Common Questions About Financing a Business Loan

What are the loan terms?

Fixed interest rates and flexible term lengths of 2, 3, 4, 5 or 10 year options (depending on type of loan and dollar amount). A fixed loan makes payments predictable and your financial planning easier.

What are the benefits of a fixed rate loan?

A fixed rate loan provides predictable fixed payments for a set period of time (term). Predictability is especially beneficial in rising rate environments and for situations where you need to accurately plan your expenditures.

How does the lender decide the maximum loan amount that I can afford?

The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing expenses and non-housing expenses. Non-housing expenses include long-term debts like car or student loan payments, alimony, or child support. The lender also considers cash available for equity in your business.

What is a credit score and how do lenders use them?

A credit bureau score is a number, based upon your credit history that represents the possibility that you will be unable to repay a loan. Lenders use it to determine your ability to qualify for a mortgage loan. In some cases your actual "score" is not considered, rather your overall credit history is taken into consideration.

How can I improve my credit score?

There are no easy ways to improve your credit score, but you can work to keep it acceptable by maintaining a good credit history. This means paying your bills on time and not overextending yourself by buying more than you can afford.

How does my credit history impact my ability to qualify?

SRFSI is generally more flexible than conventional lenders in its qualifying guidelines. In fact, SRFSI allows you to re-establish credit if:

  • Two years have passed since a bankruptcy has been discharged.
  • All judgements have been paid.
  • Any outstanding tax liens have been satisfied or appropriate arrangements have been made to establish a repayment plan with the IRS or State Department of Revenue.
  • Three years have passed since a foreclosure has been resolved.

Can I qualify for a SRFSI loan without a credit history?

Yes, if you prefer to pay debts in cash or are too young to have established credit, there are other ways to prove your eligibility.

Can I pay off my loan ahead of schedule?

Yes! By sending in extra money each month or making an extra payment at the end of year, you can accelerate the process of paying off the loan. When you send extra money, indicate that the excess payment is to be applied to the principal.

How large of an investment is expected of me when I apply for a loan?

Generally, 10% of the loan amount would be required. The larger your down payment (equity in business) the less you have to borrow.

May 2022