8 Aug

FINANCING SUCCESS: FINDING FUNDING WHEN THE BANK TURNS YOU DOWN

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FINANCING SUCCESS: FINDING FUNDING WHEN THE BANK TURNS YOU DOWN

For businesses large and small, a loan may be needed to overcome financial distress, purchase real estate, or acquire equipment to make their jobs easier. Business loans come in all sizes and for use in every aspect of business. Depending upon the size, age, and niche of your business, you can find available funding for every financial need that you can think of. The problem isn’t the availability of funding, it is the turndown rate of traditional banks that makes obtaining these loans so difficult. Businesses which have been turned down for a loan by a traditional bank often meet their ultimate end through failure. This is because business owners and representatives do not realize that alternative lending options exist and that they are easier to obtain than you may think.

What is Alternative Funding?

Dominion Lending Centres Leasing provides financing options for businesses who have been turned down for a traditional loan or for businesses that do not meet the requirements for a traditional loan. DLC Leasing matches businesses with lenders and investors within their network to provide funding outside of the traditional finance institutions. Brokers will assist business owners in finding the right loans to suit their needs and they will help with the application process as well.

Alternative funding is often grouped into specific niches. Lenders and investors will provide funding for certain needs rather than generalized financing. One lender may choose to provide funding for businesses which are in the construction field while another may choose to provide funding to businesses in retail or food service. This choice will often reflect the resources and network of the lender and will give the borrower a greater picture of where the money is coming from.

What Type of Loan Do You Need?

Every business is different and the needs of those businesses vary just as much. Where one company needs funding to pay for employee wages or utility bills, another may be looking for funding to purchase another location. The size of your business will be a determining factor for the amount of funding that you can receive. A larger business, with more income, will receive a larger loan where a small business will receive a lesser amount. Besides the size of your business, your loan broker will need to see detailed financial records, copies of your tax statements, and may even need to evaluate your accounts receivable.

When applying for a loan of any size, it is important to know what type of loan you need ahead of time. Here is an example of some of the most popular business loans available:

Equipment loan – Funds are used to purchase equipment for business use. Either to replace old equipment or to upgrade to more modern equipment. This can be used for large machinery and production equipment as well as office and restaurant equipment.
Real Estate loan – This type of loan is used to purchase real estate for business use. It cannot be used for personal real estate and will likely be calculated based on the business income.
Hard Money loan – Typically secured by real property and are often a few months to only a few years in length. Hard money loans provide funding to assist in a temporary financial situation or while your business is waiting for long-term financing to be approved
Accounts Receivable loan – The amount of this loan is based on your current accounts receivable and can usually be used for any financial needs of your business. This type of loan provides funding to help you get through financial distress because of money that you are waiting to receive.
Once you have decided the type of loan that your business needs, you will need to find a reliable, honest and knowledgeable commercial finance broker to work with. Research your broker to make sure that you are protected throughout the entire process.

JENNIFER OKKERSE
Dominion Lending Centres – Director of Operations, Leasing Division

1 Aug

HOW CREDIT AFFECTS YOUR LOAN APPROVAL

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HOW CREDIT AFFECTS YOUR LOAN APPROVAL

When you apply for a loan, lenders assess your credit risk based on a number of factors. Your credit score, as well as the information on your credit report, are key ingredients in determining whether you’ll be able to get financing and the rate you’ll pay. To get approved for a loan and to pay a lower interest rate it’s important that your credit report reflects that you’re a responsible borrower who pays their debts on time with a low risk of defaulting.

Credit Report vs. Credit Score
To start with, it’s important to understand that your credit report and your credit score are two separate things.

Credit Report – Your credit report contains information detailing your credit history. Sources include lenders, utility companies and landlords. This information is compiled by one of two major credit-reporting agencies (Equifax and TransUnion) that try to create an accurate picture of your financial history. Credit files include information such as:
• Name, address and social insurance number
• Types of credit you use
• When you opened a loan or line of credit
• The balances and available credit on your credit cards and other lines of credit
• Information about whether you pay your bills on time
• Information about any accounts passed to a collection’s agency
• How much new credit you’ve opened recently
• Records related to bankruptcy, tax liens or court judgments
Errors on your credit report can reduce your score artificially. In fact, 1 in 4 consumers have damaging credit report errors. Therefore, it’s important to stay up-to-date on your credit report history. If there is an error, you should dispute it and get it removed as soon as possible. Last year, 4 out of 5 consumers who filed a dispute got their credit report modified, according to a U.S. study by the Federal Trade Commission.

Credit Score – Your credit score is the actual numeric value extrapolated from the information in your credit report. A credit-reporting bureau applies a complex mathematical algorithm to the information in your credit file to create your numerical credit score.
Beacon is the most widely known credit scoring formula in Canada and is used by many creditors. Your FICO score can range from 300 to 850, with under 400 being very low and 700+ putting you in the healthy range. Your credit score is meant to give potential lenders an idea of how big of a financial risk you are. The higher your score, the less likely you are to default or make late payments and the more likely you are to be approved for financing.
Your score is based most strongly on three factors: your payment history (35% of your score), the amounts owed on credit cards and other debt (30%) and how long you’ve had credit (15%).

What Are They Used For?
Lenders glance at your credit score to determine your credit risk. Most traditional lenders have pre-set standards. If your credit score is within a certain range, they’ll offer you certain credit terms. If you don’t fall within their approved range, then you may be denied. Most banking institutions will only approve a loan if the client has a credit score of at least 640. A score of 700, however, gives you a much better chance at gaining approval at most lending institutions and at reasonable rates.
As far as interest rates are concerned, banks use an array of factors to set them. The truth is they are looking to maximize profits for themselves and shareholders. On the other hand, consumers and businesses seek the lowest rate possible. A commonsense approach for getting a good rate would be having the highest credit score possible.
It’s important to note that if you apply for a loan, the lender will most likely pull your credit score through what is commonly called a “hard inquiry” on your credit, which slightly lowers your credit score. Therefore, it’s important to know your credit score ahead of time, fix any errors, and apply for loans which you have a good chance of being approved for.

Things You Can Do to Improve Your Credit Score

1. Check your credit report for errors – While the credit agencies do their best to keep your record free of errors, they can make mistakes. It’s important to check your credit report at least once a year — consumers are entitled to one free credit report every 12 months — to ensure all of the information is correct. Each agency may have slightly different information and, consequently, may have errors another credit report doesn’t.
2. Set up payment reminders – Making credit payments on time is one of the biggest contributing factors of your credit score. It may be helpful to set up automatic payments through credit card or loan providers so you don’t forget to pay when payment is due.
3. Reduce the amount of debt you owe – Stop using your credit cards. Use your credit report to make a list of all your accounts and check recent statements to determine how much you owe on each account and what interest rate they’re charging you. Then create a payment plan to lower or eliminate the debt you still owe.

How Dominion Lending Centres Can Help
Many businesses need financing to start or expand. Although your credit score is only one component of your lender’s decision, it’s an important one. If you have a low credit score and are unable to secure financing through a traditional bank, DLC Leasing will be able to get you approved with our team of lenders. When the bank says no, our team will still say yes with flexible terms and interest rates.

JENNIFER OKKERSE

Dominion Lending Centres – Director of Operations, Leasing Division