Listed here are most of the types of financing available for
business today. For more information or to have FBI help you determine
which is best for your business, Apply
Now!
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Accounts
Receivable Loans — Probably
one of the quickest and most widely used methods of secured
lending is loans against accounts receivable. This is the major source of
collateral for commercial finance companies. Many banks have recently
entered into accounts receivable lending.
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Commercial
Finance Companies - Commercial
finance companies usually work on a 3 to 6 point spread between their cost
of money and what they loan to their customers. A commercial finance company’s
two primary sources for money are from lines of credit through commercial
banks and from long-tern loans from institutions such as insurance
companies.
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You can Apply Now at FBI and save time & money trying to find the right
funder for you.
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Accounts
Receivable Financing - On
accounts receivable lending, a separate account is established with a
commercial bank, whereby remittances from your customer are deposited in
that account. The commercial finance company then has
a simultaneous deposit to your regular account, less the amount of the daily
interest. At no time will your customers be made aware of the fact that you
have their accounts pledged for a receivables loan, but the principle of
dominion under the Uniform Commercial Code requires that remittances be
deposited in the control of the lender. Generally speaking, the
record-keeping process for accounts receivable loans is not cumbersome and
is usually based on a photocopy or carbon copy of your existing sales
records.
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Factoring
-Line of credit without the limitations of a typical bank line of credit.
The oldest way of loaning against receivables is
called factoring. Technically, it is not a loan against the receivables
because the factor actually purchases the receivables and in some cases there is no
further recourse for lack of payment on the receivable. With Some Factoring
services, the borrower is not
responsible for collection of the receivables.
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Sale-Leaseback
- In lease purchase
agreements, the property can be new or used. It is sold to a lease company
who in turn leases it back to the original owner or the intended buyer. The
lease purchase agreement can be used for the acquisition of equipment, real
estate and entire businesses as part of acquisition financing. For example,
if sufficient closing funds are not obtainable through normal borrowing
methods, it is possible to sell the used equipment to a leasing company and
then lease it back. This capital is then available to the original seller of
the business.
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Floor
Planning - Perhaps the
best-known use of floor planning is with automobile and truck dealers. Floor
planning is available with all types of distributors such as appliance
dealers, industrial machine tools, air compressors and other standard items
that have a rapid turnover. With floor planning, banks and occasionally
finance companies finance the goods while they are on the dealers or
distributors premises. The lender also tends to provide the time financing to
the end customer when the goods are sold. The latter
situation being the more profitable and attractive.
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Unsecured
Loans - Unsecured borrowing
is usually the simplest, method of financing. Although commercial banks are
not the only source of this type of financing, they tend to be the major
source and prefer making unsecured loans to a going business. Unsecured
loans are typically made to provide working capital to an established
company or an individual through a commercial bank.
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Working
Capital Loan - Working
capital loans are usually for the length of the selling season to a period
of up to one year. For example, if a company needs working capital to
finance merchandise being prepared for the Christmas season (i.e., a toy
manufacturer) or for the summer season (i.e., a boat manufacturer), a loan
would be made until the inventory is sold and the money collected. Unsecured
working capital loans also typically require that they be paid off for a
period of 30 to 60 days before they are re-established. By “resting” the
loan for a period, you establish that the working capital loan is not part
of the equity structure of the company. Bankers feel comfortable with this
concept.
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Your application will receive
prompt attention!
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“Warehouse
Loan” — ‘Warehouse
loans” are similar to other
types of inventory loans, which means that a lender will advance fluids
against a portion of the goods in the warehouse.
The turnover of inventory is an important consideration in making loans on
warehouse inventory. Goods that have a wide market and
high turnover can command a higher percent loan of their market value than
those goods that are seasonal in nature and have a lower demand. When
goods are placed in a public warehouse, a warehouse receipt can be obtained
and this receipt can be used as collateral for inventory financing. In
a similar situation, field warehousing with a warehouse lending
company also can be accomplished. The lender has a warehouse and the goods
are stored with them. They then loan money against the inventory that is
kept in their field warehouse.
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New and
Used Equipment Loans -
A non-working capital loan would be a loan on
equipment. To secure the lender on an equipment loan, a lien is used.
The lien used to collateralize
the loan against fixed assets is called a Chattel Mortgage. A chattel is
personal property, which can be
moved about such as machinery and equipment as opposed
to real property (land and
building), which is fixed and
permanent in place. The lender uses the Uniform Commercial Code
financing papers to perfect his
security interest by filing a financing document at the appropriate
government office.
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Collateral
Loans - A company may be
able to obtain bank loans on
the basis of such collateral as
chattel mortgages, stocks and
bonds, real estate mortgages, and
life insurance (up to the cash surrender value). Even with collateral, the
bank will still give great weight to the company’s ability to repay. The
bank may turn down the application, no matter how good the collateral, if
there is no clear showing of ability to repay. The bank does not expect to
liquidate the collateral unless forced to and
then will probably not realize book value on a forced sale. The collateral
affords the bank some security and a collateral loan is easier to obtain
than a line of credit or unsecured loan for a new or
risky business.
With all these
choices, let FBI help you determine the best one for your situation. Apply
Now!
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Endorsers,
Co-Makers, and Guarantors — Borrowers
often get other people to sign a note in order to bolster their own credit.
These endorsers are contingently liable for the note they sign. If the
borrower fails to pay up, the bank expects the endorser to make the note
good. Sometimes, the endorser may be asked to pledge assets or
securities that he owns. A co-maker is one who creates an obligation jointly
with the borrower. In such cases, the bank can collect directly from either
the maker or the co-maker. A guarantor is one who guarantees the
payment of a note by signing a guaranty commitment. Sometimes, a
manufacturer will act as guarantor for one of his customers.
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Assignment
Leases - The assigned lease
as security is similar to the guarantee. It is used, for example, in some
franchise situations. The bank lends the money on a building and takes a
mortgage. Then, the lease, which the dealer and the parent franchise company
work out, is assigned so that the bank automatically receives the rent
payments. In this manner, the bank is guaranteed repayment of the loan.
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Real
Estate - Real estate is
another form of collateral for long-term loans. When taking a real estate
mortgage, the bank establishes:
(1) the location of the real estate,
(2) its
physical condition,
(3) its foreclosure value, and
(4) the amount of
insurance carried on the property.
Prior liens and encumbrances on
title must also be cleared. See restrictions in your state regarding
licensing of Mortgage Brokers, or contact FBI
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Interim
Financing — This is simply
a high-interest short-term loan to tide you over until you can get permanent
long-term financing. It’s suited to the company that has a good
competitive position and has met an opportunity to make a profitable
business provided it can come up fast with a sizable sum of new money. It
may also be suited where interest rates on long-term financing are high and
the company expects that they will decline by the time the short-term loan
matures. If you are in this position and are already using a full credit
line at your bank you can get the necessary funds in one of two ways:
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Instalment Loans - Larger
banks generally grant this type of loan. They are made for almost any
productive purpose and may be granted for any period that the bank allows.
Payments are made on a monthly basis. As the obligation is reduced, it may
be refinanced at more advantageous rates. It can be tailored to seasonal
requirements with heavy repayments in peak months and smaller payments in
the off season.
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It can be difficult to know what the best solution is for your
business. FBI can Help
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Time-Purchase Loans - Special
types of time-purchase loans are available to finance both retailer and
consumer purchase of automobiles, household equipment, boats, mobile homes,
industrial and farm equipment, etc., and are made for varying periods of
time, depending on the product. This category also includes accounts
receivable financing, indirect collections, and factoring.
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Inventory
Loans — These are
available if the merchandise or inventory can qualify as collateral.
Requirements are stiff and loans are limited to certain classes of
inventory.
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Assignment
of Money Due Under Government Contract — A
device analogous to assignment of accounts receivable (see paragraph above)
is the assignment of money to be received under government contracts to
secure a line of credit. The lender will agree because collection from the
federal government is often more certain than from some civilian customers.
In the first instance, the government has already checked the contractor’s
credit rating to assure delivery to fulfill the contract. The one aspect,
which might delay payment, could be the borrower manufacturer's inability to
comply with government specifications, in which case a penalty would be
incurred.
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Stocks
and Bonds - If you use
stocks and bonds as collateral, they must be marketable. As a protection
against market declines and possible expenses of liquidation, banks usually
lend no more than 65% of the market value of high-grade stock. On federal
government or municipal bonds, they may be willing to lend 90% or more of
their market value. The bank may ask the borrower for additional security or
payment whenever the market value of the stocks or bonds drops below the
bank’s required margin.
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You
can Apply Now at FBI and save time & money trying to find the right funder
for you.
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Lines of
Credit - After
presenting your financial statement and loan request package to the bank the
bank hopefully will establish that you have an open line of credit up to a
specific amount, for example up to $100,000. Generally, this means the funds
are available for the company to use for a period of one year up to the
credit limit. They may use as little or as much of the line of credit at any
tune during the year that they desire. In taking down on a line of credit,
you (if this is an individual borrowing) or the company will have to sign a
note. The notes are typically for 90 days. However, where a line of
credit is tied to specific assets, such as inventory financing, as in the
leasing of uniforms, the repayment period under the loan could be for
periods of up to two years.
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SBF Programs-
Small Business is one of the fastest growing segments of North America's
economy. Imaginative entrepreneurs with a drive and spirit are
creating thousands of new jobs and new opportunities for our country’s
future. The Canada Small business Financing (CSBF) and the US's SBLA
Programs were created to help small businesses reach their potential by
making it easier for them to get term business improvement loans to finance
the purchase or improvement of fixed assts for new or expanded operations.
Administered under the Canada Small Business Financing Act (CSBFA), the
program is a joint initiative between the Government of Canada and private
sector lenders.
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Equipment
Leasing — Virtually every
business can benefit from leasing in one form or another. Also, just about
any type of equipment can be leased nowadays, new or used. For this reason,
more and more companies are opting to lease the equipment they need instead
of purchasing it. In addition, many leasing companies will allow a company
to lease up to $50,000 in equipment simply by filling out a one-page credit
application. These deals can be completed in as little as three working
days. Leasing itself is really nothing more than an alternate form of
equipment financing where the lessor (owner) purchases the equipment from a
vendor on behalf of the lessee (user). The lessee maintains possession and
usage of the equipment provided he insures the equipment against theft or
damage, and pays the lessor a monthly user fee. At the end of the lease, the
lessee can purchase the equipment (usually for $1.00) or give it back to the
lessor and begin a new lease, or simply walk away.
If you would like us to help you determine which type of
financing is best for you, Apply Now!
