What are Business Credit and Loans All About?
Maybe you are thinking about getting into business offering business credit and loans for customers. Or maybe you are already in the business. But either way, there are five crucial things you should know to maximize profits. Take a look as we dive into all five, plus a bonus.
#5 Licensing Requirements
Business loans are classified as financial products. As such, some states have licensing requirements for anyone who is working with or handling loan products directly. This applies to you even if you are a broker, or offering loans through different lenders.
Section 22000 for example, requires anyone lending money or acting as a broker to have an active license. This applies to any and all transactions you do or promote in the state of California.
And to get this type of license in California you’ll have to have a net worth of $25,000 and to have an active surety bond of $25,000. And you’ll need to have $320 to submit with your application for approval.
Many other states (such as Alaska, New York, and Vermont) have similar licensing requirements, and many counties also have additional requirements to get properly licensing.
There is one way you can offer business loans in these states without needing to qualify and pay for your license. If you are working with a company like Credit Suite, you won’t need a license though because you aren’t the one working directly with the lenders, the Finance Officers are.
#4 There are A Lot of Loans to Choose From
When you are in the business of offering business credit and loans you’ll find the typical person you speak to will want a lot of money, and they want it now. The best way to accommodate your customers is to become familiar with their needs, and offer a large array of financing options for your customers.
Merchant advances offered by online lenders are the most common type of loan being offered today. Brokers love these loans because closings are fast, qualifying is easy, and payouts to brokers are large.
Qualifications
But to qualify, customers will need to already have an established business and have consistent revenue. They tend to need good business credit scores. When they do not meet these qualifications, you will have to consider another type of loan.
If your customer has good credit, our Credit Line Hybrid is a great fit. Even startups can qualify for up to $150,000 in financing. And they can get 0% rates for up to 18 months. Yet if you work with the right lending source, you can also make a good number of points per deal. Read more to find out how.
More Options
There are even more financing options you should look into offering as well. Securities financing and 401(k) financing are two of them. So are inventory and equipment financing, and account receivable and purchase order financing. Plus there are venture capital and private money. And don’t forget SBA loans! These are just some of the many options available to you today.
On this page you can scroll down and find a list of many of the top programs available today.
#3 Offering Business Credit as well as Loans is a Must
Are you familiar with business credit?
A survey conducted by Manta and Nav in 2017 found that 72% of business owners do not know their business credit scores. So that makes it one of the best-kept secrets in the business financing world.
Conventional loans are tricky because applicants need good credit, collateral, and cash flow to get approvals. This is why alternative lending has become so popular. But even with almost all alternative lending options, a borrower will still need to have at least one of those to get an approval.
The Details
When an entrepreneur has credit issues, no collateral, and cash flow of less than $10,000 monthly, there’s a problem. Because they won’t qualify for any real business loans. But, they can qualify for business credit.
Business credit is a “catch-all” for business owners. So this is because anyone with an established entity can get approvals. Hence, this means even a startup business where the owner has bad credit can still get business credit. Business credit allows the business owner to finance day-to-day activities keeping business expenses off personal credit reports allowing them to establish better personal credit in the process!
And for business owners who want money at the best terms, business credit is a must-have. To even qualify for a conventional SBA loan you must have good business credit per the Small Business Administration. And by having it, business owners can get away from providing personal liability on the credit they get.
And with programs like this one you can earn thousands of dollars with each business credit sale you make—even to business owners who are disqualified for other types of financing like loans and lines of credit. For all of these reasons, it makes sense for anyone offering business loans to be offering business credit as well.
Join this webinar for even more details on how you can offer both business credit and funding in a matter of a couple hours!
#2 It’s All About Relationships
Recently, a partner told us he was going to work directly with lenders to offer loans. This was instead of having us help. Later that week, he returned with a client he couldn’t get a cash advance for and had gotten denials from two banks.
Later that same day we secured an approval for over $200,000 for the client that he was able to close on 48 hours later. The client got the loan, and the partner earned, well, a lot of money on the deal. The reason this deal came to a close is simple. It’s all about relationships.
The Details
Working with a lot of lenders and programs, one thing we’ve learned is that it’s often the relationship with the lender that closes the deal.
These include needing an exception in underwriting and getting rates lower than most can get. And they also include funding loans super fast to help business owners in difficult spots. And getting loan approvals when most try and get denials. These are all related. So, it all comes down to funding a lot of deals and having good relationships with lenders.
Without financing a lot of deals, you still might be able to get approvals with some lenders as a broker. And you can even get some deals done.
But the more that you close and fund the more you realize something. It’s that the best rates and closing of even the most difficult deals has to do with the relationship you have with your lenders. And of course the amount you are constantly funding with your lending sources matters.
Getting Started with Business Credit and Loans
If you are just getting started with offering business credit and loans, or if you’d like to have all the work handled for you and earn just a little less, that’s okay. Just look into other sources you can work with who finance a lot of loans. In doing so you’ll find you can get higher loan amounts, better rates, and higher payouts. As a result, you can just get more deals done. Or you can “fast track” your relationships.
We have an entire team here at Credit Suite dedicated to maintaining relationships with lenders, brokers, and other funding sources so that you don’t have to. The best part is we even will help match your clients with the best source for them!
#1 You Can Make A LOT of Money with Business Credit and Loans
At the height of the real estate boom, real estate agents and mortgage brokers were making a ton of money. It was common for most to earn commissions of $5,000, even $25,000 on a single deal. And, it only took about 30 days or less to close that loan.
The Good Old Days of Business Credit and Loans …
Those were the good old days as many real estate industry veterans will tell you. But there isn’t, and may never be, an opportunity to make so much money so quickly in that industry. At least, it’s not like it once was. This has left many looking for something that does offer good money. So that’s something preferably without all of the regulation headaches you find with consumer compliance and regulation.
The business credit and loan space fills that void. In the business world, there just isn’t much regulation at all. The paperwork isn’t cumbersome. And there is no real limitation of what lenders can charge or pay you for originating a deal.
That’s why you can often make 3 to 4 points on many deals you fund. And with deals such as merchant advances, it’s possible to make 5 to 10 points or more per deal. So the best part is, this is without the client paying anything out of pocket to get their money.
Bonus: The Three Cs of Business Credit and Loans
You’ll need to know these in order to best help your clients.
In order to get a business loan, an entrepreneur and their business have to have at least one of these to qualify:
- Cash flow
- Collateral
- Credit (good business credit and/or good personal credit)
And when you offer business credit and loans, you should be looking for these as well. But why?
Lenders and credit issuers just want to know a business can and will pay back its debts. A business owner missing all three of the Cs is not inspiring confidence in a lender that any bill will be paid when due.
Cash Flow
Cash flow is an important C because it shows a business is succeeding and even growing!
Collateral
Collateral provides a great assurance to a lender because it’s something they can get in the event of a default.
Credit
There is a close connection between business credit and loans. Business credit is a helpful C because it shows a lender that a potential borrower already has a reputation for paying their bills in a timely manner. And personal credit is helpful as it not only shows a reputation for paying bills on time, it’s also part of the calculation of Experian business credit scores.
The Three Cs, Business Credit and Loans—and You
Offering financing options that your clients can’t qualify for doesn’t do anyone any good. By understanding the 3 Cs and which work best with which form of business funding, you can better match clients to lenders who will say ‘yes’ the first time. This is more than just the satisfaction of a job well done. It’s also a way to save time and money, and enhance your relationships with clients, prospects, and lenders.
This is why, at Credit Suite, we emphasize the 3 Cs. And if you’re going to offer business credit and financing as a service, then we strongly believe you should, too.
Business Credit and Loans: Takeaways
This is why the business loan space is blowing up. In the last few years, we’ve gone from barely hearing about business loans to seeing them all over TV. We see them in our Facebook news feed. Alternative lending now makes it easier than ever for business owners to get loans. And for you to get money supplying them.
This is just one more great reason you should consider offering business credit and financing as a service. Even if business credit and loans are just a secondary service you offer for customers, it will work. It still can be a major profit center for your company.
