Arizona Short Sale Specialist: September 2017

Thursday, September 21, 2017

Your Credit Data May Have Been Stolen - Who Cares?

Hello clients and friends,

On September 7th, we awoke to news that credit reporting agency, Equifax, had been hacked and some 143 MILLION credit records were stolen. Let's put that number in perspective. The U.S. has a population as of 2016 of 323.1 million.

If we subtract those who do not have credit records, estimated as 26 million, the Equifax data breach exposed the credit records of right at HALF the U.S. population. That is ridiculous!

PLUS, the breach happened in May and we are just hearing about it! I could go on and on, but as successful investors, we need to take action to mitigate possible problems that could affect us going forward.

It is expected much of the data, which includes your name, Social Security number, birth date, addresses and driver’s license number, will be used to generate fake tax returns to steal your refunds and cause massive headaches.

You can check Equifax's website to see if your information was part of the breach here, but be warned that you may get different answers over multiple tries. Equifax wants you to enroll in their TrustedID Premier to monitor your credit, but consumer advocates say this is a waste.

Others have suggested you use Lifelock which offers to protect you from the Equifax breach — by selling you services in part provided by Equifax (see story here). Besides this service can get quite expensive over time.

Here Is What Well-Respected Consumer Advocate Clark Howard Recommends.

1. Go to Credit Karma.com to sign up for free credit monitoring. Follow Clark Howard's guide to sign up. It only takes a few minutes and you will be surprised at the amount of information you can access on the site.

This is a good time to check the accuracy of that information. Be sure you sign up for their alerts so Credit Karma will let you know if someone tries to open an account in your name.

Some have expressed concern that Credit Karma only monitors Equifax and TransUnion, but Clark says that is enough.

2. Next, you want to freeze your credit. Whereas the first step was free, this one will cost you a little, $3 to $10 and a similar amount when you want to unfreeze it.

See a state fee chart here. Read Clark's guide to freezing credit here. You want to freeze your credit at each of the three credit reporting agencies - Expirian, Equifax and TransUnion.

The Equifax freeze is free for the now, but it will cost you for the other two. The Equifax servers are overloaded, so freeze the other two services first and then try Equifax every couple of days until you can complete a freeze there as well.

Congress is considering making all credit freezes/unfreezes free in the light of what has happened. Don't wait though. It could take months for a Bill to pass and be signed into law.

A lot can happen in that time. Besides, there is a good chance any fees charged after the Equifax breach will be refunded.

And don't forget to freeze children's credit as well. You may not think they have any, but remember social security numbers are now issued at the hospital at birth.

The good news is that it will be years until they will need to unfreeze their credit.

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage,commercial lenders

Wednesday, September 20, 2017

Commercial Mortgages in Texas Could Face a Potential High Risk Due to Hurricane Harvey

Many are having a hard time figuring out just how to evaluate the impact that Hurricane Harvey had on commercial mortgages in Texas along with other factors of the economy. This is crucial to Houston and other areas in southeastern Texas because they were already seeing some troubling issues in this department before the record-breaking storm hit the area.

It is reported by Barrons.com that Hurricane Harvey caused major flooding in Houston and the surrounding areas, breaking rainfall records whole hitting an estimated $19.4 billions dollars in properties financed by commercial mortgages in Texas. A total of 18 counties in Texas that home these properties have officially been declared disaster areas. In fact, Harris County alone had just $16 billion dollars in properties that were hit hard and saw destruction by the category 4 storm.

High vacancy rates in the Houston area were an issue well before Hurricane Harvey made landfall in southeastern Texas. The vacancy rate was the highest the area has seen since 1994, nearing 19 percent at the end of the 2^nd quarter of this year. That happens to be a 14 percent increase in vacancies in just the short time of three years. Since Texas has been working on recovering from that, it could be even more challenging because of the major flooding that damaged the area brought on by Hurricane Harvey. The flooding could very well jeopardize the ability to pay-off some of these debts.

With a struggling real estate market that was already in place before the storm, most expect that the recovery time from the damage caused by Hurricane Harvey could be a long and difficult road. But luckily, some are forecasting that the damage will be recoverable and maybe even in a quicker time frame than previous hurricanes that have rocked the United States.

Local analysts try to set recovery expectations for commercial mortgages in Texas

Morningstar analysts are trying to forecast how the area will recover from Hurricane Harvey. They had a total of 10 properties in the flood zone that happened to be their largest properties backed by commercial mortgages in Texas. The company was only able to reach one of the properties, the Two Allen Center. Even though they are temporary closed, they reported no flood damage.

Commercial mortgages in Texas still need a helping hand after being hit by Hurricane Harvey

Some of the properties hit the hardest from the storm were lucky enough to have flood insurance that will cover most of the damage costs, but they still have a long road ahead of them to fully recover. Commercial mortgages in Texas were suffering before the hurricane, but hopefully the impact of Hurricane Harvey isn’t too devastating, but it could take months to get that answer. But there is some news on local properties. According to Willowbrook Mall and Deerbrook Mall’s website, their properties were closed until further notice, not stating if damages from the floods were the cause.

Technorati Tags: commercial loans,commercial lending,commercial mortgage,commercial lenders

Hurricane Harvey Could Make a Huge Impact on Commercial Real Estate Loans in Texas

There were already plenty of complaints about commercial real estate loans in Texas well before Hurricane Harvey made landfall in the southeastern portion of the state. But with the destruction brought on by Hurricane Harvey, it might take the Houston area even longer to recover from their economic and real estate slump.

In the 2^nd quarter of 2017, Houston and the surrounding cities have seen the highest percentage of commercial vacancies since the year 1994. With a vacancy rate nearing 19 percent, proving that commercial real estate loans in Texas were already hurting before Hurricane Harvey hit. The area has been trying to bounce back, but since the hurricane has caused quite a bit of damage in its path, unfortunately, it could take even longer than expected for the Houston area to recover.

The real estate market including commercial real estate loans in Texas may take months to rebuild and could face many challenges while trying to do so. Local businesses not only have to clean up from all of the damage that was caused by the category 4 storm, which produced record breaking rain and flooding, they also have had to deal with loss of revenue for days or even weeks. The damages caused by the storm is only going to amplify already existing issues in southeastern Texas, leading many to fear that it might be too much for some to recover from.

Some businesses could face disruption for 2-3 months and some were forced to deal with these issues without power for several weeks. That is why it is hard for us to be able to predict the long-term impact of Hurricane Harvey had on commercial real estate loans in Texas. Luckily, the forecasts that have been released think that the area may be able to recover quicker that some other areas that have been impacted by previous hurricanes. But, it may take months for us to even know how much damaged was caused by the record-breaking storm.

However, commercial real estate loans in Texas could see some benefits

After Hurricane Sandy hit the southern part of the United States, self-storage companies and local hotels saw a spike in businesses. The need for these two things sky rocketed after heavy storms hit the area and Houston can expect to see the same. While the southeastern part of the Lone Star state works on rebuilding, these companies could see some economic reward, but there is still a great deal of work to be done to repair all of the loss the area suffered from, especially with around 2,900 commercial properties being affected from the hurricane.

Many are eager to see commercial real estate loans in Texas grow

Luckily, it is estimated that most of the commercial businesses hit hard by Hurricane Harvey have coverage from flood insurance. This still doesn’t mean that it will take a lot of time and work to rebuild not only from Hurricane Harvey, but from the already suffering real estate market in the Houston area.

Technorati Tags: commercial loans,commercial lending,commercial mortgage,commercial lenders

Commercial Real Estate Loans in Texas Have High Expectations to Recover Quickly from the Aftermath of Hurricane Harvey

Frost Bank located in San Antonio forecasts that most of the businesses impacted by Hurricane Harvey will be able to recover rather quickly from the damages caused by massive flooding from the category 4 storm. And because of this, many are eager to see what the affect the hurricane will have on commercial real estate loans in Texas.

Areas hit hard throughout southeastern Texas by Hurricane Harvey have some fear that there would be negative impact on commercial real estate loans in Texas. Especially since the storm brought record-breaking rain and caused damage to most of the area. But, along with Frost Bank, Prosperity Bank in Houston are optimistically forecasting that the most affected businesses will be able to manage a quick recovery. Both banks have projected the loss from Hurricane Harvey to be around an outstanding $53.4 million dollars, but this is estimated to only be about 10 percent of the 2017 consensus of earnings in Texas, as reported by My San Antonio.

Prosperity Bank and Frost Bank are regional lenders offering commercial real estate loans in Texas. They have plenty of research to start analyzing and predicting the damages, but it is still a little too early to tell the full impact that Hurricane Harvey had on the industry in the area. Banks and some lenders are preparing to be more impacted at the beginning due to upfront costs like the loss of overdraft income. They may also choose to waive fees and storm created expenses, which will also reflect a loss in revenue to many banks and lenders.

These factors could actually cause the most negative financial impact from the category 4 storm. Banks and lenders are already seeing a bit of the aftermath from the record-breaking storm, but again, it is still too soon after Hurricane Harvey to just know how their customers have been fully impacted.

It is a struggle to figure out how to evaluate the impact Hurricane Harvey had on commercial real estate loans in Texas

It can be hard to evaluate the damage so soon after a storm and to predict an accurate number of those impacted. But many banks and lenders are trying their best to assess the situation and make for the most accurate forecast model based on damages reported, in addition to claims filed and applications for loans.

The good news is that lenders and banks are helping those with commercial real estate loans in Texas

Those with commercial real estate loans in Texas that have seen damage from Hurricane Harvey are strongly encouraged to work with their banks and lenders to receive support after the storm. Thankfully, the help from these experienced financial institutes will help the recovery process be more manageable for all involved. Some of these banks and lenders are working closely with their customers to help them best they can by offering waived fees and even restructuring plans to make the payments easier.

Technorati Tags: commercial loans,commercial lending,commercial mortgage,commercial lenders

American State Bank Announces Delightful News with the Addition of New Commercial Lending in Texas Officers.

In the wake of the devastating news across southeastern Texas with damaging Hurricane Harvey, American State Bank was eager to announce the addition of experienced professionals as the new Senior Vice Presidents on Commercial Lending in Texas. Todd Tutt and Richard Solomon are being welcomed with open arms in hope that their expertise will strengthen the industry in the Lone Star state after suffering a bad 2^nd quarter and now the damages caused by the storm.

The Business Insider reported that American State Bank’s President, Kelly Sanders, is thrilled to add lenders to the team at this caliber. Mr. Tutt and Mr. Solomon are valuable assets and received nothing but praise from their new boss. Sanders also mentioned that the two new Senior Vice Presidents of Commercial Lending in Texas will bring the service the community banking industry and local businesses are looking for and need to grow and succeed, all with a personal touch.

American State Bank also expects that the new additions to their team will be able to provide swift decisions for local consumers and commercial clients. The bank’s team also offers cash management options along with loan solutions for not only existing loans, but for potential future loans as well. The state of Texas is looking for all the expertise and help they can get to recover.

Todd Tutt brings over 25 years of local banking experience, serving the banking community of the Tyler area his whole career and being a Tyler native. The other new Senior Vice President of Commercial Lending in Texas at American State Bank, Richard Solomon, brings around 30 years of professional banking experience and comes from Dallas, Texas.

American State Bank is eager to serve the community with experienced officers in the commercial lending in Texas industry.

The locally bank has been operating for an impressive 100 years and is a full-service bank to the community of Tyler. They provide all of the community’s banking needs to local businesses and customers. Plus, they add personalized service to all of their customers that they service in the cities of Tyler, Arp and Chapel Hill, all located in Texas. TexasBank is striving to become even better and offer the community even more stellar customer service with professionals highly experienced in the banking and lending field.

The area will see many benefits with more experienced professionals in commercial lending in Texas, especially after Hurricane Harvey hit the state hard

Before Hurricane Harvey rocked the southeastern portion of the state, the industry of commercial lending in Texas was already suffering. The Houston area saw an incline in vacancy spots in the 2^nd quarter of 2017. In fact, they saw the highest percentage of commercial vacancies since the year 1994, with a vacancy rate of just under 20 percent. American State Bank is hoping that these experienced new additions to their team will help the area recover quickly from the real estate slump and now the damages brought on by Hurricane Harvey.

Technorati Tags: commercial loans,commercial lending,commercial mortgage,commercial lenders

TexasBank Announces the Addition of New Vice-President of Commercial Lending in Texas

TexasBank is excited to announce some good news in the wake of all of the devastation brought on by Hurricane Harvey. The bank is pleased by the new addition of successful professional, Donald “Donnie” Ivey, as the new Vice-President of Commercial Lending in Texas at the bank’s Brownwood location. Ivey brings years of experience and gives the state of Texas hope after the southeastern part of the state was damaged by Hurricane Harvey.

Bringing over 20 years of experience in commercial lending in Texas, Mr. Ivey is also a 1994 graduate from local Texas Tech University. His new position was just announced last month on August 21^st, but CEO and President of TexasBank, Greg Dodds, is already thrilled to add Ivey to his team. Mr Dodds is extremely eager to see what is in store for the company with Ivey on board as a significant leader.

TexasBank is one of the top leaders when it comes to commercial lending in Texas. With Ivey bringing not only experience, but existing relationships among many professionals in the lending and banking industry throughout the community, TexasBank is hoping to use those connections to strengthen and grow across the state. Ivey is a valuable asset that will only help TexasBank expand and assist more customers across the Lone Star state.

The full-service community bank has 8 locations across the state of Texas and they consider themselves a financing institute providing quality service to the communities throughout Texas. The bank is hoping that the addition of Ivey will make them stand out even more to the community.

With commercial lending in Texas on the verge of trouble, this is good news for the state

Before Hurricane Harvey hit, commercial lending in Texas wasn’t quite thriving. The state saw the highest vacancy rate since 1994, with commercial vacancy rate of around 19 percent. The entire banking industry has been working diligently on bouncing back from this and things will become harder now since they also have to deal with the devastating aftermath from Hurricane Harvey, which produced severe flooding across the southeastern portion of the state. Having an experienced lender like Ivey join TexasBank brings some positive vibes and adds optimism to the industry when it comes to their recovering efforts.

Commercial lending in Texas needs to meet high expectations after Hurricane Harvey to help the industry recover quickly

Luckily, many in the lending and banking business expect the economy to recovery quickly for the Houston area that were impacted the hardest by Hurricane Harvey. It won’t be an easy road, but with the help of lenders and banks around the area, the area can hopefully recover faster than some fear. It is advised that local commercial businesses take advantage of the help that these local banks and lenders are offering and feel free to ask questions and seek assistance in any way they need.

Technorati Tags: commercial loans,commercial lending,commercial mortgage,commercial lenders

Sunday, September 10, 2017

The Difference between Bank Commercial Loans and Private Hard Money Lenders

There is a vast difference between commercial loans obtained from banks and those acquired from private hard money lenders. Two of these distinctions are speed and access.

The term “Hard Money Lenders” has led to varying discrepancies regarding this type of loan and who actually funds them. We would like to set the record straight. Hard money loans are neither “hard” to get nor are they funded by “hardened” criminals. What they are: Loans based on collateral, otherwise known as hard asset-based loans. Private hard money lenders are individuals or a group of individuals that have decided to make investments in this type of lending. There are several characteristics that make this type of funding quite unique and very different from commercial loans that are acquired from institutions such as banks.

Banks offer programs that are guided by government agencies such as Fannie Mae, Freddie Mac, FHA, and VA as well as some in-house programs. They are heavily regulated and funding is determined by credit scores and finances including debt-to-income (DTI) ratios. Borrowers must be able to document their income and expenses, making it sometimes difficult for self-employed individuals and small businesses to acquire a loan. Eligible properties include single family homes and some commercial properties.

On the other hand, private hard money lenders are not guided by the regulations and red tape that banks are under. These types of loans are based on collateral and criteria such as loan-to-value (LTV) ratio. These types of lenders are interested in the property and project and often acquire an exit strategy which is how you plan to obtain the needed funds to pay the loan back either through a sale after a renovation, obtaining a traditional loan, or acquiring tenants, to name a few of the many exit strategies. Credit does not play such a dominant role as the property and collateral, making it easier for self-employed individuals, small businesses and those with damaged credit to obtain funding. Private hard money lenders are more apt to make fix and flip loans, bridge loans, construction loans and mixed-use property commercial loans.

How do Individuals and Businesses use Hard Money Loans?

A real estate investor looking to purchase a property in need of rehab may get a hard money commercial loan in order to obtain quick capital for the purchase and renovation funds. Once completed, they may turn to a traditional loan and get funding based on the properties new and improved value, paying off the hard money loan which often has no prepayment penalties attached to it. Home owners may decide to purchase a new property before their old home sells. A hard money bridge loan will offer them a bridge from one asset to another and give them the time they need to sell their home without losing out to another offer on their new home that was not contingent on a sale.

One of the main reasons individuals choose hard money loans is because capital is available in a matter of days instead of weeks to months.

At Level 4 Funding we’ve established a working relationship with numerous private and group hard money lenders. With our vast network of investors, we can often say “Yes” when banks have said “No.”

mark-gowlovech-150x150 Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com

Technorati Tags: commercial mortgages,commercial loans,commercial lender,commercial hard money lenders texas,commercial mortgage Texas,commercial loan Texas,commercial mortgage Arizona,commercial loan Arizona

Sunday, September 3, 2017

Questions to Answer before Using Commercial Lending

Commercial lending processes are not quite the same as personal lending. Borrowers will want to be prepared for this process and have information and answers prepared to expedite the application process.

Unlike with your home mortgage, a commercial property loan often requires you to pay off the loan much sooner than the term stated on the loan documents. You will pay the regular interest and principal payments for a specific length of time, generally 3, 5 or 10 years, and then there is a balloon payment due. This payment is the entire balance of the loan. In many cases the borrower will not have sufficient cash to pay the balance and will need to refinance or requalify for a loan. If the business has less cash flow that when it originally applied then the interest rate could increase or you might not qualify at all. In this case the property is at risk for foreclosure. So you will want to be very certain of the terms of your commercial loan and know that you have the means to meet the payment structure that is being presented. You don’t want to pay on a property for five years only to lose it in a foreclosure over a huge balloon payment.

In addition to understanding the actual repayment terms, you will also want to be sure that you are asking for a manageable loan amount. You will likely need to make a down payment of 15% to 35% to secure the loan. But consider the benefits of making a larger down payment if possible to lower the final payment amount for the future. Knowing how much you need to borrow and how much the lender will offer you needs to be balanced with your ability to pay on a monthly basis as well as at the end of the loan term. Planning for the future and that large payment can save you from facing foreclosure, the loss of your property and potentially the loss of your business.

You also need to answer your questions about a time frame for your loan. Knowing that a commercial loan is a long process with many steps can help you to manage your expectations and plan your purchase. There are many documents that you will need to submit to justify your business’s financial position as well as the personal financial footing of all of the owners. In addition, there are several levels of approval that will need to be cleared before the loan is actually completed and you can get your money. Having this information will allow you to plan your purchase and deal with any time constraints that the seller might impose.

Be Ready to Prove Your Business’s Stability

Because there is no government backing for a commercial loan, banks are very strict on their eligibility for commercial real estate loans. They will want to see that your business is established and has been successful for 3 – 5 years. To demonstrate this fact you could be asked to provide leases, asset statements and your original corporate documents to the lender. If the history is not long enough to satisfy the review committee then you could be asked to submit additional business or personal documentation.

Know the Hurdles You Will Face and Be Ready

Once you have answered many of these important questions about the requirements to secure commercial lending and repaying the loan, you will know if you want to proceed with the application. If you are moving forward then you will want to have all of your documents in order to help to speed the process as much as possible. Then with your loan secured you can take the next step and become a commercial property owner.

mark-gowlovech-150x150 Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com

Managing Expectations when applying for a commercial mortgage

If you’ve never gotten a commercial mortgage before you may not know what to expect.

Getting a mortgage for a commercial property can be a bewildering and frustrating process. Don't expect the process to resemble the application process for a residential mortgage.

Commercial banks are far more conservative in who they give money to and the process will likely take longer than you expect.

You as a borrower should begin the process expecting a lot of scrutiny. Commercial banks are far more risk-averse, because the mortgages they issue are not backed by any government entity. These types of loans often charge more in interest and require higher down payments than their residential counterparts. If you want to get favorable terms on your loan, be prepared to provide a lot of documentation. Have on hand, financial records going back three to five years, lease agreements, incorporation documents and asset statements. Your lender may ask for further documentation but it is important to have these basic documents on hand. This will not only ensure the process goes smoothly, but will also give your lender faith in your ability as a business owner to pay back the loan.

You should also expect to wait a long time before your mortgage is approved and be aware of the loans terms and conditions. Getting a business loan from a bank is a long process. Banks have the most stringent review process of any lending institution. They will thoroughly examine the documentation you provide and it may take several weeks to get a written commitment. Even after a written commitment is provided there is always the danger that the loan can be vetoed afterward, forcing you to start the process all over again. Even if you manage to secure a mortgage, it is not always a matter of paying the mortgage on time. Some lenders may expect you to provide documentation, tax returns, income statements or balance sheets on a regular basis. The lender may stipulate that your business maintains certain financial benchmarks, such as maintaining a positive cash flow during the term of your mortgage. If you fall short of the specific standards and conditions of the mortgage, you may go into default and risk foreclosure.

Putting it all together

Getting a commercial mortgage from a bank is a very different process than getting a residential mortgage. You will be expected to have a lot of money up front. Your financial history will be closely examined. The process is very time-consuming and there are no guarantees. It is important to be aware of these factors before beginning the process. The conditions set by your lender may require you to keep your business operating at a certain standard. If your uncertain as to whether your business can maintain these standards then you may want to look at other options instead of a traditional mortgage. In short, have realistic expectations about the loan approval process and be aware of the conditions of your loan.

Saturday, September 2, 2017

Finding the right Alternative Lender for your Commercial Loan

You may be seeking an easier way to get a commercial loan through an Alternative Lender. But with the bewildering array of options out there, how do you find which one is right for you?

Have you been trying to get financing from a traditional bank, only to be turned down after a rigorous and exhaustive application process? Non-bank institutions are offering innovative loans to those who don't meet the higher standards of traditional banks. But any online search will quickly reveal a bewildering array of options in terms of alternative loans. How do you find the right one for your needs?

The main reason to seek a loan from an alternative lender is that such sources often don't set the same high standards as traditional banks. But what types of loans do these groups offer and how do you know which one is right for you? Broadly speaking alternative lenders offer three types of unique loans, cash advances, micro-loans and invoice financing.

A cash advance loan involves the issuing of lump sum in exchange for a percentage of future sales (i.e. credit card transactions). These loans are easy to qualify for and are usually quickly approved, but this comes with the disadvantage of extremely high interest rates and frequent payments that could eat away at revenues. Micro-loans are the most similar to traditional bank loans, but are often for smaller amounts and with a much faster application process. However these loans often require an excellent credit score and a well-established business. Invoice-financing involves borrowing an amount of money against unpaid invoices. This is great if you have many outstanding invoices and need quick cash to cover the shortfall. However if your customers don't pay their bills, then you are responsible for paying off the remaining balance along with any fees or interest. This is simply a broad overview of the types of loans alternative lenders offer, indeed there are many more, but you will always need to take into account the needs and structure of your business before seeking financing.

What should you consider when getting a commercial loan from an alternative lender?

Consider how your business operates, the consistency of your cash flow, what you need the money for and how quickly you need it. Referring to the three types of loans described above as examples: Seek a cash advance if you need money quickly, your business is relatively new or if your credit score is low. By contrast you may want to seek a micro-loan if your business is well-established and your credit looks good. This can be a faster way of getting a small amount of money at a relatively low cost. Invoice factoring may be ideal if you have many outstanding payments from your customers and need money quickly to plug the gap in your revenue stream.

Ask yourself the right questions before seeking financing an alternative lender

Finding the right loan is always about asking yourself the right questions and thoroughly examining your situation. There are many other types of loans which alternative lenders offer. But the three types of loans described above apply to specific situations. Consider your specific situation to determine the specific type of financing you need. Armed with this sense of purpose you will be better equipped to navigate through the many financing options available online.

Happy senior business man making his notes at work Dennis Dahlberg

Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Dangers of Merchant Cash Advances

Merchant cash advances may seem like a quick and easy type of commercial loan, but do the benefits really outweigh the risks?

First what is a merchant cash advance? Broadly speaking it is a lump sum issued and then paid off with a percentage of future sales (most often credit card transactions). This means any time your customer pays with their credit card, a specific percentage of that transaction will go towards paying off the outstanding debt. Another feature of this type of loan is that you pay a factor, rather than an interest rate. A factor rate is a number multiplied by the amount borrowed, which gives you the total amount you owe. For example if you borrow 2,000 dollars on an MCA with factor rate of 1.5 then you owe 3000 dollars. This payment structure has very specific implications. But who would want to get an MCA in the first place?

This type of commercial loan can appeal to borrowers with bad credit, little in the way of collateral or those without an established business track record. Issuers of MCA’s often don't ask for the same amount of documentation and usually have a broader criteria of who can qualify for their loans than traditional lending sources. Getting an MCA is also faster and easier than getting traditional financing. Obviously, this model appeals to business owners who don't qualify elsewhere or those who need money quickly.

But consider the many downsides to this type of loan. MCA issuers don't have to abide by the same regulations as other lenders and therefore they can charge exorbitant interest. MCA’s can be very expensive and it is not unheard of for borrowers to pay triple-digits in the way of APR. The fact that the amount owed is fixed based on a factor rate, also means there is no benefit to paying off these types of loans early. You will always owe the same amount for an MCA ( i.e. amount borrowed x factor rate), regardless of when you pay it off. The unique payment structure of MCAs however presents the greatest risk to borrowers.

What are the implications?

Because MCAs are often paid off on the basis of credit card transactions, they can consistently eat away at your revenue streams. The lender could be entitled to as much as 45 percent (depending on the agreement) of your daily credit card sales. Therefore if this type of loan isn't paid off quickly, your revenue is deferred to paying back the loan rather than expanding your business (defeating the purpose of getting the loan in the first place). In the worse case scenario, you could find yourself trapped in a cycle of debt, taking out another advance just to pay off the previous one or getting new loans simply to continue operating your business.

Even though a Merchant Cash Advance may seem attractive if you have poor credit, consider the expense and risk involved in this type of commercial loan.

Considering the risks involved in Merchant cash advances you should probably consider them a last resort when seeking financing. While every business is different, the benefits of MCAs are few while the risks are numerous.

Dennis Dahlberg

EntRotten Credit? Ideas to improve your business credit score to get the commercial loan in Texas you needer a post title

Your business credit score is a vital factor impacting your ability to secure a commercial loan in Texas. Learn some strategies to improve your business credit score.

Your business credit score can be more important than your personal credit score when it comes to qualifying for a business loan. According to the Federal Reserve, 45 percent of small business borrowers were denied loans because of their credit score. Having a low or even non-existent business credit score will put you into a bad position, forcing you to pay higher interest rates and accept less favorable payment terms. Learn some steps to build your business credit score and strategies to help you establish your credit.

It is vital that you regularly check that your information is current with all reporting agencies. Each business credit reporting agency uses a different strategy to determine your score, so check your score with all three major agencies ( Dun and Bradstreet, Equifax and Experian), at least quarterly. Carefully review your credit report, takes steps to correct any errors and consistently update the information each agency takes into consideration. That way you can ensure that whichever score a potential lender takes into account, your business credit score will be accurate.

There also certain steps you may not be aware of that can help you improve or establish a good business credit score. You should ensure that your vendors consistently report your payments to credit reporting agencies. Paying your vendors on or ahead of time is an excellent way to improve your score. Even if your vendors don't report to an agency regularly you can still cite them as a trade reference on your credit report. Similarly you should ensure that your lenders actually report your payments to credit agencies. This is vital, as you want your on-time payments to be reflected in your score.

Some other ways to raise your business credit score

The strategies outlined above are meant to help you consider issues you may not have been aware of. Knowing that each reporting agency calculates your score differently and that your payments to vendors (not just lenders) are reflected in your score are distinct factors taken to take into account with a business credit score. But strategies that improve your personal credit score are also applicable. Obviously you want to pay your debts on, or ahead of time in order to maintain your score. Credit utilization is also a factor, so you may consider getting a business credit card to help you establish your score. However keep the balance of these cards at 20 to 30 percent of the credit limit.

Your business credit score will impact the type of commercial loan you can obtain

Your business credit score will determine how much you pay in interest and the terms of any loans you may take out. It is important therefore that you keep your information up to date with all major credit bureaus, document your vendor relationships and ensure that your lenders actively report to credit bureaus.

user Dennis Dahlberg