The sense of pride and joy of running your own small business cannot be over exaggerated. Many of today’s largest and most successful companies started out in someone’s kitchen or workshop and became a raging success and household name. But it can be a struggle to start a small business alone, especially financially. Prospective business owners may already have learned this when they began to seek a small business start up loan.
The benefits to receiving extra funding from a small business start up loan are many. An owner can quickly get his or her business idea up and running. The extra cash can be used to purchase, lease, or renovate a building. An owner can advertise his or her concept in a variety of forms—banners, newspaper or radio advertising, starting a website, and getting new business cards. Additionally, an owner can get new equipment, tools and other items necessary. Extra funding can help a business owner make a big impact at first, and give a good first impression to his or her customers. A great beginning with a startup loan for small business needs is key to the success of a new small business—and a small business start up loan can help attain just that.
Unfortunately, it is not so simple when it comes to the loan process. Potential business owners are quickly discouraged when lenders impose a long list of requirements that are difficult or impossible to meet. Detailed business plans and collateral requirements are the two biggest setbacks when it comes to obtaining business funding. And many loan processes take weeks or even months!
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Monday, October 12, 2015
Loans After Bankruptcy – Be Prepared!
Though it is not impossible to obtain financing after a bankruptcy process, it is not an easy task. The reason is simple, bankruptcy ruins the applicant’s credit and it can take a lot of time to recover it. The lending industry is based on the concept of risk and those borrowers who have a past bankruptcy on record represent a very high risk for the lenders that have to consider their applications. Nevertheless, the lending industry has become so competitive that even those with a past financial failure can obtain a loan. But, they should expect certain restrictions and drawbacks:
Smaller Amounts
Rebuilding credit is a matter of time. Those with a past economic failure cannot expect to obtain high amounts easily. The only possibility for obtaining a high amount loan is to provide a proper and valuable asset as collateral for the loan. And even in that case, the borrower will have to cope with other drawbacks such as a higher interest rate and reduced repayment programs which imply higher income requirements.
Higher Interest Rate
The interest rate is a risk related variable and these two magnitudes are directly proportional. This means that the higher the risk implied in a transaction, the higher the interest rate that you will have to pay. Therefore, those with a financial failure on their credit report should expect to pay a significantly higher rate than those that have a clean and stainless credit history.
This does not mean that you will have to cope with exorbitant interest rates. It is possible to obtain an unsecured personal loan with a moderate interest rate even with a past bankruptcy. However, as explained above, the amount of money that you will be able to obtain will be reduced. Low interest rate and high amounts with such low credit is not feasible.
Additional Charges
Often, you will find yourself having to pay additional charges or costs for products that other people can obtain at reduced prices or even for free. For instance, credit cards with high credit limits may require you to pay an annual renovation cost while high credit applicants can obtain these products with no extra costs or charges and even obtain interesting reward programs.
Also, since you probably need to offer some sort of asset as collateral if you are applying for a loan, the closing costs on that loan will include the fees and charges usually associated with secured loans related to the assessment of the property used to guarantee the loan. As you can see, having bad credit due to a economic failure will imply overall higher costs that are unavoidable if you are in need of finance.
Course of Action
The reasonable thing to do is to avoid applying for finance during a reasonable amount of time till you can build up your finances again. Even if you take more time to recover without finance, your credit will eventually rebuild successfully and you will be able to obtain small loans and credit cards with reasonable rates that will help you further improve your credit situation.
Smaller Amounts
Rebuilding credit is a matter of time. Those with a past economic failure cannot expect to obtain high amounts easily. The only possibility for obtaining a high amount loan is to provide a proper and valuable asset as collateral for the loan. And even in that case, the borrower will have to cope with other drawbacks such as a higher interest rate and reduced repayment programs which imply higher income requirements.
Higher Interest Rate
The interest rate is a risk related variable and these two magnitudes are directly proportional. This means that the higher the risk implied in a transaction, the higher the interest rate that you will have to pay. Therefore, those with a financial failure on their credit report should expect to pay a significantly higher rate than those that have a clean and stainless credit history.
This does not mean that you will have to cope with exorbitant interest rates. It is possible to obtain an unsecured personal loan with a moderate interest rate even with a past bankruptcy. However, as explained above, the amount of money that you will be able to obtain will be reduced. Low interest rate and high amounts with such low credit is not feasible.
Additional Charges
Often, you will find yourself having to pay additional charges or costs for products that other people can obtain at reduced prices or even for free. For instance, credit cards with high credit limits may require you to pay an annual renovation cost while high credit applicants can obtain these products with no extra costs or charges and even obtain interesting reward programs.
Also, since you probably need to offer some sort of asset as collateral if you are applying for a loan, the closing costs on that loan will include the fees and charges usually associated with secured loans related to the assessment of the property used to guarantee the loan. As you can see, having bad credit due to a economic failure will imply overall higher costs that are unavoidable if you are in need of finance.
Course of Action
The reasonable thing to do is to avoid applying for finance during a reasonable amount of time till you can build up your finances again. Even if you take more time to recover without finance, your credit will eventually rebuild successfully and you will be able to obtain small loans and credit cards with reasonable rates that will help you further improve your credit situation.
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