Tag Archives: debt

Benefits and Drawbacks of Online Loans

Posted on by by Evan

These days, basically everything can be found online. You can do anything from buy sneakers to registering to marry. An industry that has become huge online is the financial industry. Financial institutions offer many investment options online. You can do online banking, manage your portfolio, and even apply for credit cards and loans. All of this makes your finances become easier to manage. One popular online application is finding loans. When you are in a bind and need money, convenience is key. However, there are many pluses and minuses to having business loans available online.

Advantages

Obviously the first advantage to online loans is their convenience. The applications are as easy as it gets. All you need to do is visit the site, compare loan offers from multiple lenders, pick your choice loan and then fill in the required information. You will need to wait for the lender’s response which can take as little time as one day. You can access online loans from Loanable or many other sites that compare products for you. With the internet being available twenty four hours a day, seven days a week, no other method could be easier or more convenient. It also allows you to easily compare different factors of a loan like repayment terms and interest.

Besides convenience, it is also very efficient. By doing it online you do not have to have multiple credit report requests. Too many requests for your credit report can have a negative effect on your credit score. If you apply online you are only submitting it once so the negative effect is discarded.

Disadvantages

When you are shopping around to get a loan you are mainly concerned about the amount, repayment terms and also the interest rate. Online loans typically have higher interest rates compared to traditional loans. Another potential issue with online loans is that they are a relatively new loan vehicle and therefore are not stable. It is possible that the companies from which you are lending from may crumble or close and go out of business. Therefor, be sure to do your due diligence and research online lending companies and choose one that is more established and has good potential growth.

It is important to know that online loans are known for their convenience and effectiveness for small business owners when they are in a bind. However, be sure to complete your research to find one that is good for you. Either way, they are a good option for borrowers.

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Pros and Cons of Unsecured Business Loans

Posted on by by Evan

For years, obtaining a loan from a major bank was your only option.

However, while that wasn’t such a problem before, over the past several decades, banks have become much more strict about who they lend to.

Now, most banks require at least:

  • 2 years in business
  • Good personal credit
  • Positive cash flow and profit on your tax return
  • And, even then, collateral such as your business property

The problem is, most businesses under 2 years show a loss and you may or may not have good credit. In addition, putting down collateral such as your property or personal assets is a big risk that no one wants to take.

So, what are your options?

Fortunately, over the past several decades, non-bank (or “alternative”) lending has exploded. And, with it, several useful options for businesses that otherwise might not be able to get approved with a traditional lender such as a bank.

That’s where unsecured business loans come in.

With an unsecured business loan from an alternative lender, you can get anywhere from $10,000 to $2,000,000 (based on your cash flow and revenue) and fast, often in as little as 24-48 hours depending on the lender.

Plus, you can use an unsecured business loan for whatever you need, including:

  • Purchasing supplies
  • Buying new equipment
  • Making new hires
  • Adding additional locations
  • Pumping cash into the business
  • Paying accounts payable
  • Paying taxes or other obligations
  • Marketing and advertising
  • Or payroll

In addition, an unsecured business loan doesn’t require collateral such as property, cash savings, or personal assets, meaning your risk factor is greatly reduced.

But what are the trade-offs? There is no perfect loan option, so an unsecured business loan is definitely better suited for certain businesses more than it is others.

For that reason, it’s important to know what the pros and cons are of unsecured business loans.

Pros of unsecured business loans

Unsecured have a few downsides, but quite a few upsides. The benefits of unsecured business loans are:

Pro: No collateral required

Easily one of the biggest pros, an unsecured business loan doesn’t require hard collateral.

Traditional secured business loans from banks can be a big gamble because they require collateral in the form of business property, cash savings, equipment, material, and even personal assets such as your home or car.

If you fail to pay and default on your loan, your business could end up crippled from much more than just the lack of cash flow.

However, with an unsecured business loan from a non-bank lender, such collateral isn’t required. You may be required to offer a form of limited collateral, however, it typically comes in the form of future business sales and you’re not required to pay the loan and said collateral if you go out of business.

Pro: Large loan amounts

Unsecured business loans offer very large loan amounts, up to $2,000,000 for some lenders.

If you need a large lump sum for business expansion, an unsecured business loan might be the perfect vehicle for helping you get there.

The only caveat to this is the loan amount is typically based on your gross annual sales in combination with your cash flow. In other words, you need to show lenders that you’ll be able to pay the loan back within a reasonable amount of time.

Pro: Your credit doesn’t have to be stellar

As we touched on earlier, the problem with trying to get a loan from a bank is they require stellar credit. If you don’t have good personal credit– you’re out of luck.

That kind of sucks, right? Fortunately, unsecured business loans from non-bank lenders now offer a way of obtaining the funds your business needs even if your credit isn’t great.

With an unsecured business loan, approval is based on your entire business’ health, not just your credit score.

This is possible for lenders to offer because they use information like debt-service coverage ratio– the difference between your cash flow and debt owed– and other metrics to calculate your ability to pay back a loan.

Pro: Get funding fast

Most alternative lenders offer approval and transfer of funds fast. And we mean fast, often in under 48 hours from submitted application to funds arriving in your account. Each lender is different, however, many lenders offer funds with a very short turnaround.

If your business is hurting for funds now and you need a quick injection of cash, an unsecured business loan could be a good option, especially if your credit isn’t stellar to top it off.

Cons of unsecured business loans

While there are several pros of unsecured business loans, and they’re big ones, there are a few cons that are important to consider before applying as well.

Here are the cons of an unsecured business loan:

Con: Higher interest rates

With an unsecured business loan, interest rates tend to be higher so that lenders can make up for the added risk.

Remember, they’re not taking on any substantial collateral such as property or cash savings (and neither do you have to worry about it), so they need to cover ground somewhere else.

Rates on an unsecured business loan vary depending on your risk factor, however, they can be as low as 14% or much higher if you’re considered high risk.

Con: May require limited collateral

As we talked about earlier, unsecured business loans don’t require hard collateral. However, depending on the lender, you may be required to offer a form of limited collateral.

Don’t worry, though, as limited collateral doesn’t work the same way the hard collateral you’re likely familiar with does.

As opposed to typical collateral like your business property or personal assets, limited collateral typically requires you put down a percentage of your future sales in case you default on your loan. However, if you go out of business you aren’t required to pay the loan back.

Con: Must have been in business for at least 6 months

Clearly, this is an easy hurdle for most businesses to pass through without a hitch, however, if you’re a startup looking to generate funds to get yourself off the ground, an unsecured business loan probably isn’t an option.

That’s because most lenders require that you’ve been in business for at least 6 months and often more than 1 year.

Con: $10,000 or more in monthly sales

Another one of the basic requirements for approval with this type of loan is a minimum amount of monthly sales. Typically, to be approved for an unsecured business loan your business needs to have at least $10,000 (or more) in monthly sales.

That might not sound like much for most business owners, however, it again means that while an unsecured business loan is ideal for many business occasions, it’s not generally a good fit for startups.

Get the funding your business needs

Getting the funding your business needed was once difficult, if not impossible, especially if you had bad credit.

Fortunately, now, there are options available to you that don’t require stellar credit or valuable collateral.

With an unsecured business loan, you can get the cash your business needs for everything from new equipment and materials to hires, training, marketing and everything in between on terms that just make sense for your business.

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How to Get Rid of Debt

Posted on by by Evan

One thing that is true about debt is that it is easy to accrue but very difficult to get rid of. It often snowballs and gets out of control and you are faced to figure out what to do. Most people will visit a financial professional to come up with a plan of how to tackle the issue at hand. Some people come up with a goal to demolish their debt on their own. Below are some tips and examples of how you can tackle your debt.

Snowball

One method of paying off debt is the snowball method. It is a debt reduction strategy that focuses on paying off the small balances first while paying minimal payment on the larger debts. The idea is that as soon as the first debt is paid off use the freed-up payment amount to pay down the next debt even faster. Continue the process (building like a snowball) until all debts are paid off. There are calculators to help you determine the method to use based about all of your debt products and debt amounts. It is simply a calculation that can be performed at home.

Avalanche

Debt avalanche method is the opposite of the snowball method. It focuses on the debts with the highest interest rates first. It will allow you to repay debts in the shortest time and will save you the most money on interest. It wants you to pay off the accounts with high interest because they do not want you to waste your money on interest when it could be going towards your debt repayments.

Refinancing

Besides just chugging along and paying off debt, it is also a good option to refinance your debt. Things such as mortgages, student loans, business loans or credit cards can all be refinanced. Refinancing means to have your debt product reassessed a new rate. This will help you in the long run because it could save you money that is to be paid on interest. You can shop around to find the best rate at different institutions. You could also save money by refinancing and redoing your life insurance

 

Increase Income

If debt is making you lose sleep, the only other option is to make more money to put towards your debt repayment. Obviously this is easier said than done because if extra cash was accessible than you wouldn’t have the debt. But you can try to get additional cash to pay off debt by additional supplemental income, a change of profession, or an investment. You may be asking yourself how does Uberpool work, you can earn some extra cash for driving people around when you’re not busy. Things such stocks, mutual funds, real estate, life insurance, etc. are all good examples of sources of additional funds.

By using the avalanche or snowball debt repayment strategies, refinancing, or earning some extra cash, hopefully these helpful hints will help you tackle your debt.

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