How banks deal with business loans

Nowadays, there are so many people are interested in opening up a business for the first time and hiring an seo expert to flip capital or raise funds by getting a second mortgage on their property is one of their options. This method is quite popular due to the fact that it is possible to raise funds at exceptionally favourable terms. The interest rates are the lowest in the market and you can spread payments over many years.

We all know that some people turn to their family and friends to either provide funds. The benefit of getting loans from friends and family is that often there is no arrangement fee and interest is usually waived. The problem with this is that if you feel for whatever reason, chances are you will also lose a friend and bring financial pressures to bear to someone close to you.

If people are trying to raise money from the banks and they do not have a decent credit score they can often overcome this by getting personal guarantees from people close to them. Banks now know that if there is a problem getting repaid, they can chase the guarantor for sums outstanding. Again, this method carries the risk of bringing you into disrepute with someone close to you.

Typically, banks will lend fifty percent of funds required for a new start up whereas they can lend up to seventy percent for people considering a business. Many banks have already analysed the businesses prior to the approach for funds. They know as much about the business as the potential income and in many cases have carried out more due diligence.

Most banks today may even have business lending managers who specialize in assisting prospective borrowers. They have already prepared guidelines to assist and advise them. They have also been trained to examine new business opportunities and can point out the potential and downfalls of the type of business that is being considered. Business lending managers can assist with the creation of business plans and forecasts. They will also help in analysing the overall business process, applications, and fees. On average, fees vary between ten and fifteen percent of turnover.

Usually, this advice is free and fees are only payable once funds have been approved. The recommendations they give are invaluable and based on many years of experience lending money to entrepreneurs.

That’s why you should also be wary of lending institutions which insist on a charge just to examine your case. Always base your choice of a business, not only with regards to the money-making potential but also your lifestyle. It is important to find a business opportunity that you can commit to for many years.


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