I’ve been trying to figure out a good way to consolidate all of my credit card bills (that were racked up by order equiptment for the restaurant, and is now screwing my credit) into 1 bill and a decent apr rate.
I came across a few of those Business loan places that front you the $$, then take a certian % out of the businesses credit card sales.
Has anyone ever had this type of loan? and how does it work? do they give you a certian apr or what?
When I try to talk to these people they say they can’t give me any straight info until i fully apply for the loan, ALL I WANT TO KNOW IS HOW IT WORKS!
Herein lies my refusal to deal with such companies. No disclosure of terms and rates means that there is something unpleasant that they will not share until you are on the hook?!?!?! That’s just not my way of doing things.
I want to see exactly what I am buying BEFORE I pay or sign a contract for it. What about lending disclosure laws and such? I just don’t like it.
Typically, you have to change your credit card processing to them. And yes they will be higher than normal rates.
They then take about 25% of every batch out for their part. There is no loan app or qualifying. Seems almost too good to be true doesn’t it…well you know the saying…and yes it is.
Stay away from these unless you have absolutely, and I mean absolutely, no other way of acquiring a loan.
What Nick said, 100% true. If they won’t tell you the rules of the game, then they can change them at any time.
I went to a bank last year and asked about a “business loan”. They said no one does that anymore. Whether thatâ€™s true or not, I donâ€™t know… but it soured me from checking other local banks.
What other type of loans are there other then this? I do not have a house to mortgage, and I rent the property the restaurant is in.
Thanks again all!
I’ve been a Commercial Lender at a mid-size bank for a number years. It’s pretty much absurd that a bank told you “no one does that any more”! Maybe that was their easy way of telling you no. Go to a small to medium size bank and begin a relationship with a Small Business Lender there. Ask your friends and family if they know a good banker and by all means don’t go to the same bank you went to last year. Invite them into your shop and just talk. Feel them out for your needs and see what reaction you get. Tell the Banker that you would be willing to bring your entire financial relationship to their bank, including business deposit account, personal deposit account, Merchant Card processing, investments, insurance, etc. Extending credit is going to depend on a few factors: A/ Is your restaurant profitable? B/ Do you have sufficient cash flow to service your debt? C/ Is your personal credit good? D/ Any collateral to offer ( I assume not)? Credit is super tight right now. Good luck to you. -T. Pegarella
Excellent advice from Pegarella. Small businesses often underestimate the relationship part of the business with a bank. So much depends on them trusting you and your abilities and that trust comes from openness.
Stay away from credit card loans. They are a VERY BAD deal.
For a small business, especially if it is a fairly new business, the bank really has to buy into your entire plan and vision for your company. They become an investor in your business just as if you sought outside investors to contribute for a % ownership. The difference here is that a bank won’t own anything, they will make their money on interest.
I agree with the above posters that the best bet is to get someone to buy into your concept and goal for your business. Don’t show them what you have, be sure to show them where you are going. And if possible, get more than one to quote the loan. Bankers HATE getting beat out by other bankers.
You might also try looking for a Small Business Development Center somewhere near you. They can help you put all your information together for the bank to review a lot easier and professionally. They may also have some ideas on the who/where to go to get what you need.
The bank I use for my personal and business accounts are with the bank and told me â€œno one does that anymore".
I guess Iâ€™ll start looking for a new bank and tell them Iâ€™m willing to transfer all my accounts to them as Pegarella suggest.
Do you all think timing is an issue with doing this? Should I start going after the loan now… or wait until early to mid January? Or does it even matter?
As for “no one does this anymore”, they mean that banks are skittish right now. We have a very strong relationship with a banker here, and she made us a line of credit loan to consolidate debt, make a smallish capital purchase and provide some cash flow flexibility. It wasn’t anything gigantic, but in the $50K range, if I remember correctly.
I would run as fast as you can from anyone wanting to buy your recieivables. Thats only robbing Peter to pay Paul. Not to mention the dumb rates they charge. As a new pizza shop owner, I’ve approached my business banker for a line of credit on my assets ( ie Equipment). I think its really important to establish a good relationship with your bank. Dont take no for an answer. You may have to shop around. I was all set to go with one local bank and they pulled the old “restaurants are a risky investment” (duh…no kidding most new businesses are). I just kept looking until I got someone to work with me. Sometimes people (business bankers) just need to think outside of the box. Finding the right bank and banker is like finding the right food supplier.
As a reward, I gave them all of my business. My deposits, credit card sales even my personal stuff and they gave me the line of credit.
Remeber, your banker is just as important, if not more, than your lawyer or accountant.
Keep fighting the good fight.
Dan aka the “Pizzaviking”
A lot of excellent advise here on the forum. If I may suggest a couple of things:
Â· Do talk to 2 or 3 Bankers, but donâ€™t apply to all of them. Choose one and donâ€™t base it on price (interest rate) alone. Look to see who you jive with. Get someone with common sense and someone that you sense really cares about you and your business.
Â· Apply for 5 to 7-year term financing with a set amount, set rate (around 6.5 to 7.0% is fair). You donâ€™t want a line of credit for equipment financing. This way the debt will amortize out (payoff on a schedule) and it wonâ€™t be revolving like a big credit card !!
Â· Watch the fees. Donâ€™t pay more than a couple hundred dollars in fees. There are some business lenders out there that rob you blind in loan fees.
I have two Pizza shops in my portfolio and am thrilled to know that I have been part of their success. Donâ€™t wait. Start talking now. I hope this helps.
Couple questions about when I go to the banks and ask for a loan…
Do I go in and say that I need a “Business Loan”… or is this type of loan called something else?
Also, do I tell them that the loan will be used to payoff a bunch of credit cards… or should I say something like it will be used to purchase new equipment?
I’m looking for between $30k and $60k
Thanks again all. I’d like to be totally prepared when I go start talking to the banks.
Be honest with them, tell them exactly where the money is going. My bank cut the checks for all of my major purchases so, I needed to tell them exactly what it was for and who to make the check out to.
They will want a copy of your financial statements and your personal tax return for the last 3 years since you are new they will probably just want your financial statements since you opened and your personal for the past 3 years.
Stay away from the bigger banks go more community banks look around during lunch and see if any of the bankers frequent your place.
You may want to run YOUR credit report just to see what you are dealing with. I am sure your FICO will be low because of the debt but just to get a jist of what it is and if there are late payments etc. If it is just because of the high balances you will probably be okay…most smaller banks actually get together and decide on loans instead of just using FICO.
Be sure to explain (with records) what the money was for, I would have somehting typed up.
My score as of Aug is 722… i know that is decent, but like i said, it’s that one closed credit card with a $8k balance that is screwing my from getting anything.
I would be absolutely honest with the request. Yes, ask for a business loan. Look for a $50,000 term note for 5 or 7 years. Additionally, ask for a $10,000 business line of credit to give you some flexibility on cash flow. Only use it for cash flow, not purchase. Pay it down as soon as you have the $$. Cut up all but one credit card. Don’t worry so much about the balances you’ve built up. Often we see new businesses that start up with either home equities or credit cards, but be sure to tell the banker you used them for equipment purchasing as opposed to anything else.
Your credit score is very good and once you’ve paid off the revolving debt, you should see it go back to the mid to high 700’s. The bank should approve your request as long as your cash flow would support the payment and you would be willing to personally guarantee the debt. As another poster said offer the equipment as collateral. And don’t forget, offer them your other accounts (i.e. business deposits, personal deposits, credit card processing, etc.).
Best of luck to you. Be happy to help anytime.
thanks for the info… I will start looking next week for smaller banks in the area and let you all know how it goes.
I went back to my regular bank to ask them about a loan, gave them 2007 and 2008 personal and company taxs… took 3 weeks for them to “get back to me” after I e-mailed the loan officer 3 times. We were shot down. Here is what I got.
We have reviewed your entire loan request package and based on the repayment ability of the company, we will not be able to provide you funding for your loan request. We are extremely sorry for any inconvenience this may cause to you or your company, but based on the restaurant/barâ€™s current income statements, we are unable to prove the company has the repayment ability.
Although many companies try to limit their tax liability as the year draws to a close, losses are a bit of a catch 22. They do provide you with the tax shelter that you are trying to achieve, but it also limits all lending capacity of your company in these market conditions, as one key element that banks are looking for at this point is repayment ability.
So my next question is, should I just take all my info to another bank and try again, or wait until this years taxs are finished (which will show we have a loss again) and THEN go to another bank?
A friend of mine who is a lender for a Community Futures operation here in Canada said it is easier for them to lend to startups (based on a solid business plan and government incentives) than to going concerns…And the longer a business is in business, the harder it gets…Good luck…