Conventional Loan and Conventional Loans

Conventional loans, otherwise known as traditional funds, can be defined as the usual standard method for the application and approval process of monies being granted by a lending institution. These monies are more commonly seen in the area of mortgages. Mortgage funds offer traditional and nontraditional ways to attain them. These funds consist of a standard set of criteria, to purchase a home or property, which must be met in order to qualify for approval. The lenders utilize creative financing and government guarantee programs to qualify individuals for mortgage funds who normally cannot qualify under the conventional loan standards.
Mortgages typically require 10%-20% down as a payment to the lender in order to receive 80%-90% financing of the purchase price when it comes to a conventional loan. Depending on the area, 10%-20% could be a lot of money to provide, out of pocket, to purchase a home. These funds also require that the applicant have stable and consistent employment income, and that the employment income be documented and verified. Conventional loans also require that the lending institution appraise the home in question to validate its worth. A home inspection; however, is not required or contingent upon for this type of approval.

Programs such as the FHA, Federal Housing Administration, and VA or Veterans Administration provide alternative options to conventional loans. FHA loans differ than the traditional ones because a 3% down payment is all that is required. In addition to the 3% down, most if not all of the closing costs (which are usually the buyer’s responsibility) can be wrapped into the FHA mortgage monies. The VA loan requires no down payment, and is only offered to Veterans and their spouses. Both types of creative financing have purchase limits, unlike a conventional loan mortgage. A person should pray and seek godly counsel when deciding which process is the best for them.

Conventional loans are being phased out because of the requirements placed on the buyer for much money up front. These do not seem to offer any benefits with the exception of no financial limit, and no inspection requirement. With the housing costs on the rise, many people cannot afford the 10%-20% down payment that this requires and are therefore utilizing the creative financing options more frequently. It is said that within the next decade, the conventional loan will be totally phased out, and replaced with more options for creative home purchase financing.

Business Bank Loan

A business bank loan can come in a variety of forms and options provided by the lending institution or their relationships with brokerages. These loans are typically offered to larger corporations that need larger amounts of money for operations. Business bank loans will require an extensive proposal plan with a new and documented statement of success. In times past, this funding could only be offered by a bank or credit union. Today there are many governmental programs and private organizations offering assistance to entrepreneurs around the world. Choosing the best program should begin with seeking Gods guidance. “And I say unto you, Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you” (Luke 11:9).
It is a good idea to search for lenders that have special programs that coincide with the businesses agenda. Institutions that deal in small business bank loans would be inappropriate to apply for if the amount requested is millions of dollars. SBA or Small Business Administration lenders allow for a certain number of financial agreements to be received by small establishments. The SBA guarantees a percentage of the funds loaned to small businesses requiring a pre-authorization before the funds can be distributed. When researching the services the SBA has to offer, it is important to note that the SBA is not, by any means, a business bank loan lender. They simply make a guarantee to the lender in the case of default.

The SBA may provide resources for contacting a plethora of lenders who offer funding for small and upcoming businesses. The best chances a borrower has of securing any business bank loans comes with franchise ownership. Banks are more ready to provide money for a franchise than for an unknown start up. A franchise will have already established methods for success. This success is documented in their financial statements, which are required if the borrower would like to receive a business bank loan. Fictitious financial statements as required for start ups are just that, fictitious. While the method may sound good on paper, there is no documentation to back it up and it is therefore considered a risk.

Funding that involves a tremendous risk will usually be denied without ample collateral being pledged as security. Even if the business bank loan, with the collateral, is approved; the interest rate may skyrocket to immeasurable lengths. Banks do not like to risk their money in faulty investments. They only allow for a .05% default rate. When their default rate increases beyond that .05%, they tighten up their lending reigns and no longer take on any risky ventures, with or without the security of collateral. It is wise to develop an effective moneymaking plan before applying for any business bank loans.

Small Business Loan Applications

Small business loan applications are available through many lending institutions who issue financing to cover all that a small company needs to prosper and grow. Most of these are based on programs that the SBA has initiated and confirmed with a secure guarantee. No matter what a private lender calls the financing, it is probably based on one of these three programs: Basic 7(a) Loan Guaranty, a Certified Development Company (CDC)–504 Program, and a Microloan, a 7(m) Loan Program. They even offer prequalification so that requests for $250,000 or less can be analyzed and sanctioned by the SBA based on financial ratios, credit and company history, and terms. The small business loan application information is then reviewed and processed by SBA district offices who work directly with business owners.
The Basic 7 is the most flexible, providing money for working capital, machinery or equipment, furniture, fixtures, land, building (renovation or new construction), leasehold improvements, and sometimes debt refinancing. Commercial lending institutions will accept a small business loan application for start-up and existing businesses for loans maturing between 10-25 years, but it is entirely up to them. All requests will include repayment considerations, management capability and issues regarding good character, collateral, and owner equity contributions. CDC financing provides fixed rate financing for small companies that want to expand or modernize. Small business loan applications for CDC loans needs to come hand in hand with multiple liens and 10 percent equity from the owner who is applying. Microloans are short term financing for up to $35,000 from the SBA to a lender to pass on to owners using an application. This is an ideal choice for smaller companies and not-for-profit child care centers.

The small business loan application focuses on two types of funding: equity and debt financing. Companies with low equity or a ratio of more debt than equity should increase ownership capital before beginning the application process as required information about non-professional investors like your mother (or friends, relatives, employees, and industry investors) or, as in most cases, venture capitalists whose wealth better guarantees the success of application will be needed. All information should be well-researched to demonstrate sound business management, without which most companies fail. ‘Give instruction to a wise man and he will be yet wiser: teach a just man and he will increase in learning.” (Proverbs 9:9) Having done so, the information will help provide adequate and timely financing. Small business loan applications are designed to help secure the right type of financing, the exact amount of money needed, and a clear estimation of how much it will cost a business to borrow.

Business Micro Loan

A business micro loan is especially for the start-up or to develop a newly established for-profit small company or non-profit child care center, which is made available by the Small Business Administration (SBA). Local non-profit lenders are in charge of setting their own terms and interest rates for these business micro loans. The non-profit lenders, called intermediaries, operate independently of federal oversight to a certain degree, and generally require collateral and the personal guarantee of the owner. This collateral is generally the equipment or other assets of the company. To locate an intermediary lender who provides business micro loans, look for the SBA listing in the telephone book under the U.S. Government.
The amount provided by this funding is to be used for the initial money to set up a new company expenses – working capital, equipment, furniture, inventory and supplies, but is not to be used as a down payment or to purchase real estate. Business micro loans have a maximum of $35,000 with the average amount being $10,500. The fees are at the lenders’ discretion but are also based upon their cost to receive the Treasury funds which is tied to the current rates of Treasury Bills. Current rates vary from 5-7% in the United States, but foreign countries are subject to rates that exceed 20% due to the subjective lending by their intermediaries. The SBA does require that a business micro loan has a maximum term of six years, however, this will be set by the lender and can be for a shorter period depending on the financed amount and other terms established at signing.

Training to use this funding source is available through the SBA and other organizations whose goal is to see small businesses succeed in their communities. This training includes management of finances, capital, inventory, advertising, customer service, forecasting and cash flow, marketing among other topics. This training is meant to provide for leadership and communication skills that will help the small company to be successful, which in turn, makes the community more successful. The length of a business micro loan training program varies with each session offered, but a typical session will last ten weeks.

Business micro loans are an excellent means for entrepreneurs to start-up a company from scratch. But they must prove that they are ready to project themselves in a solid, business manner and are willing to meet the guidelines of the SBA to prove that stability. Biblical advice from Paul to Timothy would be well heeded when accepting a business micro loan: “Study to shew thyself approved unto God, a workman that needeth not to be ashamed, rightly dividing the word of truth.” (2 Timothy 2:15)

Small Business Administration Loans

Assistance through the SBA can meet the financing needs of a company. Whether the money is needed to start a new business or expand a current operation, there probably is a package that will suit the company’s needs. Small Business Administration loans can be used for working capital, or to purchase machinery, equipment, furniture, fixtures, land or a building. Others may seek to use a loan to finance a new building purchase or to renovate a building to better suit their needs. A great advantage to financing through the SBA is the flexibility of the financing for the specific needs of the company.

Another advantage to Small Business Administration loans is the variety of programs they offer. With their numerous lending programs, almost any type of company can find financial assistance. Those people who may not qualify for financing through traditional lending channels will especially appreciate the assistance a Small Business Administration loan can offer them. These programs can be used for non-profit or for-profit businesses and can be used for long-term or short-term financing. Furthermore, there are packages designed specifically to assist women, minorities or people with disabilities.

When someone applies for financing with the SBA, they will receive more than financing opportunities. They also can receive counseling as well as other information about running a successful operation. The SBA employs volunteer counselors who are retired executives that can offer valuable advice regarding various aspects of a business. Financial assistance is only the beginning of launching a successful venture.

Starting or expanding a business can be a risky venture. This is especially true when considering the various funding programs like those available through a Small Business Administration loan. If someone is considering opening or expanding a new company, they should seek the wise counsel of others, possible including the counsel of retired executives. The Bible says that “where no counsel is, the people fall: but in the multitude of counsellors there is safety” (Proverbs 11:14). Taking the time to receive professional advice and information will provide a company with a much greater opportunity for success.

Builder Construction Loan

Builder construction loans can be received whether a contractor is hired or not. Many times, homebuilders with knowledge of construction will choose to build a home without the help of a contractor. This allows the homebuilder to cut out the cost of paying for labor. Also, the homebuilder who takes on the building project without a contractor has the ability to use all funds that are received from a builder construction loan to benefit the cost of materials.

Home financing can be pursued at any point of time when in the process of construction a new home. If the individual building the home does not feel the need to obtain a loan before the construction begins but runs into financial need during the process, the loan will be available. Receiving approved financing before the construction begins is also a great option because the homeowner knows what kind of financial situation they are in throughout the entire process. Prudent planning will help new home owners pay back builder construction loans fully in a timely manner, showing themselves to be trustworthy borrowers. “The wicked borroweth, and payeth not again: but the righteous sheweth mercy, and giveth.” (Psalm 37:21)

The best option that is provided by a builder construction loan is the immediate ability to use the loan to pay for materials or labor. With many loans, there is a waiting period. Sometimes the waiting period can be up to one months time, making it impossible to use the money for needs that may arise in that first month. With builder construction loans, any money that is provided by the loan will be available for use as soon as the agreement is reached and signed.

Seeking financial help provides many unique opportunities to anyone in the process of building or thinking about building a new home. Whether or not you plan to use a contractor, financing will provide you with the money you need at any point of time: before or during the construction phase. With the money borrowed, you’ll be able to afford the labor and supplies needed to build your dream home now.

Equity Business Loan

Equity business loans can help the company’s owner draw from his own resources for additional financing rather than to take on additional debt from an outside source. Using one of these contracts can be a good way to receive additional purchasing power, provided the company has enough equity built into it at the time. If a business owner was interested in equity business loans, he can find the means to draw from his equity from lenders online, or even from local or current lenders. Whether an owner can qualify will depend on the business’s financial situation. If a company, particularly a small one, has been running for awhile, it may have enough equity built up to qualify for one of these contracts. The advantage to this type of funding is that the owner does not have to take on additional debt from an outside source, but can use his own resources to provide additional streams of financing.
No matter the type of property, businessowners have the option of taking out equity business loans. One could be taken out on such properties as office and retail, warehouse operations, restaurants, multi-family dwellings, and more. There is great flexibility in the types of properties from which one can draw money. In addition, a company could use equity business loans to purchase additional land or building space or to purchase additional equipment or supplies. This is an option for the businessowner to find additional purchasing power at a time when the company needs more.

However, before taking out a contract, the proprietor should have a thorough understanding about how much the process will cost, as well as having prepared the documentation he will need to apply. There may be several associated costs with taking out a contract of this type, such as inspections and appraisals, legal fees, and loan application fees. Therefore, the business owner will want to insure that the company can afford not only to take out the equity business loan, but the monthly payments that will accompany the loan.

This may be a viable way for a proprietor to inject additional financing revenue into his business in order to aid its growth at critical times. However, the owner should make sure that the company can support the additional equity business loan debt before proceeding. Luke 14:28 warns us, “For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it? Lest haply, after he hath laid the foundation, and is not able to finish it, all that behold it begin to mock him.” This principle applies to getting a loan and not being able to repay it. Be wise when applying for a equity business loan. Owners can find competing quotes online or through their current lender.

New Business Loan

A new business loan can be granted by lending institutions such as a bank or credit union; however, there are a plethora of other sources that offer them to those that apply. This type of funding is easier to get than previously thought by thousands of aspiring entrepreneurs around the country; businessmen just don’t know where to look. Some common private lenders include non-profit companies that cater their lending to women and minorities. While this is not always the case, a woman or minority owned business may have an easier time getting a new business loan from a private lender if they have been turned down by the traditional application process through a typical lending institution. Fortunately, God makes a way for even those who have trouble borrowing. “In the way of righteousness is life: and in the pathway thereof there is no death” (Proverbs 12:28).
In order to have a chance at approval, an entrepreneur must create a proposal. This proposal must be original and must describe to the viewer, the bank, how the company will succeed, and how it will be able to make payments on the loan once established. New business loans are harder to get for a start-up company compared to a franchise. A franchise usually has a documented method for achieving a profit and banks are more inclined to lend to them before taking the risk on an original start up idea. If .05% of amounts are not repaid, then they will tighten up their standards for granting new business loans.

An entrepreneur seeking financing should have at least a 10% down payment for the amount they would like to borrow. New business loans with lower than 10% down are typically denied. Banks recommend an entrepreneur to take out a home equity loan to come up with the 10% or allow a friend or relative to make a one-time gift towards the new business loan cause. Repayment arrangements can be paid privately if needed with the friend or relative making the money gift. If there is no way to fund the down payment, then there are private organizations who do not lend, but will grant an entrepreneur money for a down payment.

Once the amount has been granted, it is up to the borrower to ensure that the repayment requirements are met. If the business did not utilize real property, then the lender has nothing for collateral, which coincidentally also makes approval much more difficult. At least if the business included the property, then it could be pledged as collateral. Having no collateral and attempting to borrow is not wise. It has been known to happen, but usually for very small new business loans in which the borrower only needed under $5,000 to start.

Hotel Loan

Some financing of hotel loans can be received through direct lending sources that provide commercial financing officers that are trained in structuring loans for the resort industry. Understanding the resort business offers keen insight to any business owner’s requirements and will facilitate the approval process to the satisfaction of most business owners. Many lending sources have nationwide experience in providing resort financing. The approval process need not be as difficult as many owners expect, if requirements are met early. The hotel loan pre-approval process is offered online by many lending sources.

A business owner or prospective hotel owner is wise to go through the pre-approval process in order to circumvent any loan problems that may arise at the time of a closing. Application can be pre-approved quickly and relatively simply, by choosing an online lending source. Pre-approval for hotel loans can be within a matter of a few days. There are several requirements in order to receive approval for any hotel loan. As with any residential or commercial agreement, these arrangements require personal financial information and a credit check. Collateral is a significant factor for receiving large, financed amounts and requirements vary among lenders according to loan amount.

Commercial sources require past financial hotel statements, tax records, and all other pertinent financial records associated with expenditures and earnings. Management information is required by many lending sources in order to determine structure and business organization. Hotel loans require a huge investment for lending sources and it is necessary for applicants to provide as much information as possible to minimize the risk factor. There are many hotel loan sources that offer more information on their websites or through personal contact. “For the Lord is a great God, and a great King above all gods.” (Psalm 95:3)