LOANS FOR THE BUSINESS

Articles In This Section:

· Form of business and financing

· BUSINESS ADVANTAGES OF OPERATING AS A SOLE PROPRIETOR

· BUSINESS DISADVANTAGES OF OPERATING AS A SOLE PROPRIETOR

· BUSINESS FINANCING

· WHAT TYPES OF BUSINESS LOANS

· LOANS FOR THE BUSINESS

· A LINE OF CREDIT FOR THE BUSINESS

· How a Sole Proprietorship is Taxed

· BUSINESS ADVANTAGES OF THE PARTNERSHIP FORM

· BUSINESS DISADVANTAGES OF THE PARTNERSHIP FORM

· THREE RULES AS BUSINESS PARTNERS

· BUSINESS TAXATION

· BUSINESS CORPORATION

· BUSINESS DISADVANTAGES OF THE CORPORATE FORM

· BUSINESS CORPORATE FINANCING

· BUSINESS STOCKHOLDER ELECTION TO REPORT CORPORATE INCOME

· MAKING THE BUSINESS ELECTION

· HOW THE BUSINESS ELECTION IS LOST

· BUSINESS ADVANTAGES AND DISADVANTAGES OF STOCKHOLDER REPORTING OFCORPORATE INCOME

Finally, in your consideration of banks as a source of funds, you may be able to obtain loans by pledging the cash value of your life insurance policy or of any stocks or bonds that you may own. You may also receive a loan on the strength of an endorsement made by a co-signer, surety or guarantor acceptable to the bank.

Loan Companies. Small-loan companies operate under state regulations and licenses, and are also known as personal finance companies or consumer finance companies. In many states the maximum amount of any one loan is limited by local law. It also is important to remember that the rate of charge for small loans is necessarily higher than for large business loans. It is, of course, advisable that you secure the advice of an attorney before commiting yourself on any loan documents.

Governmental Assistance—FHA; SB A, etc. The Small Business Administration is authorized by Congress "to purchase the obligations of and to make loans to any business enterprise." It provides a lending hand where the necessary financial assistance is not otherwise available on reasonable terms.

The SBA may make loans to business enterprises directly or in cooperation with banks or other lending institutions. You should exhaust your other usual means of obtaining credit before making application to the SBA. This is because, as a matter of policy, the SBA emphasizes "participation" loans in which the agency assumes a part of the loan made by a private lending institution.

Factoring. Factors specialize in buying outright accounts receivable. The factoring company is available for advice as to what trade credit you should extend. Here is how a factor works: he advances funds on a short-term basis, usually expecting to convert the purchased receivables into cash within 30 to 50 days. Factors charge interest and usually a fee or commission. Interest varies between five and six percent. The commission may be as much as two percent of the sales cashed. Be alert to the high cost involved in factoring. For example, if you pay a two percent commission each month the effective commission is 24 percent for the year. Weigh this consideration against the credit and collection services offered by factoring.