A personal credit score is a reflection of how someone repays their mortgage, auto loans, or other personal obligations and is typically demonstrated in a score from 300 to 800. The higher the score the better. A business credit profile reflects how business owner meets their business financial obligations. While there is no universal business credit score, some of the bureaus score different business behaviors to represent creditworthiness. The three primary personal credit bureaus are: Experian, Equifax, and Transunion. The three primary business credit bureaus are: Dunn & Bradstreet, Experian, and Equifax.

That all depends upon the type of loan you’re looking for. To qualify for an SBA loan at the bank for instance, you’ll need a business plan. While other lenders might not require a formal business plan, they will ask questions about loan purpose, how this loan might positively impact profitability, etc. Whether or not a lender requires a business plan, it’s a good idea to go through the exercise so you can articulate why your looking for a loan and the benefit you expect to gain from it.

No. The SBA does not make loans. They do offer a loan guarantee program available through participating banks, credit unions, and other lenders depending upon the loan program.

Technically factoring is not a loan; it is the purchase of future receivables. A third party, known as a factor, purchases a company’s invoice(s) or purchase order(s) at a discount giving a business owner access to a percentage of that invoice or purchase order now, instead of when the invoice or P.O. is paid. The balance, minus the agreed upon discount, is paid to the business owner once collected by the factor.

For example, if you had an invoice for $10,000, using a factor (or factoring that invoice) would allow you to access a percentage now, and the balance, minus the factor’s fee when the invoice was paid. Every factor is a little different, but let’s say the factor paid you $8,000 now and the factor’s fee was 6%, the transaction would look like this:

$8,000 today + $2,000 – $600 (factor fee) when the invoice was paid

Basically, you sold the $10,000 invoice for $600 to access the capital now, instead of later.

It’s common practice for lenders to require a personal guarantee from the business owner(s) to protect the lender should the business default on the loan. Lenders do this to mitigate the risk of lending to small businesses, and the guarantee is often a requirement by the lender before offering a loan.

In the event of a default, a personal guarantee gives the lender additional options to collect the debt. This requirement is sometimes waived for businesses that have longer than five years in business and a good business credit rating.

The SBA 504 loan program is designed to provide financing for major fixed assets like real estate and equipment. The maximum loan amounts vary depending upon how closely the business purpose supports things like community development initiatives like job creation. A 504 loan cannot be used for working capital or to purchase inventory, consolidating or repaying previous debt, speculation or investment in rental real estate.

The SBA 7(a) loan program is the most common SBA loan program. The maximum loan amount is $5 million. The SBA does not set a minimum loan amount. A 7(a) loan can be used for most typical business purposes, but may not be used for refinancing existing debt, to buy out a partner, to reimburse funds invested by a business owner, to repay delinquent state or federal withholding taxes, or any other purpose not consistent with sound business practices.

Collateral is any asset or assets, which can be offered by a borrower to secure a loan. Should a borrower default, the lender can take possession of the asset, or assets, to satisfy the loan.

You can read more about collateral in our Business Owners’ Guide to Term Loans.

he ultimate answer to this question will be obtained through one of our mortgage specialists. That person will help you arrive at the “best” answers; here are some items to consider in helping you address this question:

• Your current financial picture;
• How long you intend to keep your house; one of the most important aspects of your decision making process! – our experts will help you understand why.
• Do you expect your finances to change?

Initial establishment of a borrower’s qualification for a mortgage loan amount (or range), based on the borrower’s assets, debts, income and selected loan program(s).

Here is a simple, straightforward evaluation:

• What is your capacity to pay the debt?

Two debt ratios are used to determine your capacity to repay a loan.

The “Housing Ratio”:

• Monthly Housing Expenses*/Gross Monthly Income = Housing Ratio

* This includes: loan payment (principal and interest), real estate taxes, hazard insurance, flood insurance, mortgage insurance, homeowners’ association dues, ground rent (leasehold), special assessments, subordinate financing.

The “Debt Ratio”:

• Monthly Fixed Expenses**/Gross Monthly Income = Debt Ratio

**This includes: monthly housing expenses, installment credit balances with more that 10 months remaining, revolving credit with more than 10 months remaining, real estate loan payments on non-income-producing property or negative cash flow on non-owner-occupied property, alimony, child support or maintenance.

Where the buyer, seller or lender pays additional discount points in return for a below market interest rate. During times of high interest rates, buy-downs may induce buyers to purchase property they may not otherwise have purchased.

The amount charged to originate and close a mortgage loan. Origination fees are usually expressed in points, however, some companies may state a portion of the fees as origination fees plus points.

What are closing costs?
Costs payable by both seller and buyer at the time of loan settlement (close of escrow), when the purchase or refinance of a property is finalized. These costs usually include but are not limited to the following:

• Title search and insurance, escrow fees
• Sales commissions (Realtor)
• Origination fee
• Discount points
• Recording fees
• Courier charges
• Processing and document preparation fees

When borrowers make their monthly mortgage payments, they usually also make a payment towards the anticipated annual amount needed to pay taxes and insurance premiums. These funds are placed in an escrow account (also known as Impound account), until the lender pays the taxes and insurance as they become due.

APR is an acronym for Annual Percentage Rate. It is the actual interest rate, taking into account points and other finance charges, for the projected life of a mortgage. Disclosure of the APR is required by the Truth-In-Lending Law and allows borrowers to compare the actual costs of different mortgage loans.

The reduction of a debt by regular, usually monthly, installments of principal and interest.

The guarantee of a specific interest rate for a specific period of time. An interest rate can be “locked in” for a set amount of time – the shorter length of time for the lock in, the lower the cost in points – our loan specialists can help you determine the optimal amount of time based on your needs and goals.

Generally, as soon as you complete your loan application. You should notify your loan agent that you would like to lock or float. Remember, the shorter the time of the lock in – the lower the points.

A loan that conforms to Fannie Mae or Freddie Mac lending guidelines. A loan that is not insured, guaranteed or funded by the Veterans Administration (VA), the Federal Housing Administration (FHA), or the Rural Economic Community Development (RECD) (formerly Farmers Home Administration). Loans guaranteed by the agencies listed above are referred to as “government loans.”

A loan that is larger than the conventional / conforming limits set by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. This is also referred to as a nonconforming loan.

LTV is an acronym for Loan-to-Value. This is the relationship, expressed as a percentage, between the amount of a loan and a property’s value or sales price. For example, a $75,000 loan on a property appraised at $100,000 is a 75% LTV.

A fixed rate mortgage is a mortgage that has an interest rate that stays fixed for the life of the loan. On an adjustable rate mortgage the interest rate changes based upon a specific financial index (such as Government Treasury bill rates) and payments may go up or down based on the movement of that index.

This insurance protects lenders against loss due to foreclosure or loan default. Mortgage insurance is required on conventional loans with less than a 20 percent down payment or equity at closing of less than 80% loan-to-value.

Credit scores are numeric representations of your credit profile. The higher the score the better credit risk you are. Presumably, you can be denied a mortgage loan if your score is too low.

These scores have been around for several years but started to be used in the mortgage lending business in 1995.

1.     They are based on years of computer “modeling” aimed at predicting who might be a good or bad credit risk.

2.     Their purpose is to reduce the cost of examining a credit report and speed mortgage approvals.

3.     Important negative factors are: bankruptcies, delinquencies, credit lates, collections, “too much” credit, or too little credit history.

4.     The score is only as good as the data. The amount of credit data history is so large that there are problems with it.

Within 2 business days you will receive a package from us. The package will include a copy of your application and a list of documents that we need to close your loan. If you do not receive your package within two days, please don’t apply online again. Call us, and we’ll try to help you.

Your loan will be reviewed or pre-underwritten. Once it’s submitted to the final lender, there may be additional needs. We will, of course, try to anticipate those and make the process easy for you.