A business takes audacity, determination and hard word. This internal drive known as the entrepreneurial spirit is what sets an entrepreneur apart from the corporate executive or commercial business. While this spirit is the spark, it is not enough by itself to bring a successful company into being. For, you need to have a good chunk of fund that is ever required. If it is unavailable, then you will have the only option left is of loans. Across the money market, there are various commercial business loans. Individuals can available these loans as per their convenience either online or offline.In lieu to provide better feasibility, such business loans have been bifurcated into secured and unsecured loan forms. Secured loans are that that are tied to some sort of asset pledging. Placing of asset ascertains loan repayment of the borrowers. While there are unsecured loans, these loans are obtained without any sort of pledging placing. Individuals looking for these loans get a good sum of money without much problem,Interest paid upon these business loans varies from person to person and lender to lender. Some factors play the leading role determining the stipulation of these loans. These factors can be the amount you are looking for, the asset you are placing as of security for the loan, your repayment period, your credit history etc. based on these factors, amount of money is granted to the entrepreneur. He invests the raised money as per his requirements.Giving precision to your business plan, the lending authority has come up with commercial loans online and offline. Operating through online saves a great amount of your time and energy. Just the need of the hour is to select a lender from sites available, which too is not an easy affair. It is better you to take out four to five lenders from different websites. Go through their policies and plans. By comparing them altogether, crave out a deal that happens to be best suited to your financial standard.
Tag Archives: Personal Finance
Small Business Loan Trade-offs – Choosing the Best Rate
Most small business borrowers are understandably confused by all of the different interest rates for commercial loans. How does a small business borrower decide what is the “best” rate? Is it the lowest rate or is it more complicated than that?Commercial loan rates are indeed a source of confusion for most business owners. There are many variables in determining these rates, including the type of business, loan-to-value, length of loan, credit scores, how long rates will be fixed, stated income or tax returns used to qualify, assumable loan or not assumable, and whether recall or balloon features are included/excluded.If a small business borrower wants the lowest rate, this will usually be found in a short-term bank loan that has recall/balloon terms and other generally undesirable features. Although this type of loan might have the lowest rate, it will not necessarily have the “best” rate. The lowest-rate loan typically involves the worst terms, not the best terms, even though the interest rate might look appealing. Here is a suggested definition of what constitutes the best rate for a business loan: the “best” rate is one which is associated with business loan terms that are not detrimental to the long-term financial health of the commercial borrower’s business.The concept of “trade-offs” will help small business borrowers when they are confronted by the “lowest” rate versus “best” rate decision. There are two primary definitions of “trade-off” that are relevant to the points made below:(1) Giving up one thing in return for another.(2) Balancing of factors that cannot be maximized at the same time.It is easy to see the concept of “trade-offs” in commercial real estate loan decisions every single day. The most common application is when a lower interest rate is given up in return for more favorable terms such as a longer business loan (25-30 years instead of 3-5 years). Because these trade-offs are by no means obvious to the typical small business borrower, perhaps the most important function that a business loan advisor performs for their clients is a thorough analysis and explanation of the various trade-offs involved in each commercial real estate loan that they provide.It is critical that this analysis involve more than just the underlying interest rate for each commercial loan program. In fact, one of the most important lessons to be learned from a thorough analysis of “trade-offs” is that the lowest rate is almost never associated with the best deal for the commercial mortgage borrower. As you might imagine, this is extremely hard for most commercial borrowers to understand and accept. Most commercial lenders take the easy way out and sell the lowest-rate loan to their commercial borrowers because it is an easier transaction, but this approach rarely results in the commercial borrower getting the business loan that they should have. An experienced business loan advisor will take the more difficult path which involves a more hands-on approach with small business borrowers to ensure that they understand all of the “trade-offs” associated with their business loan choices.Most borrowers think that they need the lowest possible interest rate without realizing what they are truly giving up in order to get that rate. As stated above, the loan terms given up in exchange for the lowest rate are usually much more valuable to the commercial borrower than the lowest rate.Copyright 2005-2006 AEX Commercial Financing Group, LLC. All Rights Reserved.