Most banks and lending institutions require that you put up some collateral or security of some kind if they are going to lend you money. This is good business on their part because it provides a guarantee that they are going to get something back in return for giving out a small business loan. Security accepted for loans of this nature is usually real estate, inventory, or other business or personal assets that the bank can place a lien on if repayment of the loan is not made.
A Borrower that has assets and has been turned down for financing from a commercial bank, could qualify for SBA funding.
The SBA will give commercial banks a guarantee on small business loans up to 90%. A borrower that can come up with 10% to 20% for the difference, will most likely qualify for a secured business loan. Although the SBA does not lend money directly, the banks will be given a guarantee for the funds that they lend.
For a commercial lender it is all about the risk, the SBA can eliminate that risk, and with the borrower having some ‘skin in the game’, is a no brainier for the bank.
Commercial banks may also get some help from the Obama Administration. The President has proposed $30 billion to go to small community banks for the purpose of lending to small businesses. If you thing you may need a loan in the future, now may be a good time to contact you local bank to get the process started.
Borrowing money for personal investments has become more difficult in recent months due to high unemployment, high foreclosure rates, and a sub-prime mortgage crisis that nearly bankrupted the entire country. Borrowing money as a small business loan is not easier than it was, but it is still less difficult than getting personal credit. If your business is in trouble and you need financial help don’t jump at the first option. A secured business loan, with a SBA Guarantee, could be an option for you.
{ 2 comments }
Good to know there is still some money out there available. It seems that lenders are lending a little better in the mortgage sector these days. I hope we never see the subprime days again. I knew things didn’t make sense back in 2005-2006 but figured those guys on Wall Street knew what they were doing. It was a joke how easy it got to qualify for a home loan.
Interesting post,I enjoyed article and thank for this information.
dawrusan´s last blog ..What is Bill Consolidation?
Comments on this entry are closed.