Wish Me Luck- Applied For The Big Loan
Business By jillmakescakes Updated 21 Aug 2008 , 9:12pm by sweettoothmom
The very best of luck, I also am working on mine. One thing I wanted to
mention is I am working with the SBA in putting mine together, I was so
delighted to find this very useful and free resource in my city, just a thought
What is the SBA? 
i did hear back from the bank- they want more collateral-- i don't have enough equity in my home and my business partner is 3 years away from paying off the mortgage and not willing to put hers up (which is a whole other issue her and I are discussing)
the SBA is the Small Business Administration. They have lots of helpful info.
What if you did some minor renovations that add a ton of equity? I'm not sure what kind of home you have but things can always be done to add equity (My full time job is an account manager with a custom home builder, if you need ideas let me know).
I'd be interested to know what minor renovations. The issue we have is that when we built our home just 5 years ago, we added on to the garage and took up almost all available build space on the lot.
Here is a thought for collateral.
Borrow from a family memeber or friend or take a third partner (a silent partner) the amount of the collateral required. The bank just needs a letter stating it is a gift not a loan (if you mention you got it from a silent partner they might want to pull thier credit as well so be cautious in mentioning the partner word to the banker) and then it doesnt reflect on your Debt to Income ratios. Be prepared with an answer to the question "What is the source of these funds?", I GUARANTEE the banker will ask and want some proof of where it came from.
Now assure the person who loaned you the collateral that the loan will be paid off to them and set up a payment plan with the terms and interest rate etc spelled out clearly. I would have the details clearly lined out in an agreement in hand when you approach this potential family or friend lender of funds.
Then you take the money and place it in a secured CD at the same bank you are trying to get the loan at. The CD can be used as collateral for your loan. Here is how you go about the CD. You go to the bank and tell the loan officer that you want to open a secured CD to use as collateral for your business loan. They are usually understanding and see it as a win, win for the bank. It also shows them you are serious about your relationship with the business, your partner, and the bank itself. Sort of solidifying your true intentions. Then use the interest on the CD when it matures (or monthly, semi monthly etc) to pay the lender or family member back with interest.
Here is the catch if you default on the loan the CD which is now collateral will be absorbed by the bank. You could have an unhappy family member if that was to occur. And you would still owe them all that money. If you borrow the money you owe it, if your partner borrows it she owes it. Trust me in saying, even if you are friends, if things "go south" on you in the future with your partner, this little loan could become so nasty.
So keep it business like whenever possible. Look into the crystal ball and see what the future could be like if it was the worst case scenario and try to protect yourself, the business and each others families as much as you can.
I cant say the bank will be 100% accomodating and immediately approve your loan with this CD scenario but they might be more likely to bend rules etc to make exceptions and possibly work with you on the loan amount. Best of luck Jillmakescakes. Keep us up to date!
I hope this helps you some.
i don't have enough equity in my home
I think the equity issue for most borrowers is that the current housing crisis is in part due to too many people borrowing on the equity in the home then getting upside down on their mortgage. Their mortgage(s) becomes more than the house is worth.
I'm afraid this is a terrible time for getting capital from a bank. They've really reigned in their cash. Like a previous poster, I would check out prosper.com.
If you look good on paper and can back up your claims you can get a loan. You can come back here and invite others familiar with your work to provide recommendations. Right now there is a baker looking for a loan for a commercial bakery:http://tinyurl.com/5wymdd
Good luck!!!
Be carfeul with Prosper and other of thses loan sitres. The banker will wnat to know where you got the money for the collateral. If you state it is a loan that will skew your debt to income ratios completely throwing you out of contention for a loan at all. Just something to think about.
Now I am not bashing on Prosper because I dont know much of anything about Prosper. I just know what bankers look at.
Keep your house, dont improve or do anything too crazy until you get a CMA from a realtor or speak with an appraiser. You can over improve and not be able to get anything more out of your home depending on your location and other variables. You built 5 years ago so there is probably not much you can do to add extreme dollar amounts to up your value unless you went basic in everything you did when you built. Your house is your safe haven, my thoughts are protect that asset.
There is a lot you can do with a new house to increase it's value. Also, you might want to consider re-negotiating your mortgage if that is a possibility. I wouldn't borrow money from anyone because that just makes thing complicated, I have never ever heard of things going smoothly when you borrow money. Also, I wouldn't keep applying with banks that will decrease your credit rating which will make a big difference.
If you have some credit cards that you can pay down quickly by shifting money, that will help your debt ratio. Can you get a personal loan? If you can that can help because it will show as "available" cash (or something along those lines).
Good Luck....This is something I think I will only see in my dreams!!! All my good vibes are being sent your way too!!!
Being in commercial banking, I know that the SBA almost always requires all borrowers/guarantors to put up their homes as collateral. If you partner won't, you may have a problem on your hands with the SBA.
deb
Putting ones home for a business loan is the Old school lending method utilized often but not necessarily the primary lending option for bankers. You really have to just keep looking for the lender that is right for you. I agree you dont want to keep applying over and over again to different lenders. But talking to them having them look over your business plan and overall credit report with score that you can pull yourself online. This will enable them to give you a better, clearer picture of what they can or cannot do for you in your given situation. Every time a lender pulls your credit they ding your score down between 1 and 13 points. That can make or break you with the next financial institution who pulls your credit.
AND you DO NOT have to go SBA only. Some banks will give a commercial loan to businesses that are funded etc by them not the SBA. This gives them some wiggle room to make decisions on thier own, without as many hoops to jump through. Credit Unions and small hometown banks, (that is NON NATIONWIDE OR BIG CORPORATE OWNED banks) are the best to go to first.
Every state has a list of the licensed financial institutions for that state. Contact your states secretary of state to obtain this list and contact them with inquiries into what they can do for you. Again dont let them all pull your credit, Supply them wiht a copy of the one you pulled yourself.
And honestly I dont blame your partner for not wanting to put up her house. That is a really scenario for me too. I wouldnt do it myself no matter what the business. It is just too scary. My babies need a house over thier head no matter what. I know no pain, no glory but my kids dont need to feel that pain if I mess up. So dont be too harsh on her. I have seen your work here on CC and I think you can be successful,
I do not doubt your abilities at all.
Borrowing money is hard to do especially with family. No lie in that. Tapping into a life insurance policy or perhaps retirement savings can also be an option for you. Borrow from yourself. Another route but keep the debt to income ratio in mind, is to refinance a vehicle that maybe paid off in full. Take that cash and use it for collateral.
Work the venture capitalists they maybe a better option all the way around.
The mortgage industry is in an uproar currently to say the least and negotiating your mortgage right now might not be a bad move but it might be a mute point. If comparables in your area are not selling for more than what your house is worth and mortgaged for, you are wasting time and money. You really have to work the numbers hard to see if a refi is in your best efforts.
So many are trying to get out of those ill advised ARM loans and Option Payment mortgages right now and mortgage companies are being bombarded every minute of the day by people wanting out or to refi into a fixed loan or a better rate. Mortgage companies are sending out hourly updates in changes to policy concerning refi's. Indy mac and Freddy mac and now Fannie Mae in bad shape are leaving all other lenders in trouble for fund sourcing and protection that these companies once afforded them. Is it still possible to refi yes but literally minute by minute policies are changing in the industry. They are becoming less and less loose in thier decision making. Underwriters are over worked and unable to keep up with the numerous changes. Too many people were talked into taking a 2nd mortgage to cover the difference to obtain thier homes or make improvements in the past years, that has also led to this issue of many not being able to afford thier house payments and in need to refi. It will be harder than ever to make a simple refi work.
Go to a Financial advisor let them look over your personal finances, business finances and those of your partner. Have this pro help you make a 2 or 5 year plan to get you where you want to be. There are options out there that they might be able to turn you on to as well.
Best of luck to you and yours.
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