Banking Finance

When you’re buying a new car it is important to obtain the financing you need to be successful. Many of us wait until we talk with a car dealership to find that financing, but there are two ways you can actually get proper financing for your new vehicle. This article is going to discuss both ways as well as give you a few tips.

First you can obtain car financing from a bank either through the car dealership or you can already have your car financing in place before you ever get the vehicle. What you are really looking for with car financing is the best place you can possibly find to get the car financing. This means you are taking into consideration who owns the loan as well as the interest rate you are going to be paying. Many of us don’t think about it, but a stable bank is very important with the recent credit crunch we have been under even with car financing. You will even find that many of the banks are becoming harder for certain types of car financing because they are suffering now from to many unpaid debts of their customers.

So first make sure you research the bank thoroughly before signing. Then you can determine which banks are going to give you the best deal. Often times you will find that there are two or three banks who will offer you a loan, and one of those banks is going to have the better car loan deal by way of the interest payment. The interest payment is based on your risk that the bank sees. In other words how likely are you to default on the loan? This risk will be calculated and you will need to decide if the bank actually gave you a fair deal. If you are worried about the interest payment check around to some of the other banks for their current interest payments.

There are a few different kinds of loans that you can obtain through a direct loan rather than going through a car dealership. For instance you can get a loan that will actually before a mortgage, a consolidation loan, or other type of general loan to help you pay for other things besides the car. This type of loan may benefit you if there are things you need in your life. Of course it is often best to get a car loan for the interest rate and to make sure the payments are something you can handle.

You are also going to get this type of car loan if you are going through with a private sale over a car dealership. Some times car dealerships have great loans, and other times the loan or bank actually has a vested interest in the car dealership making the cost higher than this private type of loan. Researching your options is going to be the best way to confirm whether the offer has been the best or if the company is indeed trying to make a little more money off of you.

Let’s face it, Banks are just not lending.  It does not matter that they received over $350 billion of your money with more to come.  It does not matter how strong your business is or how great your credit history.  They just are not lending.

Most financial institutions have pulled back credit to businesses.  Nearly every well known financial company has stopped offering business programs – be it business credit cards, trade and supplier financing, commercial loans or working capital lines of credit.

These establishments cite poor market conditions and unfavorable economic outlooks.

The quandary comes when businesses, facing the same market conditions, are looking for ways to survive and in some cases grow.  In the past, healthy, established businesses could always turn to their banks for needed financing; be it for a short term line of credit or to restructure existing debt; freeing up needed cash flow.  Just not so today – especially since part of the blame of our economic toils rests on the shoulders of these same banks.

So if businesses cannot fall back on their bank or other financial institution, what are they to do?

The only real viable financing option for many businesses in this market is private, non-bank lenders.  I am not talking about equity capital or private placements.  I am talking about investors who have pulled their money out of a falling stock market and are looking to lend it to solid companies in hopes of substantial interest rate returns.

What is this you might ask?  There is always a struggle between supply and demand and the arbitrage opportunities that open to investors who know where and when to look.

A few years ago, banks and other financial institutions were lending at rates below or at market level in comparison to potential opportunities – they were offsetting lower returns with fees and deal structure (e.g. ratcheting rates). This left most private investors out of the lending market.

Today, banks are not lending and investors are taking their place.  If banks are not lending and businesses need capital – there is a funding gap. This funding gap is wide and does not have many players or competition.  Further this gap has huge barriers to entry as capital to invest is not easily obtained or easily given away.  What I am saying is that some very smart investors have realized that there is an opportunity here for them to earn substantial returns from lending money to proficient businesses and their owners.

Thus, they are filling the gap left by banks and remain the only real source for business capital.  But, they will only do so at very high interest rates.

What I am trying to say is that there are non-bank lenders that will fund companies.  But, the power (thus the arbitrage) is in their hands – not yours  – making your ability to receive funding both hard and costly.

The products they offer come with high interest rates, huge fees, and deal structures that are extremely favorable to them.  These lenders want to see strong (very strong) credit histories, low debt-to-income ratios, and very high repayment abilities.  Additionally, should a business have collateral, the property (equipment, machinery, inventory, A/Rs, purchase orders, sales receipts, etc) must be valuable and easily saleable.  Gone are the days of 80% and more loan-to-values.  Most of these lenders will only lend 50% to 60% against such collateral – especially if it involves a cash out or cash advance option.

Now, I know this does not seem fair – but what is fair in this market?  Banks are not lending – businesses need money.  You and your business must either take what it can get or get nothing.  These investors – the only entities that are still providing money to businesses – could also stop lending if they feel the returns are not there.  Then, there would be no business funding at all.

Private investor lending or advance options include:

Accounts Receivable Factoring, Purchase Order Financing, Business Cash Advances, Equipment Loans & Leases and Personal Loans.  There also remains a few investor back lenders that will finance the acquisition of a business (without real estate) – all provided the business is cash flow positive, has excellent credit histories (both owners and business) and can provide adequate financials and tax returns to prove it.

Just remember – these are not cheap and by no means easy to obtain – you and your business must still demonstrate a willingness and ability to repay these loans and advances as well as provide (in most cases – Business Cash Advances do not apply here) collateral values that are very favorable to the lender.

But, if this is all that is available – when banks and other financial institutions are not lending to businesses – private non-bank lenders may just be the answer you need to get you though.

There are many ways that you can obtain car financing. Most of us think about the traditional financing with a bank. In other words the person goes to the bank for a car loan; has the bank check out their credit history, and then either approve or turn down the loan. This is what is termed as direct financing for a car loan. You have actually spoken with the bank representative. There is a method called online car financing. Rather than going to the bank you will actually go online and search for car loans. This type of loan can be through a bank or through an intermediary. The thing to note about online car financing with an intermediary is that they are going to want to get their money from you as well. This can raise the interest rates or the loan amount a little higher than you are willing to go.

When you are searching for online car financing you need to research the company thoroughly. For instance why does this company promise you lower interest rates than your favorite bank? Why can this company give you a loan when no one else would for a car? You also have to consider the amount of the loan you need. You may find that simple failure to accept a loan application for car financing through a bank is that you have gone above the actual income that you make. In other words if you can’t afford the car you are trying to get financed for the bank or lender is going to turn down the application.

Online car financing has helped many individuals find the right loan for them. What you have to keep in mind is that not everyone on the internet is trustworthy. This means there are scams and you may not always find the best deal, even with the advertisement. You just have to be careful. When you do find a company that you can deal with then you can start the process. If you go with online car finance you should also realize that you are going to have to close the car loan before you actually approach the dealer. Most often a person with a loan not through the dealership must come with the check in hand. Sometimes the dealership will wait until the bank has passed the check, but it will be determined by the place you are going.

You should always check the facts and the paperwork that you are sent from the company before you sign the papers and send them back. They are legal documents and if something isn’t the way you discussed it you need to make sure you have brought that up and gotten a revision, especially with online car financing where you never see the person you are dealing with. There are many ways to obtain financing and it is up to you to be responsible and make the wisest decisions regarding your financial situation.

So you are thinking about starting a business, buying a franchise or expanding your existing business, but the question is where do you get the money. You have some of your funds, but it clearly wouldn’t be enough. The first thing that comes to your mind: I need a business loan. Most people believe the only place to obtain a business loan is a bank, but we all know that banks are notoriously difficult to deal with. Many businesses that apply at banks are declined for multiple reasons: not thoroughly prepared application package, not meeting the bank’s lending criteria, or not presenting the package correctly. In addition, most of us would prefer to avoid a nerve-wrecking meeting with a business loan officer when the fate of your business is being decided.

Is there a way to avoid all of this frustration and obtain a business loan that would help your business? The best option is to use a reputable business finance consulting company. Business finance consultants are in the business of helping clients find business financing. They typically have a network of lenders and they help business owners or owners-to-be prepare the package and submit it to the right lending source, which may or may not be a bank. Business finance consultants are skilled at selecting the most appropriate lending source for each business loan maximizing the chances of approval. They will not only guide you through the process, but also review your documents to make sure that everything makes sense and is consistent. A good business finance consultant is like a coach that helps you through the business loan process and handles most of your communication with a lender.

All of this sounds great to you, but you are on a tight budget and don’t think you can afford a business loan consultant. The great news is that in most cases it will not cost you a penny more than if you went to the bank. How does that work? The answer is simple: lenders like to work with business finance consultants. Similar to recruiters in the human resource field, business finance consultants scout out and pre-screen applicants for lenders. They also submit higher quality professionally prepared loan packages, which make it easier for the lenders to review. For this valuable service lenders typically pay business finance consultants a referral fee that doesn’t affect borrower’s costs. Again this is similar to using a recruiter when you are looking for a job. The recruiter helps you find a job, but they don’t get compensated by you, instead they get paid by your new employer.

All in all, if you are looking to maximize your chances of approval for a business loan and would like to save yourself time and frustration, your best bet is to use a reputable business finance consultant. That’s one of the best-kept secrets about obtaining business financing without going to a bank. Get your new business started or grow your existing business the easy way today!