Pledging your home or vehicle as a security for a business loan

Although home equity loans offer low interest rates, long repayment terms and tax deductible interest make them very risky for small businesses. If your business ventures start to turn a loss, your house can be claimed by the bank.

Similarly, when you offer vehicles as collateral, you give your loan company possession of vehicle’s title. In case you fail to make your loan installments and your loan defaults, lender has the right to take over ownership of your vehicle. Pledging collateral is an extremely risky option in these economically unstable times. You can steer clear of this pitfall with merchant cash advance.

How can merchant cash advance providers offer an unsecured advance?

Pledging a security has been an obligatory part of lending since its inception. They protect lenders against a borrower’s unwillingness or inability to repay loans. How then can merchant cash advance providers not need the security of a collateral?

Let’s go into what makes merchant cash advance funding successful without a collateral. First, in the interconnected and easy-access internet age, it is simple for providers to tell apart genuine borrowers and creditworthy businesses from those not so successful. To evaluate your eligibility, lenders check your credit card sales receipts, which can be easily obtained and validated. The second reason is that repayment is not an option after you accept the contract. Since payments are deducted automatically at the credit card processor’s end, lenders are pretty much covered.

Great thing about this type of loan is that the providers only charge a percentage that allows you to comfortably maintain regular operations. As part of the agreement, a predetermined percentage of your monthly credit card sales volume is paid out to the provider. This functions well as your payment amount is small when sales are not going so well and do not turn into an needless burden.

Fitting financing solutions to business situations

While a home equity loan may be more suitable in certain scenarios, business advance is THE solution when you are looking for low-risk, speedy and hassle-free financing. The fall of the credit industry post the recession and zero collateral makes these loans just right to pull up stressed small and medium-sized businesses. It is senseless to depend on slow and unsafe banks loans when superior options are available. Business advance is the latest development in business lending. Remember, no collateral is a good thing in funding and merchant cash advance fits that bill very well.

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Inappropriate Terminology

Guard yourself against confusing or complex jargon in the MCA agreement. According to NAMAA, be cautious of MCA providers who use the word “loan” in reference to your funding deal or ask you for collateral. Be in no doubt that you understand each term in your agreement and its implications. This becomes even more essential if you are dealing with a provider selling multiple financial services along with MCA.

Risk Management Processes

MCA providers use underwriting process to examine the risk involved in lending to your business. To determine this, legitimate providers will expect you to furnish two pieces of information – number of months in business and your average monthly credit card sales. You need not submit your financial statements, tax returns or additional asset documents to be approved for the advance. Even though this financing alternative is speedy and you will receive the MCA within a week, be cautious of providers who are willing to approve the advance without verifying necessary particulars to verify your business’ health.

Collection Tactics

The merchant cash advance fraternity has come up with a set of standards to define acceptable behavior and collection tactics. To make your MCA contract beneficial and profitable, a set of appropriate collection rates have also been outlined. Inquire about these rates before signing on the dotted line.

Fixed Retrieval Rates

In a merchant cash advance transaction, the periodic repayment sum is calculated as a fixed percentage of the monthly credit card sales. During slow months, you pay back the provider with smaller amounts and during better months you pay bigger sums based on the agreed upon retrieval rate. MCA providers are forbidden from including any conditions for increase in rate in your contract or holding the right to change the retrieval rate randomly. This is to safeguard consumers from being ripped off. Double check that your retrieval percentage is clearly stated in your contract and that it cannot be changed without your written consent.

Survey the terms and conditions of several MCA providers before picking one. Ask for a sample copy of the agreement and study it minutely. Maximize on your merchant cash advance, learn about the industry best practices and standards before begin hunting for an MCA provider.

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1. Business plan – This is very important, but often ignored by so many people. This is a big mistake because this will help ensure you succeed.

Were you aware that no one will give you a business loan to start a business without a plan? That is how important it is.

Your plan is basically why you are doing your business. You have to take time to map out what you are looking to achieve with your business.

Start your plan setting up different goals like a 1 year plan, 3 year, 5 year and also a 10 year one. This will give you all of your goals that you need to accomplish in that time frame.

Your plan will keep you on the right track to success and prevent you from get sidetracked.


2. Marketing system – This is imperative to the success of your business. You want to make sure you have a website that will convert. It is also important to have a lead capture page that will collect prospects contact information.

Be sure that your capture page is not marketing your company, but instead is marketing you. This will help people begin to trust you more because they want a person to deal with, not an impersonal business.

This will also give you a way to brand yourself, which is important for gaining trust from people. Giving away a free gift or eBook is a great way to get people to hand over their contact information so you can get the leads you need for your business.

You just want to make sure you are using other marketing methods also. Some of the better ones to use include:

- Link building
- Article marketing
- Blogging
- Social networking
- Forum marketing

3. Follow up system – Anyone that really wants to succeed, has to be sure that a follow up system is in place. This is how you will contact your prospects that gave you their contact information.

One important thing to know is that most people will not join your opportunity and many won’t buy anything until they have seen something at least 7 times.

All you need for a follow up system is an autoresponder and lead capture page and you will be good to go.

Now that you know the 3 key secrets to MLM home based business opportunity success; all that remains is to use these secrets and get your business headed on the path to succeeding. Don’t delay because the sooner you use these secrets, the sooner you can start living life like you want to.

Please check out our Peoplez Wireless website today if you enjoyed this article Jeff Schuman. You will find people helping people with an unlimited wireless business opportunity you can get in on the ground floor with. http://www.danpartin.org/

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If you don’t have any business credit established at this time, then lenders will usually look into your personal credit. Typically this information is used for them to structure the terms & conditions of your loan. With mainstream lenders, it will be very hard to secure a bad credit business loan. But private lenders specializing in poor credit business loans will be a much easier target to hit. Either way, it would be in your best interest to work to remove bad marks from your credit profile prior to seeking a loan – even with bad credit. This can improve your chances even more.

Are you in good standing with a bank or credit union? If so, this could be a promising route to securing the business capital that you need. Although there is not a 100% guarantee that this will be the solution, if you have developed any positive history with them over the years – they might be willing to lend you the money. And even if they can’t, they could be a helpful referral source to lenders who do specialize in poor credit commercial loans.

A great loophole is that when banks say No and you don’t know where to turn to, your alternative can be to look to Private Lenders. These are usually small institutions or individuals seeking to get involved with a great business opportunity. You can try locating them by talking to any and everybody – or by searching the web.

It is very important to insure that you are as professional as possible when approaching investors. Be prepared with a well structured business plan. Lenders will not want to touch a person who claim that they are “business-ready”, but yet they totally ill-prepared. Would you?… didn’t think so. Sharpen your business image & presentation to the level that you can look yourself in the eye and confidently say “If I were a lender I would definitely Lend Me the Money!-)”

Explore more about Business Loans for Bad Credit and perhaps a may work for you as well!

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While a well written business plan will assist you when you are seeking financing, it is far down on the lender’s list behind things such as your business management team’s experience, your past business successes and your “lending character “. Having a plan for accessing the business capital you need to execute your business plan is what is required to bring your business success. Not having a viable business financing plan is the direct cause of why 90% of all new businesses fail.

Your lending character means the lender sees you having the ability and stability to repay the loan. They also ask how far they believe you can take the business to maximize the potential earnings and therefore their chances of getting repaid.


The first thing a lender is going to look at is how did you structure the business and were you responsible and knowledgeable in that. Are you Incorporated or an LLC? If not you are declined for a business loan and everything becomes based solely on you as an individual. Did you do your EIN, State, business licenses and bank filings correctly? If not, you are declined because lender’s require attention to detail.

A simple business credit report check by a lender will quickly show whether or not you are even in the ballpark for getting approved for financing. If the lender finds that you haven’t bothered to insure that your business has active reports with all three major business credit reporting agencies, then of course you are immediately declined.

Next, the lender will look at the character of your business credit reports. What do they say about your business? What kind of payment histories have you had with debts that are easy to get such as vendor trade lines, small business credit cards, equipment leases, etc? If your business has no credit history or very minimal history then no lender will even consider your business for a larger loan when you have no track record of paying smaller debts.

If you pass these simple tests, now a lender will get to the heart of you business loan application and it is only at this point that you even get the opportunity to present your funding request. Unfortunately as high as 90% of all business loan applications never get to this point, because most business owners never take the time to complete the initial steps.

So you have made it this far, The next question you need to ask is what is a lender going to want to see? Debt service! Here is where the lender finally looks at your business plan (or at least the financial pat of it) to determine if your business can debt service the loan. To make this determination a lender will test the reality of your numbers. Basically this means do your numbers add up and do they make sense.

If you don’t know anything about accounting you had better get help. When a lender looks at your projected financial statement and finds simple accounting errors, then in most cases you will again be declined. They don’t want to lend money to someone who cannot produce a simple proof and loss statement; or someone that can’t balance a balance sheet. There is a lot of help out there, get some.

Next, a lender will look at the market niche section of your business plan. While most business owners think that this is the place that sets them apart from the competition, it actually is the part where lenders will compare you to your competition. Here is where lenders must see that you have done you market research. Can the revenue claims that you are making in your financial projections be backed up by the actual market demographics for your specific business industry, location, customer base, etc.? It essentially comes down to the need for your product or service.

All of this can seem overwhelming and in truth it can be. It is the reason that 97% of all business loan applications get declined. The overriding reason is that business owners are not taught this in school and typically only gain this knowledge through years of brutal experience that normally includes having one or two failed businesses under their belts.

This will give you plenty of information to get you started on putting together a business funding request. In my next article I will cover some of the other aspects of your business plan. For a full version of an excellent business funding guide do a search on Google, Yahoo, or MSN for “Business Funding Workbook”.

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