Accounts Receivable Factoring
Factoring is a type of business lending in which a business sells its accounts receivables, or invoices, to a financial company, also known as a factor. Factoring is also known as accounts receivable financing. Here’s how it works: the business assigns certain accounts receivables or invoices to the financial company or factor. The financial company or factor collects payments directly from the business’s customer. Rather than waiting 30-60, maybe even 90 days, factoring allows companies to receive cash quickly on their receivables. Factoring allows the business to build up cash flow, which may be a good short term solution.
Auto financing loans are used to finance commercial vehicles for businesses. Commercial vehicles include: heavy duty trucks, vans, business vehicles, and tractor trailers. The bank or finance company places a lien, and the vehicle is used as collateral. Terms for auto financing can range from 12 to 180 months, depending on the type of vehicle.
Business acquisition loans are used to buy an existing business. Typically the amount financed depends on the business type and industry. Business acquisition loans are known in the lending community to be difficult to get done but not impossible. The lender will take into consideration the experience of the borrower, how the business has performed, and the value of the business.
Commercial Real Estate
Commercial real estate loans are used to finance office, industrial, retail, warehouse, multi-family, and hospitality buildings. Typically, lenders will lend up to 70% LTV on commercial real estate depending on the asset and strength of the borrower. Terms for commercial real estate loans range from 5 to 30 years.
Commercial construction loans are used to finance new construction or rehab an existing commercial real estate property. The amount financed depends on the strength of the borrower and/or guarantors who are involved in the transaction as well as the land and surrounding areas. Construction loans can be risky for the lender, therefore they are much stricter when it comes to financing. The bank will look at other businesses in the area and businesses in the same industry to gauge the profitability of the business.
Expansion loans are used by businesses who want to expand by hiring new employees or purchasing real estate. Before obtaining an expansion loan, make sure that expansion is right for you. Keep in mind that prior success does not guarantee success going forward after you obtain the capital to expand. Determine how much capital you will need for the expansion. If you are expanding a retail location, obtain several estimates for building out your location and the purchase of additional inventory. Also, perform an analysis to determine when you will break-even on your new expansion before it becomes profitable.
Equipment loans are used to finance heavy equipment such as cranes, lift devices, and towing equipment. Medical equipment for dentists, veterinarians, and medical clinics also fall under this category. The lender will use the equipment as collateral. The loan terms vary, but they are usually financed based on the expected life of the equipment. A factor that a bank considers is if the equipment will become obsolete by the time the loan is repaid.
Franchise loans are used to purchase a franchise. Franchises include restaurants, hospitality, fitness centers, investment, technology, fashion, etc. To qualify for financing, lenders will be interested in your employment history and if you have lived in the same location, which shows stability. Lenders look at your income and the way you live within your income to see if you manage your personal finances. Typically, if you manage your personal finances well, you will manage the franchise’s finances well, too. Some franchisors offer financing as well.
Medical practice loans are used to purchase new practices, new medical equipment, tenant improvements, or commercial real estate. Professionals who may need medical practice loans include physicians, optometrists, pharmacists, surgeons, specialists, dentists, and veterinarians. Typically, lenders prefer medical professionals due to their high earning potential, strong net worth, and stable revenue.
Merchant Services Cash Advance
A merchant services cash advance is a loan from your daily credit card transactions. Merchant services cash advances typically have a very high interest rate. Lenders let the business borrow a percentage of your credit card transactions depending on the volume of the businesses’ transactions. Payment is deducted from the credit card sales.
Partner buyout loans are used to buyout an existing partner. This will give your business more freedom, as you’ll have full control over business decisions and no longer have to split profits. Lenders will want to review the shareholder’s agreement to see what terms were laid out in the event a buyout occurs.
Letter of Credit
Used for international trade, a letter of credit allows businesses to guarantee payments to their suppliers overseas. The document serves as a guarantee for payments to a specified person or business under specified conditions. If the business is unable to make the payment for a purchase, the bank will be required to cover the full or remaining amount of the purchase.
Lines of Credit
Lines of credit are used for short term working capital, purchasing inventory, or payroll. Businesses enjoy having a line of credit as a backup because it allows the business to continue operating while waiting for invoices or accounts receivables.
Restaurant loans are used to purchase equipment, inventory, or working capital. Lenders typically have a difficult time obtaining approvals for restaurants due to the high failure rate. However, if the businesses’ finances and cash flow are solid, there should be plenty of lenders who are able to get the deal done.
Startup loans are used to fund new business ventures. The main challenge for most new startups is obtaining financing for the venture and getting it off the ground. Lenders like to see that the borrower has experience in the industry/field.
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