Business Loans Without Banks: 14 Reasons A Business Owner Might Not Go To A Bank For A Commercial Mortgage
Traditional banks serve a very important role in the North American economy. Nevertheless, when it comes to a business loan, there are many reasons that small business owners should not always use a traditional bank. There are not just one or two major reasons to obtain a small business loan from another source. As you will see below, there are over a dozen compelling reasons to consider a source other than a traditional bank for a small business loan. For most small business owners, five to ten of these reasons are likely to be applicable to them.
With many small business loan borrowers, banks have already declined their loan application. That particular compelling reason to use a source other than a traditional bank (being declined by a traditional bank) does not even appear on the list below.
Here are 14 compelling reasons a small business owner might not go to a traditional bank for a commercial real estate loan. The compelling reasons shown below also indicate that for business borrowers that can get approved at a traditional bank, there might be better options available elsewhere.
Reason # 1:
Minimum commercial real estate loan for many banks is $250,000 or more. With non-bank small business lenders, the typical minimum commercial loan amount is $100,000.
Reason # 2:
Most banks charge an up-front commitment fee. Most non-bank small business lenders do not charge an up-front commitment fee for a commercial mortgage.
Reason # 3:
Most banks will severely limit the amount of cash a business borrower can get when refinancing a commercial mortgage. When a borrower is refinancing their business property with non-bank small business lenders, they can typically get up to $1,000,000 in cash.
Reason # 4:
Most banks are reducing their commercial real estate loan interest in properties such as bars/restaurants, auto service businesses and funeral homes. Non-bank small business lenders are very interested in these business categories (and many other special purpose properties) for a commercial mortgage.
Reason # 5:
Most banks will require business plans for a commercial mortgage. The cost to provide this is usually several thousand dollars. Non-bank small business lenders typically do not require business plans as part of their underwriting process for a commercial real estate loan.
Reason # 6:
Most banks will require tax returns for a commercial mortgage. Non-bank small business lenders do not require tax returns or any income verification for a Stated Income commercial real estate loan. Many banks not requesting tax returns will ask borrowers to sign IRS Form 4506 (which authorizes the lender to obtain tax returns directly from the IRS). Non-bank small business lenders typically do not request borrowers to sign this form.
Reason # 7:
Most banks will require cross collateralization of personal property for a commercial real estate loan. Most non-bank small business lenders do not require cross collateralization of personal property for a commercial mortgage.
Reason # 8:
Most banks will require balloon payments or the loan will be subject to recall after periods as short as 3-5 years for a commercial mortgage. With a commercial real estate loan via typical non-bank small business lenders, all properties are eligible for 25-year loans and some up to 40 years.
Reason # 9:
Most banks will not permit seller seconds or secondary financing for a commercial real estate loan. With many non-bank small business lenders, if the business borrower uses a seller second or other secondary financing for a commercial mortgage, the business borrower can obtain a loan with a CLTV up to 95% of the property value.
Reason # 10:
Most banks require income verification or audits even after the commercial real estate loan closes. Non-bank small business lenders do not verify income either before or after a commercial loan closes with a Stated Income Business Loan Program.
Reason # 11:
Most banks have strict guidelines for “sourcing” or “seasoning” of assets or ownership to qualify for a commercial mortgage. Most non-bank small business lenders do not have any requirements or limitations involving sourcing/seasoning of funds or seasoning of ownership.
Reason # 12:
Very few banks offer an assumable commercial real estate loan. Typical non-bank small business lenders have an Assumable Commercial Loan Program which includes loan amounts up to $1 million.
Reason # 13:
With most banks, a typical commercial real estate loan will require 3 to 9 months to close. At typical non-bank small business lenders, most commercial mortgage loans close in 45 to 55 days.
Reason # 14:
Very few banks use Stated Income (no tax returns, no income verification) for a commercial real estate loan. Non-bank small business lenders use the Stated Income Approach for commercial mortgage loans in their Stated Income Business Loan Programs (most commercial mortgages up to $2 million qualify for these programs). This especially benefits self-employed small business borrowers who frequently have income that is erratic and difficult to document properly.
By: Stephen Bush
Technology & Business Expansion: Matching Your Data Systems To The Business Growth Needs Of Tomorrow
Fueling the high growth rate for Retailers, Manufacturers and Distributors is a flurry of mergers and acquisitions. In today’s world of mergers and acquisitions, and heavy usage of the Web, companies are facing a new reality. Software that meets the company’s needs now will not be effective after a new acquisition takes place, or if sales substantially increase as a result of using the Web.
While meeting with a prospective client — a CEO of a large cleaning supply company — about purchasing new software, he told me that he was planning to grow his business by end of the year from 300 million to 500 million dollars by acquiring competitors he was negotiating with. When I asked him how he planned to integrate his company’s software with the new companies he was planning to acquire, his response was: “You hit the nail on its head. The software we are using cannot support our future acquisition plans. We will have to let the companies we plan to acquire keep using their current software until we find software that can meet our new needs. Not having the right software will result in a substantial increase of our operating cost. The unfortunate part is that we did not have the foresight to think ahead of the fact that our current software would not be able to support our acquisition plans. Nobody expected that we would grow at this rate and now we have to pay the price.”
Here are 4 unforeseen business disruptions that are likely to happen when your business environment changes:
1. Quite often companies engaged in e-commerce, experience an unexpectedly high volume of sales’ transactions that the current software cannot handle efficiently, resulting in the need for additional labor and excessive operating costs.
2. Frequently, the current software cannot provide the desired analytical information needed, resulting in the downloading of large amounts of data to spread sheets and more complex data manipulation to get the needed reports.
3. When mergers and acquisitions take place, the number of users along with the transaction volume will substantially increase, resulting in the possibility that the current computer system will not be able to handle this sudden change.
4. The acquired company might not have the same business practices as the company doing the takeover, resulting in the possibility that the current software may not be able to handle the new business demands. This can result in multiple software platforms being used creating higher operating costs and additional complexities in the computer infrastructure.
When planning future expansion, steps should be taken to ensure smooth business growth.
Software effectiveness evaluations should be performed the same way as evaluating old equipment in a factory. When evaluating the current software functions, the focus should not be on how well the software meets the business needs today, but whether it can meet the business growth of tomorrow when the company moves to the “next level.” In today’s business reality, which is changing at lighting speed, lack of planning can be a very costly proposition.
Nobody likes change, but not facing the fact that a company’s current software is outdated can result in substantial business disruptions and expenses down the road. The question that should always be asked is: “if the business reality changes drastically resulting in an unexpectedly large amount of new users or volume of data transactions, could the current software be able handle it?”
By: Dan Kaplan
There is a lot of difference when we look at a small business and a large one. In a large one, the owner can afford to lower down the rates owing to wavering economic scale while in a small firm the profit margin is low. Hence the owner has to make sure he cuts down on all extra expenses. There should be a large degree of cost cutting to compete with other firms in the industry. In both the large and small business firms accounting plays a crucial role. Accounting costs in small business firm must be put in restraint lest it will overflow the annual budget. Thus, there is the requirement of sound small business accounting. There are clients, government agencies, tax agencies, prospective clients, creditors, banks, debtors and employees who need to study the books of accounts.
There are many ways a small business accounting services can be managed. There are some new age accounting solutions which cab be of immense help to small business firms. As, all of us know Information technology plays a vital role in our daily life so it does in professional sphere. Lots of huge tasks can be sorted out in few minutes with the help of high-tech gadgets and tools. Nowadays accounting outsourcing firms are employing specially designed accounting software that handles the bulk task with so much ease. This software helps in producing flawless accounting record without any error. Firstly, it completes the accounting work in time less than any accountant will take. Secondly, it saves the cost that would have gone in employing accounting professionals.
Accounting software are user-friendly and doesn’t require special training program to learn using them. Almost any professional can use it without any external guidance. They do not require any additional cost of hardware except the computer. The programs can be updated as and when required. There are many advantages in using the new computer software. The firm can track payment of the debtors and check the level of inventory left in the store house according to the books of accounts.
There are a few things one should consider before buying or downloading software. There are plenty of software available in the market but one should make sure that they are compatible with the system and the accounting work that is to be done. If the business is expanding then it is best to have multi user friendly software. One must always test the software of a given period before using it completely.
Most of the outsourcing firms offer various services apart from accounting outsourcing. Search engine marketing is one such important service that your firm may require in order to flourish and expand your online business. Search engine marketing, SEM increases your online visibility by directing maximum traffic towards your website. It achieve maximum business profit by employing several Internet marketing techniques like affiliate marketing, PPC, and social media optimization. These different means of Internet marketing strengthens your position in online business world and provides you an edge over the competitors.
By: Alvis Brazma
One of the greatest opportunities for improving the organizational climate is the annual management meeting. Yet such a meeting may fail to take full advantage of this opportunity for several reasons, including the following: The facility is not carefully chosen; the wrong people or not enough of the right people are invited; the sessions are too long or too short; the objectives are poorly defined; there is a lack of participation and involvement; communication is from the top down; too much attention is focused on problem solving and dwelling on past mistakes instead of looking ahead to future opportunities; too much or too little time is spent on recreation; major priorities are not clearly identified because there is no theme to focus on; insufficient time is allowed for planning the meeting; too few people do too little homework; the meeting is not evaluated, so there is little improvement from one year to the next; there is no follow-up to reach those who did not attend.
A management meeting is the president meeting, so he should be heavily involved in the planning, implementation, participation, and follow-up. The following guides are not listed in order of importance, except in a general way.
Who makes the arrangements: one man or a committee? In a busy organization, there is generally no one of sufficient stature who can devote full-time for two or three months to planning and preparations for such a meeting. Accordingly, a temporary committee of two or three well-regarded staff and line executives should be appointed to take responsibility for the meeting. Generally, the human resources executive should chair the committee since he assumes a major role in its success. Others who might be involved are the corporate planner, an administrative staff vice-president, and a high-ranking line executive. The president should personally appoint these people and meet with them to stress the importance he places in this meeting.
Selecting the site and the participants
The site selection should be based on an estimate of the number who will attend. Depending on location, three to six months advance reservation time is mandated, particularly for a large group with corporate officers, group executives, and key staff personnel, from each of the divisions, the president and his chief manufacturing, marketing, engineering, and financial executives. The personnel director should of course be among the key staff personnel in attendance.
Among the major factors in site selection are the guarantee of sufficient good single rooms for everybody in attendance (to assure this, a personal visit for inspection is a must), quality of food and service, accessibility by public transportation, probable weather conditions, and costs. There are organizations that specialize in helping managers to select appropriate meeting sites; using such an organization is one way to insure adequacy of meeting rooms, equipment, and so on.
The theme sets the tone. Whether in times of adversity or in times of prosperity, the theme is highly important because it sets the mood and attitude of the participants. The theme selected on this particular occasion was intended to deal with a current period of adversity with its mood of austerity: Maintaining profits was extremely difficult, costs were rising while the line was being held on prices, there were fewer people to do more work, sales were down, and morale was suffering in the face of a shrinking bonus.
Objectives of the meeting
There were six objectives: to provide for
(1) Improved communication from the top down and from the bottom up;
(2) Cross-pollination among line and staff executives, including identification of problems and opportunities;
(3) Participation and exchange of ideas;
(4) Identification of practical applications of business fundamentals;
(5) Stimulation, inspiration, and intensified commitments;
(6) Follow-up and implementation throughout the corporation at both line and staff levels.
Length of the meeting
How long the meeting should run involves a number of considerations: who will be in attendance; how many are coming to such a meeting for the first time; what it will take to accomplish the stated objectives; whether there is ample time for recreation; the costs of an extra day; how long busy managers can afford to be gone from their jobs; the frequency of management meetings; and the attitudes of the top line and staff executives. There are other considerations, but consensus should decide and maximum benefits must be obtained by careful planning of each step and economizing on time.
At the meeting, registration is scheduled to start on a Sunday afternoon. This will allow time for people to get acquainted socially, and there is specific provision for a variety of recreational activities. The evening includes cocktails, dinner, introductions, announcements of new key promotions, and a good social period.
Two and one-half days are allotted to the meeting, with one entire afternoon off for recreation on the first full day (Monday) and a long recreation period (3 P.M. to 6 P.M.) on the second day. The meeting after a buffet lunch on the third day to allow ample time for participants to return to their respective homes. No evening meetings are held.
By: Artur Victoria