this case, the lender can legally take action against the debtor by acquiring the assets of the borrower as mentioned in the document, if the debtor cannot repay his/her loan. The lender can demand for immediate full payment after the maturity date and don't have to wait for long to obtain the money as installments from the person. Commercial promissory note includes strict conditions and some additional legal conditions.

2. Personal

In most of the cases, there will be only verbal agreement between family members or friends when you borrow money from them. But verbal agreement does not have legal approval in courts as you don't have any proof on the loan borrowed from you. A personal promissory note will provide good faith on the borrower and a security to the lender. You will get these notes from supply stores or can be downloaded. You should include the amount borrowed, terms and conditions for repayment, interest rate and what action to be taken if the money is not repaid.

3. Real Estate

This type of note will secure the loan borrowed by the debtor, but if she/he fails to do so, the lender has to pay the loan. So lender must include a mortgage for the loan given to the borrower which provides security to the lender when the borrower does not repay the loan.

4. Investment

These notes are used in businesses where the investors are the taking the risk of losing money. So the investment promissory note is making the borrower to repay the loan disregarding the success of the company. In this case, the note is functioning as a currency with legal value which can also be traded.

More information, please visit free promissory note form and promissorynoteform.org [http://www.promissorynoteform.org/].

Facts and Findings of Business Loans

Business Loans For Small Business

Option small business loans can be a funding solution acquired through sources which differ from the traditional method of obtaining a loan - "The Bank". Small business owners opt for this kind of loan as they have limited resources of collateral and since their business is a higher risk. These factors truly complicate the process of obtaining a loan.

Business loans for small business is 1 option for funding is identical to personal loans. Because starting companies have tendency to fail in short span of time, lenders do not want to put their funds at higher risk. When the small company owner is refused by the banks for startup loans, you would generally expect other sources like close friends, households and organizations that are willing to take risks on new businesses.

It is possible to also seek out an investor that is willing to invest their cash on your new business. There are several of private investors nowadays that will overlook the risk of startups as they are interested in the possibility the new company has to succeed.

These business loans for small business resources cater to organizations which typically have been refused a small business loan by banks. Classic lenders like banks deny most businesses that call for startup capital or those with unstable economic history.

Factoring is one of the prevalent alternative resources of small business funding. When a business opts for factoring as a source of funding, it will be selling its receivables at a discount into a different company. At the same time, the company should consider purchase order financing to assist with filling orders. There are now programs available that will assist manufacturing companies to produce their product. Purchase order funders will not put cash in the hands of the new business owner, but will pay the suppliers directly and then when the finished product has been sold to the customer, the factoring company will collect the payment from the customer directly to satisfy the funds advanced to suppliers to produce the product. It would also be advisable to get a merchant account to accept credit cards.

Optional resources for startup funding also includes angel investors. An angel investor is an individual or group of people who supply funding for startups in return for a percentage in the profit of the business. Most investors organize as a group or network to combine capital. This really is an excellent way for them to decrease the loss they could face if they invest alone in a small business.

Wade Henderson
Wade Henderson is a recognized Expert in Business Finance with over 16 years Experience in the Commercial Lending Field and a strong reputation for getting the deal done. Visit his Commercial Finance Website to put his experience to work for you.

Financing Apartment Buildings

First it was the boom, then it came the bust, and now it's the bear market. Despite the massive liquidity injected by the Fed, overall the U.S. real estate has yet to experience more bearish seasons. But there is one branch of the real estate sector that appears to be exempt from the deflationary pressures of our economy. Apartment buildings are gaining popularity due to exceptional levels of high occupancy. Therefore many investors have made the decision to park their money in this kind of investment.

If you're new to multifamily investing you will most likely want to know as much as possible about the world of financing. While each transaction is unique and underwritten on a its own merits it's worth knowing that there are a few basic requirements commercial lenders use. If you're a seasoned investor you could still benefit from keeping up to date on such criteria especially if you're looking at acquiring a new property or refinancing one that you already own.

The Collateral

The underlying asset is among the first on the lender's list to review. This is the security the lender uses for taking the risk of lending you money. Therefore, the building you own or looking to buy represents the source of repayment for the commercial loan.

Believe it or not with very few exceptions lenders do not like distressed properties and REOs. These kind come with a myriad of problems such as high vacancies, management and tenants issues, title, lack of maintenance and or upgrades, local economy, and in many cases inability to service debt. As a result, hard money may be one of the very limited financing options.

For conventional transactions great emphasis is placed on the property and its condition. In case of foreclosure, the lender wants to be sure it has a marketable property. This is the reason for which the lender will typically not allow the borrower to choose the appraiser. The commercial appraisal is detailed and it utilizes three variables to derive the property value: income approach, replacement cost, and sales comparison method. The income approach carries the utmost important factor in determining the collateral approval. A building could be fancy, well-maintained, and in a great location, but if the income is not there to support the value the collateral does not pass the test.

The Cap Rate

Among other factors worth mentioning are the age and condition of the property, the vacancy rate, and the area market capitalization rate. The "Cap Rate" is a ratio used to determine a property's value based on its generated income. It's computed by taking the rental net operating income (NOI) and dividing it by the property's fair market value (FMV) or sales price. The lender will then compare the property's Cap Rate with the general area's rate for similar properties. The red flag arises when the ratio is lower than the norm, therefore a higher cap rate is certainly desirable. Conversely, a very high ratio raises another red flag. Rest assured that an underwriter would question why a property has such a high ratio. Are there any underlying issues that could potentially affect the property in the future? Remember that an underwriter has a detective's eye, he/she is looking for what could go wrong before looking at the positives.

If you're looking at buying an apartment building something tells me you'd want to first look at the Cap Rate. Often a high ratio means a better deal for you. If the area's Cap Rate is approximately 8% and the property you're looking to buy has a 5% ratio you must justify why you're buying it. What is it that compels you to pay the higher price? Remember also that the appraisal will put a heavy emphasis on the lower ratio.

Now, let's do some quick calculations as an example. We'll assume that you're trying to determine between two previewed properties. The first property has a NOI of $35,000 and an asking price of $600,000. The second property has a NOI of $15,000 and an asking price of $150,000. Which one would the Cap Rate suggest is a better investment? Obviously, the second property since the Cap Rate is 10% ($15,000 / $150,000) versus 5.8% ($35,000 / $600,000).

On the other hand, if you're the proud owner of an apartment complex and you want to figure out its estimated value, you can do this by first learning what the area Cap Rate is for your location. Let's say the area Cap Rate is 8% and your property's NOI is $42,000. You can then easily determine your value at $525,000 ($42,000 /.008).

The Cash Flow

Cash flow plays a significant role when underwriting a multifamily loan. Within the industry the cash-flow analysis is known as the Debt Coverage Ratio ( DCR). Such ratio measures the property's net income ability to cover the annual debt service. The lender will analyze the property's rent-roll - and the financials - and determine the annual income and expenses. After that it determines if the annual cash flow can service the new debt.

The DCR is calculated by dividing the property's annual NOI by the property's projected annual debt service (based on the new loan). Annual debt service includes the principal and interest payment only. Taxes, insurance, and the rest of the expenses have already been deducted when determining the NOI. Lenders are looking to see a minimum of 1.25 ratio, meaning that for every $1 of debt service the property must generate a minimum of $1.25 in net operating income. So, let's say a building's NOI is $35,000 while the annual P&I is $27,000 (or $2,250 monthly). The resulting DCR is 1.29, a ratio within the guidelines. However, a mere increase of a half percent on the rate could bring down the ratio below 1.25 thus putting the loan in jeopardy of being denied.

Borrower Strength

Most loans funding today are recourse loans. It means that lenders are not satisfied with the collateral only and you, as the borrower must provide a personal guarantee; which implies that your credit and financial strength will be scrutinized. Keep in mind that even if title to the property is vested in the name of a corporation, LLC, or some other form, lenders still require personal guarantees from their owners or members.

Underwriting trend is rather conservative so lenders expect you to prove a great credit history, sufficient apartment building experience, and a decent net worth with a generous amount of liquid funds. When it comes to the capital invested or equity owned most programs want to see the borrower's equity at twenty percent or more. Your net worth should look impressive. Fannie Mae, for instance, wants to see the borrower's net worth be at least the loan amount requested.

Finally, the apartment building is the primary source of collateral and loan repayment, therefore it carries more weight when compared with the borrower during the loan underwriting process. Still, the strength or weakness of the borrower will ultimately impact the approval or denial of the loan.

A loan package meeting these basic requirements creates the foundation for a successful loan approval. However, keep in mind it doesn't necessarily mean that a transaction that meets the criteria is automatically approved for a loan. Still, not meeting any one of the above requirements will most likely end in denial of your commercial loan request.

The Lending industry is quite chaotic and unpredictable, especially in today's economic environment. Banks will like your deal today and hate it tomorrow. Most commercial loans are originated today as Portfolio Loans. This means the lender keeps the loan in their portfolio for the entire term. So, if they find today they have too many retail centers in their portfolio, they will decide - over night and without a warning - to shift to apartment buildings.

I have a system of shopping for your loan to hundreds of lenders nationwide and target the ones that are currently lending for YOUR particular need. Visit my site for more information at http://needamortgageloan.wordpress.com/

Commercial Loans for Small Business and Job Creation

Well, it looks like our economy is finally turning the corner and the small businesses are starting to show a profit, much like the corporations have been for the last 18 months. Indeed, there are a lot of retained earnings at the corporate level, and the banks are on solider footing and willing to make more small business loans now.

We are also entering an election year, and typically that is good news for the US economy. In my retirement I do a little bit of business consulting, and the other day I was assisting a small business person prepare a business plan, put together some proformas, and the other required documents to secure a business loan. She had decided not to go with a SBA or Small Business Administration loan because of all the stipulations and requirements, which did not make sense for her financial wherewithal, and abundance of personal assets.

Nevertheless we got to talking about what she was planning on doing with the money and it turns out she was going to expand her business so she could make more money. In doing so she will be hiring more individuals, and right away she will be hiring three new salespeople and two for marketing. That's five additional jobs that she will be creating. She will use some of the loan money for cash flow as the salespeople and marketing department sign up new corporate accounts.

Indeed, perhaps this shows how commercial loans for small business adds to job creation in this country. The corporations are very good at collecting money for their goods and services, and they are extremely good at lobbying protectionistic rules and regulations from government to stifle their competition or put up barriers to entry. But for a small business person caught in the trap of a poor business cycle or the uncertainty of future regulations it causes entrepreneurs to forgo the risks associated with business expansion, or taking out more credit in their personal name or in the name of their business.

Prior to now, there was not a whole lot of lending going on in her industry or sector, and although there was some, it hasn't been until now that she felt confident enough to go out and risk capital or borrow more money. Now she does feel confident, and she is moving this ball forward and down the field. Indeed I hope this will help others see how important commercial loans are for small business and job creation. Please consider all this and think on it.

Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank. Lance Winslow believes writing 23,100 articles was a lot of work - because all the letters on his keyboard are now worn off..

Commercial Loans and Business Plans Considered

It's not easy to write a business plan, but it is paramount that entrepreneurs do so. For instance, consider if you will the type of folks who are entrepreneurs - gregarious types of individuals, who are probably not very good with the fine details as accountants are. Therefore, they often have trouble preparing business plans. Nevertheless they need to do this so they understand what they're getting themselves into, and evaluate their potential business opportunities appropriately without allowing their optimism to run away with the game.

Over the years, since retirement, I have helped various entrepreneurs in their businesses, and often they need to get funding or financing to start these endeavors, so they go and look to get a commercial loan. The bankers know that entrepreneurs aren't very good at writing business per-startup plans, so generally they except business plans which are half baked, or in the case of the small business administration, they have a form which is filled out by the entrepreneur in place of the business plan, it's about 13 pages.

However, a decent start-up plan could easily run 40 pages including the proformas in the back. It seems to me rather than making it easy for entrepreneurs to get commercial loans and therefore requiring less than adequate business plans - that we should be moving in the other direction, stipulating that the business plans the very well done. Indeed as a taxpayer I am concerned that my tax dollar will subsidize the SBA loan program. And many of these loans fail, but right now the taxpayer and SBA guarantees 90% of the loan with the local banks which make the SBA loans.

Since the bank has very little risk because the government is guaranteeing 90% therefore they are only on the hook for 10%. Are you beginning to see the problem with this? If entrepreneurs and small business people can't prepare start-up plans, and they aren't sure what they're getting themselves into, why an Earth is the SBA and commercial business banks providing more rope for these future business owners to hang themselves with? Indeed that makes no sense at all does it?

Perhaps, this is why I often tell entrepreneurs to create a business startup plan, then look at the real numbers, and play devil's advocate a little bit against their overbearing opportunistic enthusiasm and hyper drive optimism. Indeed, I hope you will please consider all this and think on it. If you have any questions, comments, concerns, or even case studies, I would be glad to hear about it. Please shoot me an e-mail.

Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank. Lance Winslow believes writing 23,300 articles by May 23, 2011 is difficult because all the letters on his keyboard are now worn off.

Invoice Factoring For Businesses Today

Today's small business owners are struggling and many looking for answers as to how these tough times will affect the overall value of their businesses.

It is times like this in our economy when we actually see an increase in a tactic known as invoice factoring, when a business sells its accounts receivable invoices at a discount. Invoice factoring has helped many companies survive and stay in business in the midst of the current global economic downturn.

A recent report tracking the health of small business, (BizBuySell.com) indicates that there has been a decline in business-for-sale transactions and valuations. Plus, the number of closed transactions reported in the first quarter decreased by 36 percent as compared to the same 2008 time period.

Another area that is dropping during this current economic environment are the value metrics for businesses. Revenue multiples for closed transactions dropped 5.5 percent to.69 in the first quarter of 2009, while cash flow multiples fell 3.8 percent to 2.69. The way this is determined is by dividing the selling price of a business by its annual revenue or cash flow.

The same report also indicates that median business sale price for closed transactions decreased 17.3 percent to $165,500.

Valuation multiples are going down and now buyers are hesitant to pay the asking prices for a business. Uncertainty causes concerns about a business's cash flow and future revenues.

Apparently buyers are having difficulty accessing the capital they need to purchase a business, and keep it going. The traditional banks, and venture capitalists, or angels, as well as SBA-backed loans have all simply dried up. Therefore, when there are fewer buyers able to bid on most businesses, there's less pressure for upward pricing.

Economic conditions have made it more difficult to close deals than ever before, but a number of business brokers are reporting a record number of buyer inquiries due to an increasing number of layoffs.

The good news is that market conditions for small business transactions should improve as selling prices continue to decline. The reason for this is because credit will slowly become available to new buyers.

Standard factoring companies have been around for more than 4,000 years. A highly effective cash management strategy, invoice factoring allows businesses to obtain funds based on their current accounts receivables and benefit immediately from 90 percent advances against invoices that would otherwise not be paid for 30, 60 or 90 days.

A business often times doesn't get paid right away for a product or service that it has already delivered, so the bottom line is that accounts receivable factoring, also known as single invoice factoring, might be an answer. Factoring is an extremely quick way to turn a company's receivables into cash rather than waiting up to 90 days for an invoice to be paid. Factoring companies - also knows ASN factors - will look at your customers' credit rather than yours. The single invoice factoring process includes due diligence that typically takes one to two business days. Once completed the client is at liberty to offer invoices to the factor for purchase.

Factoring is not a loan - it is the purchase of a financial asset, or the receivable. Factoring varies from a bank loan in several ways. Banks base their decisions on a company's credit worthiness, whereas factoring is based on the value of the receivables. Bank loans involve two parties, while factoring involves three parties.

Factors typically look at the creditworthiness of a client's customers and they do not expect to buy 100 percent of a company's receivables. There are no minimum or maximum sales volume requirements. All the factors professional rates are competitive because each client's circumstances vary, which may have an impact on the fees charged. The program allows choices of invoices to be factored, enabling customers to retain most of their money, while spending the minimum fees to guarantee adequate cash flow.

Upon receipt of invoices, the factoring company checks the credit of the debtor named on the invoice to make certain that the sale represented has been completed satisfactorily. Once completed, the debtor is advised of the purchase by the factor and the client receives their funding. At the end of the credit period, the debtor pays the factoring company directly completing the transaction.

Single invoice factoring, or spot factoring, is an extremely fast way to turn receivables into cash.

Just Factoring is a specialist, independent and importantly, experienced brokerage that provides specialist advice on Invoice Factoring and the often complex process of finding a factoring companies. For more advice and a free consultation visit our website www.JustFactoring.co.uk

Commercial Loans - Types Available

In the world of commercial real estate, time is of the essence. Perfect timing may mean the difference in landing a great deal or losing out. Often, it is simply not feasible to wait for permanent financing to be put into place. In this interim, a bridge loan lender can insert a commercial bridge loan to secure the deal until permanent financing can be put into place.
Commercial bridge loans are exactly as their name implies, a way to bridge the gap between securing the property and securing it with temporary financing until more permanent arrangements can be made.
But this type of convenience does come at a price. Since these loans carry a higher risk, they will have a higher interest rates, points, and other additional costs associated with them. It is also common for these loans to carry a higher loan-to-value ratio, and it is common for them to have a balloon payment after a period of a few years.
In order for a lender to participate, they might require additional safety nets on their behalf. Cross-collateralization is one example where collateral for one loan is used for another loan's collateral. Another example might be what is called equity participation. In this scenario, the lender has the opportunity to retain part of the equity. Since they now have a vested interest in the deal, they have an additional incentive and are much more willing to approve it.
On a positive note, unlike the traditional method of financing commercial property, these loans are processed much quicker and require significantly less paperwork than their regular counterparts. This makes them much more appealing to investors and banks since you are dealing with a considerable amount of investment.
The appeal for bridge loans in the commercial industry is quite strong due to the positive effects they have. In this area of real estate, companies that are in a dire financial situation utilize bridge loans to temporarily carry them. This gives the company the additional time needed until an investor can be located so they may keep their doors open and continue business as usual. Without the convenience of these loans, they would likely go under.
Sometimes a commercial property is about to go under and offers to sell at a greatly reduced rate if a buyer can make an immediate offer to save them. This keeps creditors at bay, saves increased harm to their credit and helps to limit the damage that can be done to their credibility with others. A bridge loan in this situation would give them a quick buyout before their lender could require that the company's assets be liquidated in order to satisfy the debt.
Bridge loans are also used when companies are in the midst of private financing, or if a company is offering to go public. Since this time can be quite significant for the process to be completed, bridge loans give the company the needed injection of cash to carry them through this period.
Another popular way to implement their use is during a project's permit phase. Since there is never a guarantee that a project will receive the necessary permits that is needs to carry on the work, a bridge loan might be inserted during this lull in order to carry it until the official documentation has been obtained. Of course, as with any practice of lending the higher the risk, the higher the fees involved.

All of these examples are proof of the importance of the right bridge loan lender in a commercial application. To make sure that you are getting the best deal on a commercial bridge loan, make a call to Capital Direct Funding. One of their trained professionals can walk you through the process and give you vital information so you will know what to expect. Capital Funding Direct can be reached at 1-877-273-8723, or by visiting them online at http://www.capitaldirect-funding.com there address 12 Greenway Plaza, 11th floor in Houston, Texas.

Capital Direct Funding is a financial management since 1972 experience. Capital Direct Funding has Built a successful history of providing fast private bridge capital and special project circumstance lending to sophisticated real estate investors, business property owners and developers worldwide.

Business Loans From Private Finance Groups

Private finance companies have replaced banks in terms of providing business loans to entrepreneurs who find credit companies more reliable when it comes to borrowing money in the form of loans. There are satisfactory reasons behind businesses approaching finance groups rather than banks for loans. The first reason is the easy loan procedure. Conditions put forth by banks for borrowing loans are so strict that most of the businesses remain out of purview of the banks' loan program. However, a finance company finds no reason in denying a loan to a business, however small it is. The finance groups have loan offers for each business; the amount may vary from one business to another though.

Loans work as a lifeline for a business hence most of the time entrepreneurs are on the lookout for low interest quick business loans on easy terms. Borrowing money in the form of a bank loan could be troublesome because banks take their own time in processing loan applications. Also the loan is approved after assessment of the business hence entrepreneurs seldom get the full amount they have asked for. But a finance company assures the full amount of money requested, if it is satisfied with the performance of a business. The finance group can even give you cash in hand which is near impossible to receive from a bank, however generous it is.

People are fed up with the bank's cumbersome loan process and they are looking for someone who could provide business loans at reasonable interest rates without consuming too much time. Private finance companies or groups are a boon for businesses as they promise to be an easy loan facility to all irrespective of its performance. The credit companies look for ways to make their loan process more convenient so that every business can take advantage of easy loans. On the other hand, banks look for businesses that are capable of repaying loans with high interest rates.

Banks are no longer a favorite place for obtaining business loans and this is evident from the number of entrepreneurs approaching credit companies to finance their businesses. Obviously the ease of borrowing and low interest rates are the guiding forces behind the businesses approaching finance companies. The convenience of repayment and the capability of giving cash in hand provided by a finance group are becoming more interesting into today's entrepreneurs. The private finance groups are always happy to help. Loan applications are available on their sites and one can also ask for assistance to fill the loan application properly.

Robert Ellenbecker has been associated with banking industry for a long time and today he is an authority on micro finance. His articles on business loans, cash advances and credit card processing are informative and make a good read.For more information visit Business loans.

Business Loans From Private Finance Groups

Accounts Receivable Factoring And Financing

Accounts receivable factoring is one of the most flexible and immediate financing solutions available to small and medium size business owners to obtain immediate working capital to meet its current financial obligations and accommodate other business needs which can be utilized to purchase inventory and equipment as well as freeing up cash flow to bid on new contracts.

Accounts receivable factoring enables a business to reduce the amount of cash balances outstanding it has with its clients which enables the business to have more cash on hand which allows the business to put to use the cash into investment which spurs the company's growth.

A great deal of business have cash flow structure that vary greatly. Many business experience seasonal productivity where some months are extremely busy where some months are the opposite. Regardless of the seasonality of the business, even when a business is undergoing its unproductive months, the business is still required to meet payroll, overhead and other business expenses.

Because of this fact, many companies must maintain a cash balance on hand to meet these obligations and utilize Accounts receivable factoring to sell these outstanding invoices for cash rather than waiting 30, 60, 90 business days to receive their cash for services and products rendered.

Accounts receivable factoring varies greatly from traditional financing because the most important factor in funding is always the credit worthiness of the debtor. In contrast, the fundamental emphasis in a traditional bank lending funding relationship is always on the creditworthiness and financial history of the borrower, not that of the business clients.

The greatest value of Accounts receivable factoring is that it provides business owners the ability to turn the business around and generate higher profits and margins. It also allows the business to bid on opportunities and generate new business that otherwise would have had to be turned down because it did not have the cash on hand to meet the inventory, service and product needs.

As banks continue to be highly restrictive in their lending underwriting, Accounts receivable factoring will enable small and medium size business owners obtain the cash flow they need to grow their business and finance their growth and prosperity.

Today many factoring companies continue to advance funds to small and medium size business whose clients are more credit worthy organizations and contract with Government. While the vast majority of accounts receivable factoring firms never take possession of the goods and services their factoring clients sell, sold, factors offer a host of financial advice when advancing funds.

Accounts receivable factoring firms provide key services to their clients: detailed information on the creditworthiness of the clients whose accounts they will factor, reports on the collection of the invoice, as well as making the actual collection calls for the service and products rendered.

Elvin Jimenez is President of Amadeus Funding, an Accounts Receivable Factoring [http://www.amadeusfunding.com/] firm specializing in Merchant Cash Advances and Asset based Lending.