The Various Kinds of Small Business Administration Loans

Although the Small Business Administration or SBA does not provide money directly to the small businesses it actually sets up proper guidelines for them that are effectively offered by banks, lenders as well as community development organizations. When you apply for this type of fund, it is advisable that you should fill up the documents … Continue reading “The Various Kinds of Small Business Administration Loans”

Although the Small Business Administration or SBA does not provide money directly to the small businesses it actually sets up proper guidelines for them that are effectively offered by banks, lenders as well as community development organizations. When you apply for this type of fund, it is advisable that you should fill up the documents that you try to get in the best possible way. In fact, this organization motivates the borrowers to collect the necessary details that the lenders always try to get hold of. This article will highlight on a few types of SBA loans that are available for small businesses.

SBA 7 (a) loans

It is considered to be one of the popular funds that are offered by the Small Business Administration. It is used for multiple purposes such as debt repayment purpose, payment of working capital and so on. In fact, this organization secures seventy five percent to eighty five percent of this kind of fund for a lender that usually results in interest rate that is even slightly above premium interest rate due to guarantee being offered by the government. You may apply for principle up to nearly two million dollars for this type of fund whose term varies between seven to twenty five years.

SBA 504 loan

It is used in order to buy different types of things or in order to improve fixed assets in the best possible way. The total amount of money varies between more than one million to four million dollars. Unlike SBA 7 (a) loan, it is backed by forty percent of the total amount of money being offered by the Small Business Administration and the additional ten percent is offered by this type of organization as your collateral.

Microloans

Unlike other popular financial support, the Small Business Administration adopts a diverse approach with this type of fund. In fact, this organization offers money to non-profit companies who provide money to startup companies to the businesses at own discretion. In fact, its requirement varies from one person to the other. In fact, its total limitation is thirty five thousand dollars along with total term of six years. The rate of interest ranges from eight percent to thirteen percent and its size is determined as thirteen thousand dollars.

Specialty funds

It falls into the category of financial support that is being offered by the Small Business Administration. If you want to get qualified for them it is vital that you should fulfill certain criteria and that you should be aware of their terms and conditions before you actually apply for them. In fact, the interest rates on them vary between five to ten years along with a certain amount of premium. It is vital that it may not be used in order to pay the current debt or it cannot be used in order to buy real estate property by all possible means.

Commercial real estate bridge loans are provided for the small businesses to provide financial support and assistance. Besides commercial real estate bridge loans, SBA banks loans prove to be quite effective for small businesses and startup companies.

How to Get Finance With Unusual Employment

An increasing number of people are choosing flexible working opportunities with their employers, as it enables them to successfully combine both their lifestyle arrangements and their family commitments.

However, many have found that when it comes to visiting their local bank branches while looking for a home loan, car and truck loan or even equipment finance, their local bank is still apprehensive towards them. And, it is because of their irregular working hours:

1. They don’t seem to fit into the strict lending guidelines set out by banks; and

2. They are not seen by banks as holding down a stable job with a regular income.

What the Common Unusual Employment Types?

Here are some of the common unusual employment types:

1. PAYG (pay-as- you- go) contractors

2. Casual workers

3. Part-time workers

4. Self-employed individuals

5. Sub-contractors

6. People with other forms of income

Type 1 – PAYG Contractors

PAYG contractors are normally employed via an agency or directly via their employer. This form of employment is now common in a variety of fields such as:

>> Medical;

>> Engineering;

>> IT (Information Technology);

>> Mining;

>> Project Management;

>> Construction; and

>> Government.

So, if you are a PAYG contractor and you are looking for finance, here is a list of things that lenders/credit providers will require you to provide:

1. You will be required to provide a copy of your most recent “Employment Contract”, with income details listed;

2. You will need to provide evidence that you have a minimum of 12 months employment in the same industry and that you have a good track record in your chosen industry; and

3. You will need to provide evidence that your employer or employment agency takes care of your income tax and superannuation contributions for you.

Note: If you are not on the direct payroll of an employer or employment agency, you may be treated as being self-employed.

Type 2 – Casual Workers

This type of employment applies to people working on a casual basis in the following industries:

1. Restaurants;

2. Retail;

3. Teaching and Tutoring;

4. Nursing;

5. Childcare;

6. Trades;

7. Drivers; and

8. Cleaning.

If you are a casual employee, you will need to provide evidence that you have been employed at the same place for at least 6 months.

Lenders/credit providers will calculate your average earnings over a set period, and count this as your income. However, if you want to work out your own average earnings, then you can use an income annualisation calculator to calculate your own average earnings.

Type 3 – Part-Time Employees

If you are employed on a part-time basis, you will find that lenders/credit providers will generally require you to:

1. Provide evidence that you have been employed at your current place of employment for at least 6 months: and

2. Provide copies of the following documents:

>> Current computerised pay-slip covering a minimum of two (2) pay cycles in order to confirm details of your base income; and

>> PAYG Summaries; or

>> A signed letter of employment from your employer listing details of your current base-remuneration.

Type 4 – Self-Employed Individuals

You are self-employed if you run your own business. You are categorised as self-employed individual even when you are conducting freelance work as a journalist, photographer, tour guide, etc. In such a situation, you will find that most lenders/credit providers will require you to provide evidence that you have a regular income to sustain a loan. This includes providing evidence that:

1. You are a business owner or partner;

2. You have been trading in your current business for at least 24 months;

3. Your business provides a steady income; and

4. You will be required to provide copies of:

>> Your most recent Personal and Business Income Tax Returns, and

>> One set of the business financial statements, reflecting two (2) years trading activity

Note: If you conduct freelance work with an employer, you may find that lenders/credit providers may require you to provide a copy of the written agreement between you and the employer that outlines your pay and conditions.

Type 5 – Sub-Contractors

Sub-contractors have specialized skills and they are generally employed by a primary contractor to provide specialized services in a variety of fields such as:

1. Building and Construction;

2. Mining;

3. Civil Engineering; and

4. IT (Information Technology).

Note: Many sub-contractors have little to no overheads and no staff and most are typically self-employed. In a sense they are similar to PAYG contractors.

Type 6 – Other Forms of Income

If you receive any other form of income and you are unsure if it is acceptable to lenders/credit providers, you should seek help from a qualified and licensed finance broker or a mortgage broker. You can even seek financial and legal advice from your accountant and solicitor. These other forms of income can include:

1. Centrelink payments;

2. Commissions and Bonuses income;

3. Trust Distributions income;

4. Car Allowances;

5. Annuity Income from Superannuation;

6. Director’s fees;

7. Second Job income;

8. Investment income (i.e. Dividends received from publicly listed companies); or

9. Court Ordered Maintenance payments.

Seek Expert and Professional Advice

If you still have doubts regarding your employment status and want to obtain finance, you can seek help of a finance broker. You should opt for a professional qualified finance broker because he/she will have experience of dealing with many lenders/credit providers on a regular daily basis. Also, he/she will be familiar with the lending guidelines and credit policy requirements of a number of lenders/credit providers.