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.