Are you ready to apply for a business loan for your company? Review our need to know business terms so you know what you are getting out of your loan.
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Do you know that a large number of loan applicants sign the paperwork without understanding the business terms?
Before you submit your business loan application form, read this guide to understand the common terms used by lenders. It’ll help you apply for the best business loan and understand the lingo used by most lenders
Interestingly, business loans can stretch for a few weeks to 25 years. In this industry, the word "terms" ordinarily alludes to the amount of time taken to reimburse the loan and interest to the lender.
Let me take you via some of the details of the loan terms and terminologies. They’ll help you know what you’re getting into when applying for a loan.
Behind SBA loans, these loans range from 3 to 10 years and come with the longest finance terms. They’re not easy to qualify and are not accessed by most small business owners.
These provides the longest loan terms in the business market. Loan terms in this category depend on the SBA loan programs they are lent through. Below are the three familiar SBA loan programs:
Similarly, this is another type of funding that provides prolonged business loan terms and covers one to five years. However, despite being applied via optional lenders, medium-term loans function like traditional bank loans. Their loan term provides a longer repayment period as compared to several other online business credit alternatives.
Do you know invoice financing provides extremely short-term solutions to business people? Its finance terms cover 3 to 6 months, and outstanding invoices secure the funding.
Usually, the loan term is determined by the amount of time taken by the customer to fulfill the invoice. As a result, invoice financing firms accept three to six weeks of outstanding invoices.
As the name implies, these range from 3 to 18 months. You’ll have a lower cost of capital and provides small amounts of loans that are quicker time-to-fund. Short-term loans are impacted by the year or less repayment term.
This can be medium-term or short-term in nature. Hence, the usual loan term you see attached to credit business line varies broadly from 6 months to 5 years.
Are you aware that the equipment bought with this funding secures equipment financing? Also, its common finance terms usually are longer.
The built-in collateral means: lenders take less risk — the loan covers from 2 to 5 years.
These have no business loan terms. They are repaid via a day-to-day percentage of the business card revenues. The advance firm claims the daily percentage until the whole debt is cleared.
With the fluctuating daily payment, it’s hard to tell the period taken by the merchant cash advance. But do you know this has some of the shortest loan terms in the industry?
That’s due to the daily payments. Normally, borrowers repay their loan for a period of 4 to 18 months.
During the process of searching for the right business loan, you’ll come across some terminologies as highlighted below.
This takes note of the entire cash inflows and outflows from your business during a specific period.
It’s a pre-determined time after the due date of loan payment given without incurring late charges.
Moreover, the type of business entity constitutes the category your business falls legally. Entity type influences how your business functions under the law.
Do you know with collateral you have high chances of qualifying for funding and get better business loan terms?
Collateral consists of tangible and intangible property owned by an individual or business. It may include financial accounts, equipment, vehicles, real estate, etc. Businesses use collateral in two ways:
When utilized in the business loan term, it refers to loans with no collateral backing. However, unsecured debt results in bigger risks to the lender. They’re also not easy to qualify.
By underwriting your application, the lender accesses the risk of loaning you. It involves the decisions of whether to lend or not.
Commonly known as "current liability", accounts payable constitutes a business loan term that alludes to short-term debt that you’re needed to clear soon. It denotes what’s owned by your business.
This refers to the reimbursements you’re owned. They make up outstanding invoices and allude to what your trade is owed.
In business finance terms, it refers to how borrowers pay off their business loans. For amortized loans, borrowers make scheduled and equal payments until the principal and interest is paid.
Consolidating your debts means paying multiple loans with the money you got from a single loan.
Debt financing means way of business financing or a loan that necessitates you to repay the principal amount and interest over time.
It’s a contract signed when you agree to take the loan. The loan agreement delineates the loan terms.
A loan matures after making the last loan payment. That’s after full clearing of the principal and interest.
Unlike a fixed interest rate, this differs from the market interest rates during the business loan span.
It’s a borrower who is termed as a higher risk.
Signing to a blanket lien loan gives powers to the lender to seize any of your business property if the debt is not cleared.
Refinancing your debt involves paying off your loan with another better loan. It saves your huge business cash with the avoided interest.
What do you know about working capital? It’s the entire capital utilized in day-to-day transactions in your business. It's the amount of cash in your business minus the expenses.
If you are seeking to work out or modify your SBA loan with lenders, get in touch with us. We’ll walk you through common business terms.
In the business arena, we’ll get the world at your fingertips as we offer you the most important loan details.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Clients executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate and collect all pledged collateral pursuant to the trust deed instruments.
The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.
After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.
Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.
We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.
Our firm successfully negotiated an SBA offer in compromise (SBA OIC), settling a $974,535.93 SBA loan balance for just $18,000. The offerors, personal guarantors on an SBA 7(a) loan, originally obtained financing to purchase a commercial building in Lancaster, California.
The borrower filed for bankruptcy, and the third-party lender (TPL) foreclosed on the property. Despite the loan default, the SBA pursued the offerors for repayment. Given their limited income, lack of significant assets, and approaching retirement, we presented a strong case demonstrating their financial hardship.
Through strategic negotiations, we secured a favorable SBA settlement, reducing the nearly $1 million debt to a fraction of the amount owed. This outcome allowed the offerors to resolve their liability without prolonged financial strain.
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