Commercial Business Loans
Commercial Business Loans | There are as many ways a business could need a loan to grow or expand as there are businesses.
These secrets are the information your banker does not want you to know.
How to get $25,000, $50,000 or even up to $5,000,000 to fund your business with commercial business loans (even if you don’t have perfect credit)?
The biggest challenge any business owner faces today is securing the financing to support their business.
We will share with you the 5 Insider Secrets to securing commercial business loans that will ensure that your business has a long and prosperous life.
Learn how to secure a commercial business loan fast – in 24 hours or less.
What is a Commercial Business Loan?
According to Investopedia, the commercial loan definition is:
A debt-based funding arrangement between a business and a financial institution typically used to fund significant capital expenditures and or cover operational costs that the company may otherwise be unable to afford.
Commercial lenders will often look at your business in a very conservative and traditional way. Most lenders will require certain documentation before approving your business for a commercial loan.
It is important to know what is necessary regarding documentation before you undertake the loan application process.
Well, that’s not a secret. In fact, it’s public information. However, we get asked by business owners daily who request a funding solution for their business and are totally unprepared to provide even the most basic information or documentation.
If there is one major tip, we can provide to you as a lender is to stay organized.
Make sure you keep copies of your business and personal tax returns. You will need at least the last three years. Do yourself a favor and start collecting this information now. You never know when you might need to apply for a loan.
Think about it. What if an opportunity pops up unexpectedly, good or bad. Are you prepared?
You are also going to need personal financial statements, year-end financials for the business and a wide variety of other business documents.
As you can see the commercial bank application process is not as easy as saying, “I need money.”
Commercial Loan Checklist Requirements
Here are the necessary requirements to be considered for a business loan by most banks and credit unions. The information that follows is an example of what banks typically request. Your bank or lending institution may or may not need these these documents.
You will need to provide the organizational documents of the business. These documents are usually the charter and the by-laws.
Depending on the actual organizational structure, this might include partnership certificates or partnership agreements.
If you have an LLC, it is the articles of organization, operating agreements and or membership agreements.
As previously mentioned you will need the last three years of business tax returns. Most banks also want to see your personal tax returns as well.
Along with this, you’ll need to show a profit and loss statement and balance sheet for the last three years.
You will also need to include a current year to date P&L and balance sheet.
What happens if you are in business for less than three years?
If you’ve been in business for more than one year, but less than three years an alternative lender like Sunwise Capital can help you.
If you’re looking for a line of credit from a bank, they will often ask for your current accounts receivables and your accounts payable aging report.
Make sure you can provide a detailed list of any equipment or machinery. Along with the list also means providing a depreciation schedule.
Make sure you get your accountant or CPA on board to help you with many of these documents.
Are you using accounting software?
If you answer “YES,” continue reading.
If your answer is “No,”
STOP – DO NOT APPLY WITH A BANK
If you’re not able to gather all this information, no worries.
Apply and be approved for a commercial loan with one of the best alternative lenders.
Along with your A/R and A/P reports you’ll need to provide a schedule of debt. Your report should include all the details of each debt along with providing the creditor or lender and the original amount of the debt.
Banks will also want to see a current inventory report. This report will need to be clear and concise. It will include all your pertinent stock and supplies.
Once you pull this together, you will need a 2-year financial pro forma. This pro-forma is also known as a work in process report. This report provides for any contracts that have not been started as well as those that are “in process.”
This report includes all the labor and overhead expenses including raw materials.
Are we done yet?
Lastly, you’ll need to provide personal financial statements and cash flow statements – for each partner that owns more than 20% of the company.
That’s right. Every partner that owns 20% or more needs to provide these statements along with their personal tax returns for the past three years.
What a Pain in the BUTT!!!
Get approved within 24 hours without all the hassle. APPLY NOW
How is your business growing and developing? What essential milestones is the company reaching and how long is it taking to get there?
All lenders consider the age of your business as one of the determining factors for a loan approval. Most traditional lending institutions like the banks consider three years to be critical regarding survival rates.
That’s why most banks want to see your last three years of personal and business tax returns. Compare that to alternative lenders who like to see a minimum of one year of continuous growth.
How to Get More Money Out of Your Commercial Business Loans
Just like laws of nature, there are certain indisputable facts when it comes to bank financing.
The truth is that the more years of business operation, the easier it is for the bank to justify the approval. The same applies to your revenue.
One thing lenders do is see how you stack up against the averages.
Commercial lenders will take the industry you are in and then compare similar businesses in your local area to yours in terms of time in business and revenue.
It is a well-known fact that banks do not like small businesses (by way of annual income.
Just look at the headlines.
Why Banks Are No Longer Lending To Small Businesses 5 Main Reasons Banks Turn Down Small-Business Owners for Loans Small Business Finance – Why Aren’t Banks Lending?
The one common theme across all the headlines is that banks make less profit on a smaller loan. Therefore, they are not motivated to originate these loans.
Banks are in business to make money. Are you surprised?
If 80% of all business loans are for less than $500K, then it’s easy to see why banks reject these loans in record numbers.
A bank’s cost to underwrite a $1M loan is the same as a $100,000 loan. So why not just focus on the much larger, higher margin loans? That’s what they do.
At Sunwise Capital our average loan size is $50,000. Although we do much more jumbo loans our costs to underwrite the loan are significantly less than traditional banks. As a result, we have much better economics and issuing smaller loans is no problem.
Although we work with companies that generate anywhere from $150,000 a year in annual revenue to as much as $15M a year, our typical client makes around $750K.
You can easily see why we have a much better approval rate than banks. We don’t have large 23 story home offices with significant regional offices and multiple branches in every city.
You don’t see us advertise on TV nor do you see glossy print ads in all the magazines. We don’t have paper pushing personnel that need to justify their jobs by asking you for more and more information.
You get the point, right?
Don’t Make This Silly Mistake with Your Commercial Business Loans
Every business looks to grow and expand. What happens when you stop growing?
Ray Kroc, CEO of McDonald’s famously said,
“When you’re green, you’re growing. When you’re ripe, you rot.”
Does that make sense?
Businesses need a lot of capital to grow to their full potential.
What happens if your business doesn’t get the money to improve?
Companies must face the facts. If they do not receive a steady inflow of working capital either from self-generated cash flow, lenders, or outside investors, their growth becomes stunted, and if they are not very careful, they may even die.
We all seem to agree that businesses need access to capital to continue to grow.
Are you a business owner trying to go to that next level in business?
Are you trying to secure a business loan?
Commercial business loans are typical for large-scale purposes that range from buying new office equipment to buying an office building.
Often the funding process can seem like a mountain to climb. Too many business owners it’s almost inconceivable, and for many, the challenge is just knowing where to start.
If the loan application process seems like a huge minefield, the good news is that there are ways to navigate around these landmines.
Can you believe that bankers do not want you to know this information?
It shouldn’t come as a total surprise, but we will share with you the remaining 4 Insider Secrets to secure a commercial loan to help your company grow and expand.
Below are the remaining secret ways to secure a commercial loan for your small business.
KNOW YOUR COLLATERAL ASSETS
I can’t stress this enough. You have assets that you can leverage to secure a loan.
Your biggest current asset that you can readily leverage to obtain a loan is your REVENUE.
These are simply the easiest and quickest loans to get. Period – the end!
This revenue based loan looks at your past three months of revenue. It then prorates this out over the next 12 months, and you can receive between 8% to as much as 20% of that amount with terms ranging from 6 months to 5 years.
You can apply today, get approved by tomorrow and funding within the next two days. It is that simple.
These loans are usually paid back either daily, weekly or monthly, depending on a broad range of factors. These loans have no traditional personal guarantee. That is why these business loans can be a bit more expensive.
However, since approvals with credit scores of 500 or better are not unusual, what alternatives do you have available to you that are better than this?
It’s amazing how often a business owner comes to us and says something to the effect, “I want a long term business loan with low-interest rates and monthly payments.”
For those business owners who have good credit and are willing to sign a personal guarantee, fixed rate loans as low as 5.49% with monthly payments for five years are available.
The crazy part of this is when the business owner tells us they do not want or will not sign anything with a PG?
Really? Do you want a bank loan or a bank loan equivalent?
Let me ask you a serious question. Can you find a bank or lender anywhere in the United States that will lend you or your business money without a personal guarantee?
I didn’t think so.
Even the wise-guy on the street corner wants a guarantee.
PUT UP OR SHUT UP
If you’re not willing to guarantee your business loan why should we or anyone else offer you a loan?
Think about it. Even our loans that don’t have a traditional personal guarantee still have performance guarantees.
This guarantee means (in non-legal terms) that you “agree” to remain in the business we’re lending to and that that company will continue to operate and repay the loan.
Hesitate or pause, and I guarantee we will rethink our commitment to fund your loan.
If the shoe is on the other foot would you lend to anyone without any assurances?
I didn’t think so.
I’ve told this story elsewhere on this site, and many people who know me personally know this as well.
When I tried securing a business loan from a private lender, he asked me if I was willing to sign over my house to him if the business failed.
Without hesitation and I mean that seriously, there was not a fraction of a second hesitation, I said, “Yes.”
I didn’t say, “Let me think about it.” Nor did I say, “Let me speak to my wife.”
Later the lender told me that it was because of my unbridled commitment and willingness immediately to personally guarantee the funds that he approved the loan.
I’m going to let you in on a little secret. You must be willing to put up a personal or performance guarantee on the business loan.
STOP RIGHT NOW
DO NOT PASS GO
DO NOT ASK FOR A LOAN
Common Complaints About Commercial Business Loans, and Why They’re Bunk
Many of us in business know about the Uniform Commercial Code, or UCC (UCC-1), and how powerful it can be to help you secure financing.
If you want to obtain a large commercial loan, this is a powerful tool to use.
A UCC-1 financing statement is used to secure property. Typically, this is for all collateral other than real estate. It may include equipment or inventory.
You are more likely to get a 100 percent financed commercial loan if you use the building or equipment as collateral for your loan.
What I Wish I Knew a Year Ago About Commercial Business Loans
When you apply for any commercial loan, your application will go through an underwriter. The underwriter must assess what type of property you will be getting for that commercial loan.
Here are a few of the insider tips that will help you get approved for that commercial loan from the underwriter.
Lenders look at key points with commercial business loans and ask fundamental questions such as:
- Can you afford to repay the loan? This term is called “Capacity.”
- What are the quality and the value of the collateral?
- What’s your credit score? Are you creditworthy?
- How much skin or personal investment do you have in your business.
- Do you have any additional revenue sources to help with the repayment?
- What else do you have for collateral or guarantees?
The underwriter is likely to give you the green light for your commercial loan if you can demonstrate your strength as a borrower.
If there are apparent weaknesses, be prepared to address them with the lender adequately. Remember above all else, you must be consistent, and the story must make sense.
BONUS SECRET #6
Alternative Lenders: Expectations vs. Reality
You should remember that you can borrow from alternative commercial lenders instead of a bank.
These alternative lenders can be a specialized finance company or a group of private investors who want your business just as much as a typical bank but with friendlier terms, and the application process may be faster and simpler.
Many traditional financial institutions require you to complete mounds of paperwork. It is standard practice to ask you for the last three years of personal and business tax returns. Most traditional lenders also expect a 720+ credit score and other capital guarantees, assets or collateral.
This process is a nightmare, especially when you are running the day-to-day operations of your business.
An alternative lender like Sunwise Capital can help you get the commercial loan without business plans, high credit scores, and tax returns.
At Sunwise Capital, we want to help you grow and expand your business. We look for long term lending relationships. Perhaps that’s why over 75% of our clients re-borrow two to three times a year and some for two, three or 4 years in a row.
At Sunwise Capital we have commercial lending rates that are very competitive to meet what you need regarding a commercial loan.
Sunwise Capital offers to finance the following:
Qualifying for a commercial loan is important for you as a business owner. It will help take your company to that next level.
There are options for you as the business owner to secure this type of loan.
These options are especially true if you are in the process of looking for an alternative lender that is friendly, competitive interest rates and has a fast and easy application process.
It’s up to you to make the right decisions to get the commercial financing you deserve.