Connect with us

Bad Credit

Installment Loans for Small Business

Published

on

In this era of fast and short financing, it’s understandable that small business owners may overlook installment loans. After all, they require more documentation than some of the other types of lending products in the marketplace.

But this type of loan – in which you get a lump sum you repay over a predetermined amount of time – gives you predictability and a fixed interest rate, which could prove advantageous as you grow your enterprise.

“I like installment loans because, with other loan products out there, the payment may vary and it’s unclear what the APR is,” Joseph Meuse, founder and president of Business GPS, told business.com. “A lot of business owners know how to deliver a product or service, but they aren’t a CFO. The loan product is easy for them to understand and budget for.”

 

Editor’s note: Need a loan for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.

 

How do business installment loans work?

Business installment loans work like a mortgage or car loan: You borrow a lump sum of money and must pay it off over 12, 24, 36, 48, or 60 months, sometimes longer. The interest rate you pay on the loan is fixed and is dictated by your credit score. The cost for funding is much lower for borrowers with high credit scores than for those who have bad credit. Installment loans can be used to purchase equipment or property, for working capital, or to consolidate debt, among other things.

Whether an installment loan is the best funding product for your business depends on why you need the cash.

“You don’t want to take a debt obligation for too long to provide a solution for a cash need that may be short,” said Josh Jones, chief revenue officer at Kapitus. “Knowing your needs is super important.”

What are the types of business installment loans?

Small business installment loans can be used to purchase a vehicle or piece of business equipment, to acquire property, or to pay down expensive debt. They come in different terms, depending on your business needs.

  • Long-term loans: These loans have terms of six years or longer. They are typically used for big purchases such as a company vehicle or property.
  • Medium-term loans: These loans have terms from two to five years and are commonly used to purchase business equipment or to fund expansion.
  • Short-term loans: These loans have terms of less than two years. They are typically used to purchase inventory, to fill gaps in cash flow, for working capital, or for other short-term cash needs.

The longer the term of the installment loan, the more interest you’ll pay and the harder it is to get approved. Lenders are taking a bigger risk when they commit to you for six years rather than 18 months, so they charge more.

“Whether you are using it for a vehicle, a piece of equipment, or mortgage, make sure you’re using the cash for something you purchased over the course of the payback term,” Jones said. “If you’re not using the money over the payback terms, an installment loan may not make sense.”

What do you need to apply for a business installment loan?

A small business installment loan isn’t as easy to get as other financing options. Banks, credit unions, and alternative lenders all offer installment loans but expect a higher credit score and greater business strength than they do for other financing types. That’s particularly true during the COVID-19 pandemic, with lenders being even more risk-averse. That means you’ll need a good credit score, a sound business, and the willingness to offer up collateral.

“If you have assets, equipment, real estate, or accounts receivable you can use as collateral, an installment loan is for you,” Meuse said. “There’s more documentation required these days, sometimes a little bit higher credit score, and sometimes loans-to-value [ratios] are less, but lenders have a good appetite.”

From your credit score to business bank account statements, here’s what applying for an installment loan entails.

Credit score

Lenders are risk-averse, so your chances of getting a low-interest installment loan depend largely on your proven ability to pay it back. That’s where your business and personal credit score come in. Unless your company has been in business for years and has solid revenue growth, lenders will look at your personal credit score to assess your creditworthiness. If your credit score is low, they will either deny your loan application or charge you a higher interest rate. Banks and credit unions typically have higher credit score requirements than alternative lenders. Some lenders cater to business owners with poor credit.

Collateral

Business installment loans are typically secured, which means you must put up collateral. Collateral can be an asset such as equipment, accounts receivable, or property, which the lender gets if you default on the loan.

Personal guarantee

Unless you run an established business with years of revenue growth, lenders will require more than collateral; they’ll want a personal guarantee from you. This is a legally binding statement that you will pay back the loan personally if your business can’t.

Business plan

To approve you for a loan, lenders will want to know about your business. That’s where the business plan comes in. You want to have a compelling story, laid out in a slide deck or on paper, that shows your plans and your pathways to growth. It should be clear, concise, and detailed, showing lenders a sound business idea. The plan should include how much money you need and why, how you’ll pay back the loan, and the assets you’re willing to put up as collateral.

Business and personal documentation

Lenders require a lot of documentation about your business and personal finances to approve your loan application. Banks and credit unions require more paperwork than alternative lenders, but either way, it’s important to have it all ready before you apply. Each lender has its own twist on documentation, but these are the most common requirements:

  • Bank statements
  • Tax returns
  • Business plan
  • Proof of business ownership
  • Personal information

What are some tips for shopping for a small business loan?

Installment loans are a viable option for small business owners if they shop smart and choose the best lender for them. You don’t want to be stuck with a high-interest loan and a lot of hidden fees. That’s why Libby Morris, vice president of operations at Funding Circle US, said it’s important to pay attention to all the costs associated with an installment loan.

“One of the things we look for as part of our responsible lending is, are they disclosing all their fees?” Morris said. “Small business lending is not as highly regulated as consumer lending. You may see a good rate and there’s all these hidden fees.” Morris said to avoid lenders that charge you a prepayment penalty for paying your loan back early.

When you apply for an installment loan, Morris said, be prepared for a counteroffer from your lender, particularly in the current environment. With the coronavirus still out of control, lenders are wary about taking on too much risk. They have an appetite for lending but may not want to be as generous as you hope. Morris said it’s not surprising for a business owner to apply for $500,000 and get approved for $300,000.

“You have to be flexible in how much you really need,” she said.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Bad Credit

Early Termination of a Car Lease

Published

on

If you’re leasing a vehicle in order to save money, but are thinking of terminating your lease contract early, you may want to think twice. Leases aren’t always as easy or as affordable to get out of as auto loans.

Can You Terminate Your Car Lease Early?

In most cases, you can get out of an auto lease early, but you may not be able to do it cheaply.

Leasing typically comes with fees both at the beginning and end of your term. However, if you need to get out of your lease early, there may be early termination fees (ETF), making the cost more than you bargained for.

Additionally, lessors often require you to pay all your remaining lease payments in one lump sum before releasing the contract early. Costs involved with getting out of your car lease early may also include:Early Termination of an Auto Lease

  • Excess mileage charges
  • Wear and tear fees
  • Any taxes not yet collected
  • Any negative equity
  • Storage and transport fees
  • Pay the cost of sale preparation

Check your lease contract to see if your lessor has any charges for terminating your lease early, or if there are stipulations that prevent you from getting out of the contract before a certain time. Even if there are extra fees imposed on you for returning your leased vehicle early, it might be easier to terminate a lease nowadays than it’s been in the past.

Since the pandemic, many dealerships and lenders have pushed into the digital realm to get business done. This includes video conferences to meet with dealers that typically needed to be done in person in the past. Of course, your vehicle still needs to be turned into a franchised dealership to be inspected and processed before a leasing company allows you to terminate your lease contract early.

Is it Worth it to Terminate Your Lease?

The first step is to look at your leasing contract and see if you even can get out of your lease early, and how much it’s going to cost you in ETFs. Then, you need to gather the following information:

  • Your monthly lease payment amount
  • How many payments you have left on your contract
  • The residual value of the vehicle

To figure out a good ballpark figure for getting out of your leased vehicle early, add together the cost of your remaining lease payments and any ETFs. To see if it’s worth it, compare this figure with the buyout price at the end of your lease, and find out what the current market value of the car is by checking sites like Kelley Blue Book and NADAguides.

Depending on how close you are to the end of your lease term, if the buyout price on the vehicle is significantly lower than the early termination price, it may be a good idea to wait it out. Then, once you buy out your lease, you can trade in the car for something else.

If you decide not to wait, how you handle getting out of your leased vehicle early could depend on the difference between the current market value of the car and the residual value of the vehicle as predetermined in your leasing contract. If the car has more value than the lessor predicted, you may be able to sell it for enough to pay your way out of your lease early.

Three Options for Terminating Your Lease Early

If you’re looking to get out of your lease early, for whatever reason, you typically have three options:

  1. Sell your leased car to a dealer – Selling your leased car to a dealer is similar to doing a trade-in, except they pay off your lease contract, including the early termination fees. It’s typically a pretty easy process, especially since used vehicles are in high demand since the pandemic. You may be able to get a little more for a car that’s coming off a lease since the turnaround time on a sale is likely to be shorter, depending on demand. If this is the case, you may even be able to walk away with some cash in hand depending on if the dealer’s willing to pay more than the lessors estimated residual value on the vehicle.
  2. Have someone else take over your lease – Lease assumption isn’t always something you can do, but in many cases, you can transfer your lease to someone else, as long as they meet all the lessor qualifications and there’s equity in the vehicle.
  3. Lease buyout – With the demand for used vehicles at affordable prices up right now, you may be able to buy out your lease then sell the car privately as long as you get enough money to make it worth your while. If you can’t come close to selling it yourself for the amount you need to pay off your lease, including ETFs, it may not be worth it to try and get out of the vehicle early. Most leasing companies allow for some form of early lease buyout, but again, it may cost you those extra fees.

If Leasing Isn’t for You

Now that you’ve figured out whether it’s worth it or not to get out of your lease early, it’s time to decide what to do next when it comes to getting a vehicle.

If you didn’t mind leasing but the car just wasn’t for you, you likely have the option to swap into another lease on a different vehicle with the same company. Many lessors contact lessees toward the end of their contracts to see if they’d be willing to get into another car lease early.

However, leasing isn’t for everyone. If you found that the restrictions that come with it such as the mileage limitations, or cost of maintenance and repairs are too much for you to handle, it may be time to consider an auto loan for your next go-round. If this is the case, Auto Credit Express wants to get you started on the path toward your next vehicle.

We’ve gathered a nationwide network of special finance dealerships that are signed up with lenders to help people with credit challenges. Whether you’re just not sure where to start or you need a little help due to bad credit, start here. By filling out our fast, free, no-obligation auto loan request form, you’re taking the first step toward finding your next car loan without all the hassle of searching. Get started right now!

(function(d, s, id){ var js, fjs = d.getElementsByTagName(s)[0]; if (d.getElementById(id)) {return;} js = d.createElement(s); js.id = id; js.src = "http://connect.facebook.net/en_US/sdk/debug.js"; fjs.parentNode.insertBefore(js, fjs); }(document, 'script', 'facebook-jssdk'));

Source link

Continue Reading

Bad Credit

GSB focuses on social responsibility

Published

on

State-owned Government Savings Bank (GSB) has focused on providing loans to people without a record in the National Credit Bureau system or with bad credit over the last year to help those impacted by the pandemic deal with unprecedented economic hardship.

GSB president and chief executive Vitai Ratanakorn said the bank has extended loans to people with no credit history who have never borrowed from commercial banks or non-bank institutions.

He said the bank had already provided 1.5 million loans to members of this group of people.

The bank has also provided loans to 200,000 people with bad credit records.

Mr Vitai said the lending was aimed at drawing those outside the credit bureau system into the system and enabled them to get access to the loans, which was one of the main roles of state-run banks. This lending has been supported by the government.

He said this lending was not aimed at seeking profit as GSB charged a low monthly interest rate of 0.1-0.3%. For example, if the bank provided a 10,000 baht loan to a person under this scheme, it would only gain interest income of around 120 baht per year.

In addition to its objective of becoming the country’s genuine social bank, GSB’s other goal this year is to prevent loans from becoming bad debts, he said. The bank will rush to help customers in danger of accumulating bad debt to restructure before it reaches that stage.

Mr Vitai said GSB will not focus on growing its loan portfolio during the first six months of the year, but on serving the state’s policy of helping people and business operators cope with the impacts from Covid-19. Grassroots people and small and medium-sized enterprises are suffering the most from the pandemic, he said.

Source link

Continue Reading

Bad Credit

How to Start Over When You’ve Lost Everything

Published

on

Upset women laying on the wood floor of her living room and petting her dog.

Image source: Getty Images

When you’re down to nothing, you have everything to gain.

People start over for many reasons, including job loss, divorce, illness, and business failure. Whatever the reason, if you’re starting anew, here are some steps to take in rebuilding.

Acknowledge the twist

Remember that you’re not starting from scratch. The fact that you’ve lost assets means that you had assets to lose. Whether that’s a retirement account, home, or business doesn’t matter. You know what it’s like to work for — and achieve — something. You did it once; you can do it again.

Establish credit in your name

If you don’t have much credit in your name, establish your own healthy credit file by taking out small amounts of credit and paying them off like clockwork each month. If your credit score has taken a hit, apply for a credit card for people with bad credit, use it to make small purchases, and pay it off each month before the bill comes due. Or you might ask someone you’re close to to add you as a user on their credit card. Your credit score gets a boost each time they make a payment, even if you never touch the card yourself.

Invest right away

The sooner you begin, the faster you can recoup losses. Maybe you can’t invest as much as you once did. That’s okay. Something is better than nothing, and you can add to your investment pot over time. The more time compound interest works its magic, the better. Every dollar helps, whether you plan to retire in 10 years or 30.

If you’re employed by a company that matches a percentage of 401(k) contributions, do whatever you can to contribute at least that much. The matching funds are basically free money.

Let’s say you earn $60,000 annually, plan to work 15 more years, and your employer matches up to 5% of your contributions. Here’s how much you’ll have put away with just your 5% on its own:

Annual Income

Percent Contributed

Amount Contributed

Average Annual Rate of Return

Time Until Retirement

Value At Retirement

$60,000

5%

$250/month, before taxes

7%

15 years

$75,387

Since your employer also matches that 5% of your income, you’ll have $150,774 instead.

If you were to raise your pre-tax contributions to 10%, here’s how it would look instead:

Annual Income

Percent Contributed

Amount Contributed

Average Annual Rate of Return

Time Until Retirement

Value At Retirement

$60,000

10%

$500/month, before taxes

7%

15 years

$150,774

Including the additional 5% contributed by your employer, you would have $226,161 at 15 years. It’s not a fortune, but could be very helpful. By the way, if you don’t touch it for 20 years, that nest egg would be worth nearly $369,000. If you don’t plan to retire for 30 years, it will be worth more than $850,000.

If you’re not with a company that matches contributions, find a brokerage firm that supplies the level of education and direction you’re looking for and get started.

Get professional help

After financial trauma of any sort, it’s tempting to invest aggressively. While in some circumstances it could be an effective way to make up for losses, it may not be the best move if you’re closing in on retirement. Consider working with a financial advisor, even if it’s on an hourly basis and you pay only for their time helping you come up with a smart investment strategy.

Postpone Social Security

One thing my husband and I (and many of our friends) have done is raise the age at which we expect to retire. We don’t see it as a sad thing. I never want to stop working, and now that my husband is in a job that tickles him, he’s not in a hurry either. The minimum age to retire is 62, but if you can wait until you’re 70, you max out your monthly Social Security payments.

Find support

Millions of people have made money, lost money, and started over. Chances are you already know a few people who’ve redesigned their lives from the bottom up. Talk to them. Ask them what they learned from the experience. If they had it to do over again, is there anything they would change?

People who experience hardship often have the best stories to tell and are often an excellent source of inspiration. It may not be easy now, but with luck, you can look back one day and say, “Hey, I did okay — despite the unexpected setbacks.”

Top credit card wipes out interest until late 2022

If you have credit card debt, transferring it to this top balance transfer card can allow you to pay 0% interest for a whopping 18 months! That’s one reason our experts rate this card as a top pick to help get control of your debt. It’ll allow you to pay 0% interest on both balance transfers and new purchases until late 2022, and you’ll pay no annual fee. Read The Ascent’s full review for free and apply in just 2 minutes.

Source link

Continue Reading

Trending