by ARTIS COMMERCIAL CAPITAL | Mar 28, 2023 | Blog
According to the United States Small Business Administration, a microloan is any loan that is less than $50,000. While this amount may seem small, micro-lending financing comes with a variety of benefits for small businesses.
In this article, we’ll take a closer look at this loan option including how it works as well as its advantages and disadvantages.
Micro-Lending Financing Explained
The structure of micro-lending financing is similar to a typical term loan. The lender will review and approve your application and extend a loan offer with specific terms and conditions. If accepted, you pay the loan back with interest based on the terms of the agreement. Also, like traditional loans, microloans have fees and penalties attached.
This type of lending is different from traditional lending because it involves smaller amounts. Additionally, the micro-lending financing arena is not dominated by traditional financial institutions. Instead, most loans are made through P2P lending platforms. If you receive a microloan through a P2P platform, the funds likely came from several investors.
Advantages and Disadvantages of Micro-Lending Financing
Microloans have advantages and disadvantages, just like traditional financing options.
Advantages
The advantages of microloans are:
Qualification criteria are more lenient
While qualification criteria vary from one lender to another, it’s typically more lenient than traditional loan qualification requirements. You will still likely be asked for personal and business financial information, as well as to provide collateral and a personal guarantee.
However, since the loan amounts are smaller, the value of the collateral can be lower as well. For example, most of the time, the collateral must be 80% of the loan amount- so on a $10,000 loan, your collateral must be worth $8,000.
Can be used on a variety of expenses
Microloans can be used on a variety of things, including:
- Supplies
- Equipment
- Working capital
- Inventory
- Materials
However, it’s important to note that lenders may put restrictions on how you can use the funds, so check with them before accepting the loan offer.
Lender Options
Micro-lending financing is not available through all lenders, but there are plenty of options:
- Traditional financial institutions
- Alternative lenders
- Non-profits
- P2P lending platforms
- Government entities
Each lender has its own advantages and disadvantages, but the variety of lender options is one of the advantages of micro-lending financing.
Disadvantages
The disadvantages of microloans are as follows:
Smaller loan amounts
One of the major disadvantages of microloans is the size of the loans, which are not enough for many businesses. While the loans can go up to $50,000, a loan this size is hard to secure. In fact, borrowers can only obtain more than $20,000 if they are unable to obtain credit elsewhere and they are likely to succeed. If you need more funds, it may be better to seek traditional financing.
Higher Interest Rates
The interest rates on microloans are not always higher, unless the borrower has a bad credit score. In fact, even top-rated borrowers will pay at least 6% and risky borrowers will pay up to 31.9%.
Not available in all areas
While it is increasing in popularity, micro-lending financing is not available on the mainstream market yet. You may have a difficult time finding microlenders in some areas.
Will Micro-Lending Financing Help Your Business?
If you need a small amount of funding, microlending may help. However, you may want to weigh your options because some of the alternatives may be better. If you’ve done your research and still believe that microlending will help, contact Artis Commercial Capital to learn more.
by ARTIS COMMERCIAL CAPITAL | Mar 21, 2023 | Blog
A hard money loan is a real estate investor’s best friend because it is the quickest way to secure a deal. However, it can get complicated, so it’s important to understand the advantages and disadvantages before accepting this type of loan.
In this article, we’ll explain more about what a hard money loan is, the advantages and disadvantages, and when you should use this type of loan.
Hard Money Lending Defined
A hard money loan is a short-term loan obtained through alternative lenders. When compared with traditional loans, hard money lenders often have lenient criteria but stricter terms. Borrowers often turn to this type of funding after a mortgage or other loan application has been denied or to avoid the process of obtaining a loan through traditional means.
Advantages and Disadvantages of Hard Money Lending
Hard money lenders represent one of the best sources of capital for real estate investors. However, there are also a few disadvantages to keep in mind. Below, we will explore both of these facets of hard money loans to help you decide if this type of funding fits your needs:
Advantages
There are several advantages of working with hard money lenders, including:
Speed of funding
The Dodd-Frank Act set regulations on mortgage lending, meaning that investors need lots of time to close a loan, often several months. However, hard money loans can be secured within days or weeks, depending on the negotiations.
Flexible terms
Since you are dealing directly with an investor instead of with a traditional bank, terms can be negotiated.
Collateral
Typically, the property that is being purchased acts as the collateral for the loan. In some cases, hard money lenders will accept other assets such as a residential property in your name or a retirement account.
No “Red Tape”
Many times, getting a traditional loan for an investment property is difficult. Traditional lenders consider certain credentials, including credit score, LTV ratio, DTI ratio, and other factors. The primary factor that hard money lenders are concerned with is the value of the property.
Convenient
When working with a traditional lender, you must provide tax returns, leases, proof of income, bank statements, and more. On the other hand, hard money loans avoid all this hassle.
Potentially fund multiple deals
Traditional loans only allow funding for one deal at a time. Hard money lenders, on the other hand, allow investors to use other people’s money which means more than one deal can be funded at once.
Beat the competition
There are two things that a seller wants: cash and a timely transaction. A hard money loan provides both- which can help you beat the competition.
Disadvantages
When considering whether or not to work with hard money lenders for your real estate transaction, there are also some disadvantages to consider:
Cost
The convenience of a hard money loan comes at a cost. Since the lenders are at a higher risk, the interest rate is often up to 10 percentage points higher than traditional loans, ranging from 10% to 15%. Other fees, such as origination fees and closing costs are also higher.
Shorter repayment schedule
The repayment schedule for a hard money loan is typically between 6 and 18 months, which is much shorter than a traditional loan. Therefore, it’s important to sell the property and make a profit as quickly as possible.
When Should You Use Hard Money for Real Estate Investment
While hard money lenders will issue loans for nearly any type of real estate, there are certain properties that are ideal for this type of funding. One of the most common hard money loan deals is house flipping. This type of project typically moves quickly which means investors don’t have time to wait for a traditional loan.
Do You Need a Hard Money Loan?
If you are a real estate investor looking to secure a deal quickly, you might want to consider a hard money loan. Contact Artis Commercial Capital to learn more about how this type of funding can help you.
by ARTIS COMMERCIAL CAPITAL | Mar 14, 2023 | Blog
Banks and traditional lending institutions are constrained by governing bodies to observe certain guidelines when approving loans, and these guidelines tend to cause a high rate of disapproval. Even if your application is approved, it may take as much as two months before you actually have the money in hand. By that time, your small business could have drowned because your cash flow has dried up and choked off the lifeblood of your business. To have the best chance of being approved for a bank loan, here are some of the bank business loan requirements you’ll be expected to fulfill.
Bank business loan requirements
Here are some of the bank business loan requirements you’ll be expected to provide when applying for a bank loan. Missing any of these, or submitting documents that are inaccurate or incomplete may be grounds for automatic disapproval.
Business plan – not all banks require this, but it shows how sound your business is and how well-thought-out your path to the future is
Credit – it will be best if your credit score is 660 or above
Cash flow – if you can demonstrate positive cash flow, it will show that your business is fundamentally sound
Collateral – if you have some kind of collateral to offer, your chances of approval will increase
Industry – banks like to know the specific industry you’re in, and what your position is within that industry
Age of your business – it helps a bank to know how long you’ve been operating because that shows stability and success within the field
Documentation – you’ll be expected to provide all kinds of documentation for your bank business loan requirements: tax returns for previous three years, employer identification number, proof of collateral, income statement, balance sheets, personal financial statements, and a copy of the commercial lease on your property.
Our expectations
When you work with Artis Commercial Capital, you won’t have to supply all the same documentation that a bank expects from you. We’d like you to have good credit history, but we can probably still work with you if yours is less than perfect. Contact us today about your business loan, and find out how much easier it will be to meet our expectations than it would be if you worked with a bank.
by ARTIS COMMERCIAL CAPITAL | Mar 7, 2023 | Blog
Many entrepreneurs are lured into the area of house-flipping because of the potential to earn huge profits and to accumulate wealth in a relatively short period of time. It’s true that a great deal of money can be made by flipping houses, but you should be aware that there are some pitfalls commonly experienced by newcomers to the business, and even veterans sometimes fall prey to these same mistakes.
Mistakes made by house-flippers
Here are some of the most common mistakes made by people in the house-flipping business. Being aware of these pitfalls is no guarantee that you’ll be able to avoid them, so be very wary of the presence of any of these deal-breakers:
Not enough money – there are a number of different financing options available when house-flipping, but there are also a number of hidden costs that suddenly appear and can scuttle deals. For instance, repair work, interest rates, property-holding costs, and renovation costs.
Not enough time – it can take quite a bit of time to locate properties suitable for flipping. Then it can take more time to carry out any needed repair work or remodeling, and it will take more time to have the house inspected.
Inadequate skills – if you had hoped to do much of the repair work yourself, you may be hampered by the fact that you lack certain professional skills necessary for the job. Lacking those skills, you’ll be obliged to pay for them, and that will increase your expenditures while lowering profits.
Insufficient knowledge – once you’ve become good at flipping houses, you’ll be aware of all the subtleties and nuances associated with the business. Until then, you may lack the knowledge to pick the right property, at the most favorable location, and for the best possible price.
Need cash for flipping houses?
If so, we might be able to supply the funding you need. Contact us at Artis Commercial Capital, and our financial experts will discuss some possibilities with you so you can secure the funding you need to carry on your house-flipping enterprise.
by ARTIS COMMERCIAL CAPITAL | Feb 28, 2023 | Blog
Economic downturns have the potential to cripple or even destroy businesses. The key to survival for your company is advance preparation. Here are some strategies that can assist your business in being prepared for a recession.
Recognize the Signs
Identifying the warning signs will assist you in being prepared for a recession. According to the National Bureau of Economic Research, recessions are characterized by significant long-term economic downturns. During these periods, there is less demand for products and services. Economic uncertainty causes consumers to be wary of spending. Companies may receive fewer orders than usual. This often causes businesses to implement cost-cutting measures such as closing locations, reducing productivity, and letting go of workers.
Keep Your Workforce Flexible
During recessions, workforces become more volatile. Some workers may make greater efforts to prevent the possibility of being laid off, while others may search for openings for better-paying jobs. Companies that maintain a flexible workforce have a distinct advantage in being prepared for a recession. To complement their core full-time employees, they hire extra temporary staff from online personnel apps according to the needs of specific projects. These workers are already trained and ready to go. While you temporarily employ them you have the chance to observe their efficacy in the positions in case you want to hire full-time help again when the recession ends.
Take Advantage of Opportunities
If you have prepared for a recession by building up a cash reserve, you will be in a position to benefit from certain opportunities that economic downturns present. For instance, you may be able to hire talented employees that other companies have been forced to let go. Suppliers may offer you better prices for goods that you need. If your competitors experience difficulties or even fold, you have a chance to take over some of their market shares or even acquire their companies.
For more advice on being prepared for the recession, get in touch with Artis Commercial Capital.
by ARTIS COMMERCIAL CAPITAL | Feb 21, 2023 | Blog
Most small businesses eventually come to a point where it becomes necessary to secure additional funding in order to keep the business running smoothly and generating profits. Getting the funding from a bank is always more difficult than obtaining needed funding from an alternative lender, since alternative lenders are not subject to the federal guidelines that traditional lending institutions are. In order to improve your chances of getting a bank loan, there are some things you can do. It still may not be possible to get the funding you need, but taking these steps will give you the best opportunity.
Securing a small business bank loan
The first step you can take toward securing a bank loan will be to ensure that you have excellent credit. That means you’ll have to establish a history of paying your vendors and suppliers promptly, and you cannot have defaulted on any previous loans. If your credit history is good, then you’ll need to find out exactly what your candidate bank requires in the way of documentation when applying for a loan. Have a solid business plan ready to show your banker, because this will demonstrate that you’ve done market research, you know the competition well, and you have a good grasp of the financial flow you expect from your business.
Then you’ll need to choose the right kind of small business bank loan for the funding you need, and this should be a loan type that fits your circumstances. You should be able to demonstrate to the bank that you’ll be able to maintain positive cash flow while repaying the loan back for the number of years agreed to in the term length of the loan. The better prepared you are for all contingencies, the more likely it is that you’ll be approved for the small business bank loan. However, sometimes even the best candidates get turned away by most banks, and in that case you’ll still have the option of working with an alternative lender.
No luck securing a small business bank loan?
It isn’t surprising, since the majority of applicants are disapproved these days by conventional lenders and banks. However, alternative lenders like Artis Commercial Capital are not obliged to follow the same stringent guidelines as banks, so we have higher approval rates. Contact us today to see if we can help you secure the funding you need for your small business.
