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How Are Factoring Loans Used in Business?

Businesses must look at a slew of financing options in order to choose the right one for their situation. One loan that people often don’t think about is a factoring loan – which technically, actually isn’t a loan at all.

What is a Factoring Loan?

Factoring allows businesses to sell the accounts receivable they have accumulated to outside financial companies (called factors). This lets the businesses use the funds faster than needing to wait for the customers to make their payments. In essence, they are speeding up their accounts receivable so that they are better able to move on to other things without waiting lengthy months for the money to come in. When these accounts receivable are sold to factors, not all of the money is given to your business immediately; you can usually expect about 75% of the account receivable invoices at that point, and then the rest will follow once the company is able to collect the full invoice.

The Details

In order to make some money out of the deal, factors tend to take anywhere from 2% to 6% of a cut from the total they collect from your invoices. They collect funds directly from your customers and might ask you in advance to provide proof that your customers have paid their dues in the past (this can give them a better idea of what risk they are taking on). Not only does factoring typically work faster than the approval process of a regular loan, but you won’t have any repayment terms or need to worry about debt accruing in your business.

Who Might Like to Use Factoring?

Since there are no requirements for collateral, a down payment, or a specific credit score, many businesses might benefit from using factoring. Businesses that haven’t been open for very long or those that need money fast might find factoring to be a helpful financing alternative. Another side to factoring that people forget about is that they won’t need to staff employees to continue doing the billing and payment processing for those accounts receivable. When maintaining cash flow is paramount, rather than going through the process of getting a short-term loan, factoring might be a better option.

Although factoring can have its pros and cons, thousands of businesses use it as a financing option. There are many different types of factors to choose from such as banks, small firms, or industry-specific investors. If you think factoring is something your business might be interested in using, give us a call today to see how it can impact your business!

Is a Merchant Cash Advance Right for You?

Not only is it important to find the right commercial loan broker, but it’s crucial that you understand everything involving a loan before you request one. While there are many loan options out there, a professional broker will be able to give you a pros and cons list of each one – and recommend which one fits your business situation the best.

For those that are on the search for their first ever business loan, it can be confusing searching through all the information out there. Here’s what we would recommend that you focus on asking your lender before ever settling on a loan:

What is required as collateral?
Different loans require different types and amount of collateral, and the total funding of the loan you need will also affect this. Some loan types require a specific type of collateral, while others are more relaxed in their specifications and will accept a personal guarantee instead. Your lender can help you determine what would be good collateral up against the amount of loan you are hoping to receive.

What fees are there?
Loan approvals are not simple decisions made by lenders. In fact, many outside vendors might be called in for various reasons throughout your application process, which will increase the total costs. These might include site inspections, recording fees, credit reports, and more. However, your lender should be upfront about these fees with you and can typically give an estimate of the costs before you apply.

What’s the APR and Interest Rate?
APRs come from calculations of the interest rate and other lender fees included in the loan. Since each lender might create the APR calculation for a loan differently, be sure to ask your broker specifically how your loan will be broken down. Pay attention to how often the interest rate is adjusted and be aware that the APR of a loan is not applicable for early payoffs.

Is the loan application approval decision made in-house?
Depending on the type of loan you are interested in and whether or not your lender has an in-house underwriting team will determine if your loan can be processed by them. Government-backed loans typically have a longer approval process, which is something to be aware of if your business is looking for a quick decision. This leads into the next question:

How long does it usually take to close on this loan?
A lot can ride on the approval of the loan you are seeking, which is why understanding the length of time it takes to process a loan is important. A good lender will coordinate with you on a closing date, as well as work with you to ensure your paperwork is all in order throughout the process.

The more you understand loan offerings, the more you’ll feel comfortable applying. Let us help you determine the right loan for your business to help you grow and thrive!

Understanding Your Commercial Financing Options

Not only is it important to find the right commercial loan broker, but it’s crucial that you understand everything involving a loan before you request one. While there are many loan options out there, a professional broker will be able to give you a pros and cons list of each one – and recommend which one fits your business situation the best.

For those that are on the search for their first ever business loan, it can be confusing searching through all the information out there. Here’s what we would recommend that you focus on asking your lender before ever settling on a loan:

What is required as collateral?
Different loans require different types and amount of collateral, and the total funding of the loan you need will also affect this. Some loan types require a specific type of collateral, while others are more relaxed in their specifications and will accept a personal guarantee instead. Your lender can help you determine what would be good collateral up against the amount of loan you are hoping to receive.

What fees are there?
Loan approvals are not simple decisions made by lenders. In fact, many outside vendors might be called in for various reasons throughout your application process, which will increase the total costs. These might include site inspections, recording fees, credit reports, and more. However, your lender should be upfront about these fees with you and can typically give an estimate of the costs before you apply.

What’s the APR and Interest Rate?
APRs come from calculations of the interest rate and other lender fees included in the loan. Since each lender might create the APR calculation for a loan differently, be sure to ask your broker specifically how your loan will be broken down. Pay attention to how often the interest rate is adjusted and be aware that the APR of a loan is not applicable for early payoffs.

Is the loan application approval decision made in-house?
Depending on the type of loan you are interested in and whether or not your lender has an in-house underwriting team will determine if your loan can be processed by them. Government-backed loans typically have a longer approval process, which is something to be aware of if your business is looking for a quick decision. This leads into the next question:

How long does it usually take to close on this loan?
A lot can ride on the approval of the loan you are seeking, which is why understanding the length of time it takes to process a loan is important. A good lender will coordinate with you on a closing date, as well as work with you to ensure your paperwork is all in order throughout the process.

The more you understand loan offerings, the more you’ll feel comfortable applying. Let us help you determine the right loan for your business to help you grow and thrive!

What to Ask Your Lender Before Submitting a Loan Request

Not only is it important to find the right commercial loan broker, but it’s crucial that you understand everything involving a loan before you request one. While there are many loan options out there, a professional broker will be able to give you a pros and cons list of each one – and recommend which one fits your business situation the best.

For those that are on the search for their first ever business loan, it can be confusing searching through all the information out there. Here’s what we would recommend that you focus on asking your lender before ever settling on a loan:

What is required as collateral?
Different loans require different types and amount of collateral, and the total funding of the loan you need will also affect this. Some loan types require a specific type of collateral, while others are more relaxed in their specifications and will accept a personal guarantee instead. Your lender can help you determine what would be good collateral up against the amount of loan you are hoping to receive.

What fees are there?
Loan approvals are not simple decisions made by lenders. In fact, many outside vendors might be called in for various reasons throughout your application process, which will increase the total costs. These might include site inspections, recording fees, credit reports, and more. However, your lender should be upfront about these fees with you and can typically give an estimate of the costs before you apply.

What’s the APR and Interest Rate?
APRs come from calculations of the interest rate and other lender fees included in the loan. Since each lender might create the APR calculation for a loan differently, be sure to ask your broker specifically how your loan will be broken down. Pay attention to how often the interest rate is adjusted and be aware that the APR of a loan is not applicable for early payoffs.

Is the loan application approval decision made in-house?
Depending on the type of loan you are interested in and whether or not your lender has an in-house underwriting team will determine if your loan can be processed by them. Government-backed loans typically have a longer approval process, which is something to be aware of if your business is looking for a quick decision. This leads into the next question:

How long does it usually take to close on this loan?
A lot can ride on the approval of the loan you are seeking, which is why understanding the length of time it takes to process a loan is important. A good lender will coordinate with you on a closing date, as well as work with you to ensure your paperwork is all in order throughout the process.

The more you understand loan offerings, the more you’ll feel comfortable applying. Let us help you determine the right loan for your business to help you grow and thrive!

What is a Bridge Loan?

Bridge loans are a unique option for those that need a quick source of capital until they can find a more long-term financing solution. While bridge loans are most widely known for their use in real estate, this type of loan is also used for buying out partners, moving business locations, or even to boost a business’s credit score. Typically, bridge loans are required to be paid back anywhere from a few months up to one year.

Who needs a bridge loan?

As we mentioned, bridge loans are often used by business owners to tide them over while they figure out other financing options better for their future. However, bridge loans are also used by investors or buyers in order purchase property fast without getting caught up in the long approval process of traditional lending. Additionally, you can find developers using this type of loan to continue their timeline of building while waiting on others to close on their properties.

Why don’t more people use bridge loans?

Bridge loans can be a great asset when businesses are in a jam and need financing fast – but they do come with some negatives. Interest rates are expected to be higher than those of traditional loans as the length of the loan is much, much shorter. You will be expected to pay any closing costs when purchasing a property along with origination fees on the loan.

How can you qualify for a bridge loan?

As with any loan, banks will look at your credit score and past payment history, along with the collateral being offered. For investors or businesses looking to acquire property, the building or property itself will often be seen as the collateral in the loan. Most bridge loans cover around 75% of the value of a property.

Where should you look for a bridge loan?

Bridge loans are offered by a multitude of lenders. Most often, banks are able to provide the best terms and rates and will probably be able to also help you find long term financing as well. However, there are also bridge loan options through the SBA and many online brokers.

In the business world, we understand how fast opportunities can fly by. Utilize a bridge loan to ensure you don’t miss out on an important chance for your business to expand and profit! We’re here to help determine whether a bridge loan is the right fit for your business. Give us a call today for a consultation about your needs!

What are Fix & Flip Loans?

Fix and flip loans have become much more well known in recent years as people have watched multiple TV series documenting the potential gains on “flipping” houses. This refers to someone buying a rundown property at a low cost, fixing it up, and then “flipping” it for a profit. Even though this can be a risky venture in the commercial world, it can also have a very large payoff when done well.

Fix and flip loans tend to finance from anywhere as low as $50,000 all the way up to around $2.5 million. The loan money must be specifically used for the renovation process, and nothing else. Similar to a bridge loan, fix and flip loans are typically very short in their terms, usually only about one year long. Those that go into the commercial flipping business learn to move quickly through properties so as to capitalize on the loans they have and the profits to be made. Interest rates vary per property and investor’s credit score.

Using Fix & Flip Loans

While many people think that you have to be an experienced property flipper in order to be qualified for a fix and flip loan – but the reality is that isn’t always the case. Lenders typically look for credit scores above 600 and a certain amount in down payment (this number depends on the amount of loan you are asking for).

Investors are able to choose a wide range of properties and still use a fix and flip loan like single family homes, condos, or even commercial buildings. Many banks try to go through the underwriting process as quickly as possible for fix and flip loans because of their fast nature.

Finding the Right Fix & Flip Loan Lender

Using a lender that is experienced with this type of loan is a great way for beginners to feel more comfortable with the process. While some people might push investors to go to private lenders, traditional banks can serve as a fantastic resource for not only your current financing needs, but also future loan inquiries. By establishing a relationship with a bank, you set the groundwork for larger loans with lower interest rates down the road.

Whether you’ve found the first property you’d like to flip, or it’s your 100th, we’re here to find you the right commercial loan. Not only do we have experience with commercial investors, but we can help you through the process! Give us a call to get started on your fix and flip loan today.