February 23, 2012

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What Do Financers Look for When Making Loans (or denying loans)

The banker has likely told you to bring in the financial statements of your small business before he helps you get a loan. After talking to the banker you wonder if he even looked at the statements. Chances are, he didn’t . The initial decision of whether a bank will entertain the option to provide you a loan is based more on ratios than on the actual numbers. The ratio of your financial statements will let the banker know if you will be able to pay and if you will pay.
The key to getting that loan is to know how to work the ratios in your favor. A banker wants to know if you can repay the loan. To determine this his finance department will calculate a cash coverage ratio. Find the sum of the net income, the amortization expense and the depreciation expenses. This is the net cash flow of what is left when all of the businesses bills are paid. Divide the sum by the annual payments of the loan you want to take. This is the cash coverage ratio. The banker likes to find a 1.5 or above ratio. To make this ratio work for you simply add your spouses income and any additional income that you have, these can be considered in determining the ratio.

Your credit score will be used to predict if you will pay your future debts, whether short term loans or expensive home mortgages. Your history report will be used to calculate a debt to worth ratio. Divide the shareholders equity by the amount that you owe (your liabilities). This ratio should be less than four times the equity at the most. A lower number will be better. To make this ratio work for you, tell the bank if any of your debtors will allow the bank to collect their loans first. The other loan is then considered equity.

Filed Under: Investors Tagged With: , ,

The Purpose of an Investment Loan – How It Should Work For You

Whether you’re investing in the smaller end of the market or the larger end, whether it’s an investment home for your family or a place for your growing business, you will need to get the appropriate loan.

Having no money to invest is a common investor scenario, but other people make it work and so can you. Doing your research on investment loans is a foundational step in becoming and efficient property investor.

Choosing the right loan is an important part of the process. The right loan will not only serve you to increase you cash flow through your chosen investment property, but it will also make sure you don’t fall deeper and deeper into debt. Consider GreatPlainsLending for your loans.

The purpose of an investment loan is purely for the purchase of investment property. The many banks out there offer varying investment loans with varying interest rates and deals. It is very important as an investor to do your homework. You nay have a favorite bank, or a bank you have done a lot of previous experience with, but they may not have the right investment loan for you.

The purpose of a property investment loan is to serve you. It needs to work for you and your money to increase cash flow through property investment. It should not be the cause decreased cash flow.

Looking for an investment loan is not the time to be sentimental. If the bank you have always dealt with doesn’t have the right investment loan for you then you need to do yourself a favor and shop around. Make this be known to your bank and they may offer you exactly what you want to keep your business.

Making the choice to purchase a real estate investment is an important one. Knowing that an investment loan is there to help you increase funds is an important key to understanding the purpose of an investment loan.

Filed Under: Businesses, Investors Tagged With: , ,

Consolidating Multiple Loans

A debt consolidation service is a great way to help people save money each month. The purpose of debt consolidation is to combine multiple loans that are all interest accruing into one interest accruing account. This can help all kinds of people in all kinds of different situations, not just college graduates with student loans. For many, there are a variety of debts that are present. They can range from credit cards and second mortgages to new business loans, stock loans, and even personal loans. When this debt is grouped together in a consolidation program, it can help make the interest rates paid every month much more manageable. This means that for consumers, instead of paying each separate payment and spending more and more money without making any headway, the consumer can make one payment and see the difference with their first payment.

Debt consolidation can help to lower interest rates as well. Say there is a business loan at three percent and a credit card bill at 15 percent. The three percent does not sound high, but combined with the 15 percent, and possibly some other bills, it becomes clear that there is a lot of money going out each month on bills, and much is to inflated accounts that have high interest rates.

If a consolidation evened out all of the loans into one loan with a lower interest rate, that could potentially save hundreds of dollars a month in interest payments. This also works for homeowners that have equity in their home. They are able to consolidate their debt using the equity in their home, which would allow them to have thirty cut and dry years to pay off debt. For many, this provides them the peace of mind, security, and relief that will allow them to sleep better at night.

Filed Under: Businesses, Corporations Tagged With: , ,

Seek Investments Or Opt For A Loan? Here Are Some Pointers

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What factors should one consider when comparing and choosing between seeking outside investment and getting commercial loans? Bringing an investor into your organization can lead to loss of independence. Unless terms and conditions are clearly specified when making deals, it is obvious that any person who is investing money in your business will demand a say in the decision making as well.

Even if you have an investor who is not going to do anything more than putting money into the business, you cannot expect complete independence unless you provide satisfactory returns at all times. Either way, you will have to get used to the fact that you will be accountable to an external party about your business decisions.

The exact terms and conditions of the deal need to be finalized when negotiating with investors. However, you will never find an investor who is prepared to offer ‘no questions asked’ money without demanding promise of plenty of returns. If you want ‘no questions asked’ money, you should opt for loans.

The lender is interested in interest and nothing else. As long as interest is being paid promptly, the lender will have absolutely no inclination to interfere in your decision making process. It is obvious that there cannot be any single universal formula to help you decide between inviting investors and taking loans. A lot depends on your individual needs and requirements.

In some cases, having the right investor can be very beneficial for your business. You can use not just the investor’s funds but his or her experience as well. The fact that your business has got funds from an investor will help you get recognition in the industry. You should consider all these factors before taking a final decision. Do not focus on funds alone. Consider all other benefits as well.

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