Q. I am in the process of writing out my business plan for a start up company, of course I have very little capital and am considering a business loan. What would you say is the most important factor in getting a small business loan of say $15,000. I have no previous financial statements for the business, and I will be putting in $2500 of my own money.
A. Financial institutions look for a couple main things when approving a loan:
How will your company repay the debt? Include any projections, rental income, etc that will be used to repay the bank.
Collateral - what will you be securing the loan with? property, assets, etc.
Your money - on average, banks will want you to put down 15%-20% of the loan amount into the company of your own money, especially if you're buying a building.
Personal credit - you'll need to personally guaranty the loan if you're a 20% or greater owner - make sure you're credit report is excellent
Experience - banks can be somewhat leery lending to a new company. This is because so many new companies fail. Make sure to include all experience you have in your field. If you'll have any partners, etc make sure to include their biographies/experience as well.
How will your company repay the debt? Include any projections, rental income, etc that will be used to repay the bank.
Collateral - what will you be securing the loan with? property, assets, etc.
Your money - on average, banks will want you to put down 15%-20% of the loan amount into the company of your own money, especially if you're buying a building.
Personal credit - you'll need to personally guaranty the loan if you're a 20% or greater owner - make sure you're credit report is excellent
Experience - banks can be somewhat leery lending to a new company. This is because so many new companies fail. Make sure to include all experience you have in your field. If you'll have any partners, etc make sure to include their biographies/experience as well.
Would it be better to apply for a small business loan or a home loan?
Q. I am a 1st time home buyer, I live in Michigan and am interested in purchasing a 2 (or more) unit home. My husband and I plan on this being a lucrative business; with a long term plan of owning several residential rental properties.
A. You would want to get a mortgage loan for the purchase of the investment properties you would want to purchase. In the real estate or mortgage industry a 1-4 unit is considered a single family property for the sake of getting a mortgage loan. You might qualify for a FHA or conventional mortgage loan. If one of you were in the military you could do the same with a VA mortgage loan.
FHA have a mortgage loan that require a minimum of 3%-4% down, while a conventional loan would require around 10% or better.
The interest rate and loan terms are the same as if you were to purchase a single family home. In order for this to work you and your husband will sign documents at closing indicating that the property you are purchasing would be your residence and agree to live there a certain number of years normally 2-3.
Buying a house is a step by step process, this is the first step. Once this step is taken the others will fall in place for you.
In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book.
Make sure this mortgage broker or mortgage banker is able to do government loans such as FHA and VA loans if you qualify for one.
He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.
The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.
When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.
#1 One month of pay stubs for each person that will be on the mortgage.
#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.
#3 Two years of federal income tax along with the W-2 that match.
Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.
Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.
Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.
If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.
You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.
Make sure your mortgage broker explain all your options so you may make an intelligent decision.
What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.
So select the best option for you and your financial situation.
You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.
Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.
Your mortgage broker will now order an appraisal to show proof of the property value.
The mortgage broker might ask for additional information or documentation, don't get all up tight this is normal, just supply the information or find the documents needed.
After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.
Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.
I hope this has been of some benefit to you, good luck
"FIGHT ON"
FHA have a mortgage loan that require a minimum of 3%-4% down, while a conventional loan would require around 10% or better.
The interest rate and loan terms are the same as if you were to purchase a single family home. In order for this to work you and your husband will sign documents at closing indicating that the property you are purchasing would be your residence and agree to live there a certain number of years normally 2-3.
Buying a house is a step by step process, this is the first step. Once this step is taken the others will fall in place for you.
In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book.
Make sure this mortgage broker or mortgage banker is able to do government loans such as FHA and VA loans if you qualify for one.
He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.
The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.
When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.
#1 One month of pay stubs for each person that will be on the mortgage.
#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.
#3 Two years of federal income tax along with the W-2 that match.
Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.
Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.
Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.
If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.
You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.
Make sure your mortgage broker explain all your options so you may make an intelligent decision.
What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.
So select the best option for you and your financial situation.
You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.
Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.
Your mortgage broker will now order an appraisal to show proof of the property value.
The mortgage broker might ask for additional information or documentation, don't get all up tight this is normal, just supply the information or find the documents needed.
After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.
Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.
I hope this has been of some benefit to you, good luck
"FIGHT ON"
Are there any grants or loans available in Illinois for a lower income family to purchase a business?
Q. My husband and I live in a very small town in Illinois. There is a business for sale here in our town that actually consists of two buildings. One building is a empty business front with some apartments above. The other building was is an icecream parlor/fast food restaurant with all equipment. These two are being sold as a package deal and will not be seperated.
My husband is the only one who works in out family of 6. I go to school, take care of the kids and house and help out at their school. We are interested in purchasing these buildings, but with limited income comes limited funds. My husband has experience running a restaurant and in very busieness savy. We also own rental property in Kentucky so we have experience as land lords.
Our question is this...is there anyway for a lower income family to get a loan or grant to purchase these properties? I am almost certain that we will not be able to get a grant because it is not a non profit business venture. THANKS!
My husband is the only one who works in out family of 6. I go to school, take care of the kids and house and help out at their school. We are interested in purchasing these buildings, but with limited income comes limited funds. My husband has experience running a restaurant and in very busieness savy. We also own rental property in Kentucky so we have experience as land lords.
Our question is this...is there anyway for a lower income family to get a loan or grant to purchase these properties? I am almost certain that we will not be able to get a grant because it is not a non profit business venture. THANKS!
A. Contact a local bank and ask them about the SBA 504 Program. You will need at least a 10% equity injection (down payment) If you have equity in your personal residence or in the property in Kentucky, you may be able to offer that as additional collateral.
Should I buy a foreclosed property so that I can have collateral to get a small business loan?
Q. My score is a 604, I'm 21. I want to start a business but I dont have any thing to put up as collateral. I thought about buying a house for cheap and rent it out until my credit score raises. Is this a great idea? buy the way i rent an apartment.
Yes I have extra income to invest in a property. I have already considered the risks.
Yes I have extra income to invest in a property. I have already considered the risks.
A. Remember that a rental property requires insurance, maintenance and repair, taxes, tenant screening and management. Do you expect to have enough cash flow from the rent to cover all that plus the mortgage?
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