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Published By Janet Gershen-Siegel at August 29th, 2017
If you love to cook or you love to eat but know you can do better than the restaurants and cafés in your area, you might be dreaming about opening your own restaurant. But to grow a restaurant, you are going to need business capital.
Like all businesses, getting started with a restaurant is probably going to mean you will need to borrow capital. Often, that will be a business loan.
Many credit line varieties that most business owners imagine come from conventional banks and conventional banks use SBA loans as their key loan product for small business owners. This is because SBA assures as much as 90% of the loan in the case of default. These credit lines are the most challenging to get approval for because you must qualify with SBA and the bank.
There are two fundamental sorts of SBA loans you can commonly get. One kind is CAPLines. There are in fact 4 types of CAPLines that can work for your business.
You can also secure a lesser loan amount more quickly using the SBA Express program. A lot of these programs offer BOTH loans and revolving lines of credit.
From the SBA … “CAPLines is the umbrella program under which SBA helps business owners meet short-term and cyclical working capital needs”. Loan amounts are offered right up to $5 million. Loan qualification prerequisites are the same as with other SBA programs.
This one advances against anticipated inventory and accounts receivables. It was created in order to help seasonal businesses. Loan or revolving are on offer.
This one finances the direct labor and material costs of performing assignable contracts. Loan or revolving kinds are available.
This one was made for general contractors or builders constructing or renovating industrial or residential buildings. This line is for fund direct labor-and material costs, where the building project acts as the collateral. Loan or revolving types are on offer.
Borrowers must use the loan proceeds for short term working capital/operating needs. If the proceeds are used to acquire fixed assets, lender must refinance the portion of the line used to acquire the fixed asset into an appropriate term facility no later than 90 days after lender discovers the line was used to finance a fixed asset.
You can get approval for right up to $350,000. Interest rates can be different, with SBA enabling banks to charge as much as 6.5% over their base rate. Loans above $25,000 will call for collateral.
To get approval you’ll need great personal and company credit. Plus the SBA states you must not have any blemishes on your report. An acceptable bank score demands you have at least $10,000 in your account over the very last 90 days.
You’ll likewise need a resume showing you have market practical experience and a well put together business plan. You will need three years of business and personal tax returns, and your business returns should show a profit. And, you’ll need a current balance sheet and income statement, therefore showing you have the funds to pay back the loan.
To get approval you’ll need account receivables, but just if you have them. As for the collateral to offset the risk, normally all business assets will serve as collateral, and some personal assets including your home. It’s not unheard of to need collateral equivalent to 50% or more of the loan amount. You also need articles of incorporation, business licenses, and contracts with all third parties, and your lease.
Let’s look at credit lines.
A credit line, or line of credit (LOC), is an agreement between a borrower and a bank or private investor that establishes a maximum loan balance that a borrower can access.
A borrower can access funds from their line of credit anytime, so long as they don’t go beyond the maximum set in the arrangement, and as long as they meet all other requirements of the bank or investor including making on time payments.
Credit lines deliver many unique benefits to borrowers including flexibility. Borrowers can use their line of credit and merely pay interest on what they use, in contrast to loans where they pay interest on the sum total borrowed. Credit lines can be reused, so as you acquire a balance and pay that balance off, you can use that accessible credit again, and again.
Credit lines are revolving accounts similar to credit cards and compare to various other types of funding including installment loans. Oftentimes, lines of credit are unsecured, much the same as credit cards are. There are some credit lines which are secured, and for this reason easier to qualify for
Credit lines are the most commonly requested loan type in the business world although they are preferred, authentic credit lines are rare, and tricky to find. Many are also difficult to get approval for calling for good credit, good time in business, and good financials. But there are other credit cards and lines that few people know about that are attainable for startups, bad credit, and even if you have no financials.
Private investors and alternative lenders also offer credit lines. These are less complicated to qualify for than conventional SBA loans. They also demand much less documentation for approval. These alternative SBA credit lines frequently need good personal credit for approval.
Unlike with SBA, many of them don’t call for good bank or business credit approval. Most of these kinds of programs call for two years’ of tax returns. Tax returns need to demonstrate a profit. Rates can vary from 7% or greater and loan amounts range from $25,000 into the millions. Loan amounts are frequently based on the revenues and/or profits on tax returns. At times lenders may ask for other financials such as a profit and loss statement, balance sheets, and income statements.
Merchant cash advances have quickly become the most popular way to get financing, in large part due to the effortless qualification process. Businesses with $10,000 in earnings can get approval, with the business owner having scores as low as 500.
Some sources have now even begun to offer credit lines that accompany their loans. You must have at least $10,000 in revenue for approval. You should be in business for at least one year, however three years is better. Lenders usually want to see a credit score of 650 or better for approval.
Loan amounts are usually around $20,000. Lenders normally will pull your business credit, so you ought to have some credit already and at times lenders will want to see tax returns.
Rates vary, due to the risk for this program, and there typically aren’t a lot of funding sources who offer it.
You can get financing despite personal credit if you have some sort of stocks or bonds. You can also get approval if you have somebody wishing to use their stocks or bonds as collateral for financing.
Personal credit quality doesn’t matter as there are no consumer credit requirements for approval. You can get approval for as much as 90% of the value of your stocks or bonds. Rates are often lower than 2%, making this one of the lowest rate credit lines you’ll ever see. You can still earn interest as you generally do on your stocks and bonds.
With this form of business financing, you work with a lender who concentrates on securing business credit cards.
Our Credit Line Hybrid program is perfect for entrepreneurs who are just starting their business as well as those who are already well established. You can get approval for up to $150,000 in 0%, unsecured, no-doc, business financing with no collateral or cash flow requirements.
This program is designed to help clients get funding based strictly on personal credit quality. Our lenders will not ask for financials, bank statements, business plans, resumes, or any of the other burdensome document requests that most conventional lenders demand.
This program is as close to a “no-doc” program as you can get with business funding. And the best part is that you can even get approval with introductory rates as low as 0% giving this program the best terms in the country.
Our Credit Line Hybrid program is extremely popular due in part to how easy it is to get approval. To qualify lenders will look solely at your or your credit partner’s personal credit quality. They are looking for very good personal credit with no derogatory items reporting.
Our lenders will review the credit report to ensure there are no derogatory items on the report. For approval, you shouldn’t have any open collections, late payments, tax liens, judgments, or other types of derogatory items reported.
To qualify you should also have less than 5 inquiries on your credit report within the last 6 months. You should have established credit including open revolving accounts now reported on your credit report with balances below 40% of your limits. And lenders typically want to see personal credit scores of at least 680.
If you have good credit there is a good chance you can get approval for our Credit Line Hybrid. But even if you have personal credit issues now and no established business credit, we still might be able to help.
You can qualify for our Credit Line Hybrid program with a personal guarantor. If you have someone such as a business partner who does have good personal credit, they can apply and qualify for unsecured financing for the business.
Our collateral-based financing programs are perfect for consumers with personal credit challenges. You can get approval with great terms and get approval even with severe credit issues. You can also qualify for financing with us if you have been open more than a year and have active cash flow for your business now.
Our Business Credit Building Program can help you quickly establish a business credit profile and score so you can qualify for unsecured financing based on your business credit. We even work with a powerful network of credit improvement specialists who can help you repair your personal credit damage.
Most lenders charge very high interest rates on unsecured financing due to the risk of the business owner not pledging collateral for security. But most of our exclusive unsecured financing offers very low initial intro interest rates, as low as 0% for the first 6-18 months. Rates typically range from 5%+ after the intro period, the actual rate will depend on risk.
Most unsecured lenders also charge high amounts of points ranging from 12-30%, and they also charge application fees for Credit Line Hybrid financing programs. But our exclusive lenders offer the lowest fees in the industry, ranging from 9-12%. And you only pay them any type of fee if you get approval and have secured your funding. Pay an interest rate of 5-29% after the initial period.
You can get approval for as much as 5 times whatever your highest revolving credit card limit is now.
You must have excellent personal credit now, ideally 680 or higher scores, the same as with all business credit cards. You shouldn’t have any negative credit on your report to get approval. And you must also have open revolving credit on your consumer reports now and you’ll need to have five inquiries or less in the last six months reported.
Company credit is credit in a company name, in connection with the company’s EIN number, and not the owner’s Social Security Number. When accomplished correctly, you can acquire business credit without a personal credit check and without a personal guarantee. This is something all other cards above can’t deliver.
You can get three types of business credit cards. First is vendor credit, which offers net 30 terms to set up a business credit profile. Then is retail credit, where you will get credit cards with high limits at most stores.
Next is fleet credit. It’s credit to fuel, service, and maintain business vehicles. And then there’s cash credit, which includes Visa, MasterCard, and American Express cards that you can use anywhere. You can get these with no credit check or guarantee. Limits are oftentimes $5,000 – $10,000 to get started and can exceed $50,000.
Your business can get credit cards and financing, if you know where to look. Learn more here and get started toward establishing business credit. And grow a restaurant you can be proud of!