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| Items to consider when borrowing: |
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| Variables
w/ Type of Loan: |
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| 1) |
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Interest
Rate: can vary with personal credit history,
collateral pledged and paperwork required
(less risk / reduced rate). |
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| 2) |
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Variable
or Fixed Rate: does the rate change fluctuate? |
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| 3) |
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Points or Fees:
certain loans may include costs over the interest
rate. |
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| 4) |
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Personal Funds:
the amount of your money required in the investment
(typically 20% to 30%). |
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| 5) |
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Term of Loan:
loan terms can vary based on use of funds
and risk. |
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| 6) |
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Collateral:
requirements pertaining to assets pledged
and related implications. |
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| 7) |
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Personal
Guarantee: is a personal guarantee required? |
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| 8) |
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Pre-Payment
Penalties or Balloon Payments: understand
the terms of repayment and your options. |
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| 9) |
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Type of Lender:
leasing, financing or SBA (Small Business
Administration) loans. |
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| SBA
(Small Business Association) vs. Bank / Leasing
Company Loan: |
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| 1) |
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Loan Purpose:
SBA loans are partially guaranteed by the
federal government to stimulate small business
growth. |
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| 2) |
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Process Time:
SBA loans usually take a little longer due
to their more detailed application and documentation. |
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| 3) |
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Support:
SBA lenders serve you and the loan; may provide
greater support during the loan. |
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| 4) |
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Variable
Rates: fluctuate with the prime rate (adjusted
quarterly) and are typically seven to ten
year terms. |
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| Four
Things That Banks / Lenders Will Look At: |
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| 1) |
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Personal
credit score: how you have handled
your personal debts
(personal payment history). |
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| 2) |
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Historical
cash flow: what cash flows are available
to repay loan (if start up / projections -
will revert to other cash flow items). |
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| 3) |
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Collateral:
specific assets pledged (liens) - used / old
assets typically at only 50% value (l/hold
improvements no value). |
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| 4) |
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Value
of personal guarantee: other assets
of the borrower (adds other assurances of
repayment). |
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| If
#1 not good, most lenders will not consider you
or at best you'll receive a very high interest rate. |
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| If
#2 or #3 are deficient (i.e. higher risk), SBA /
financing company loan may be only option; bank
will typically not loan the monies. |
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| Other
Possible Needs - Business Plan, Personal Statements
of Cash Flows & Net Worth: |
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| 1) |
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Business
plan - what is your overview of the investment
and the funds required? |
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| 2) |
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Statement
of current cash flows - existing sources and
uses of funds (net cash position). |
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| 3) |
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Personal
Financial Statements: tax returns and statements
of personal net worth (balance sheet). |
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| Click
here for a list of Store Financing/Equipment
Lease Providers |
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