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What is a business loan advisor?
There are many different types of business loans, including bank loans, SBA loans, merchant cash advances, franchise loans, commercial real estate loans, equipment financing, and more. The Small Business Administration (SBA) alone offers more than six different loan programs each with its own set of eligibility requirements, approval processes, and funding conditions. More often than not, small business owners and startup entrepreneurs do not have the time or the resources to thoroughly research all available financing options, so they turn to business loan advisors.
A business loan advisor is an individual or company that specializes in business financing options and works to understand each clientâs financial needs and match them with the right financing option. The loan advisor is familiar with all of the types of small business loans available to entrepreneurs and individuals. Some business loan advisors work with lenders that directly issue funds to borrowers, while other advisors act as business loan brokers and match their clients with the most appropriate financial institution.
Benefits of working with a business loan advisor
Small business loans can be a great financial tool for first-time borrowers or seasoned financial professionals. Benefits of securing a loan through a business lender include:
- Provide capital for startup costs
- Build better business credit history
- Facilitate large purchases, like equipment or real estate
- Discounts for purchasing inventory in bulk
- Employing the right staff from the start
- Sustaining seasonal cash flow fluctuations
- Frees up working capital to cover operating expenses
The most efficient way to access the right business loan and take advantage of the benefits of business borrowing is to work with an experienced business loan advisor, like Biz2Credit. Working with a loan advisor can benefit your company in the following ways.
Access to unpublished information
Business loan advisors have access to up-to-date information about lenders, banks, and loans. They understand details about a lenderâs approval process or loan origination fees that do not get published on the companyâs website or other public sources. Lenders are not always able to update their websites with current interest rates or loan terms, but the information is available to individuals already in their network. Their access to inside information allows advisors to match your business needs more effectively with the right loan provider.
Experience with startup businesses
The traditional business loan industry was built to serve clients who have at least two years of business financial statements. But new business owners need funding too. Startup entrepreneurs donât have documented annual revenue or net income, so applications and requirements for startup funding can look different than traditional loan applications. Finding a business loan advisor that has experience working with new business owners can significantly reduce the research and application times.
Established relationships with multiple financial institutions
Each lender has access to different loan products. Some lenders specialize in long-term loans like commercial real estate financing, while some lenders work to meet short-term needs with financing options like invoice factoring. The eligibility requirements, approval process, interest rates, origination fees, annual expenses, and repayment terms vary depending on the type of loan and lender you are working with. Business loan advisors work with multiple lenders at once, so they can help you be sure to know whatâs available and choose the best option.
A business loan advisor can save you a lot of time during the loan application process. Each type of loan and lending institution has its own set of eligibility requirements and underwriting processes. Trying to discover and organize information on multiple lenders is tricky for any small business owner to do alone. A business loan advisor has first-hand knowledge about what youâll need to get approved for your loan. With the help of your advisor, you can prepare all of the necessary documents ahead of time. Some commonly requested documents include:
- Credit report â Lenders may ask for both a business credit report and a personal credit report. If you donât know your credit score you can access that here.
- Income tax returns â Many lenders want two years of business income history, but your loan advisor can help you decipher which information they need based on the type of loan you are interested in.
- Bank statements â Lenders generally require statements from the bank where your business checking account is open.
- Financial statements â Working with a business loan advisor can help you decide which reports to share with the lender and which reports should be kept confidential.
- Business plans â A business plan shows lenders the financial, operational, and managerial aspects of your business.
- Debt schedules â If you are considering refinancing older business or personal debts, the loan advisor can review your current debt schedules and share their expert insight.
Thorough explanation of repayment terms
Repayment terms come with every loan. The paperwork received when reviewing loan options includes details about the number of payments required, repayment schedules, interest rates, prepayment penalties, and more. Even the most seasoned entrepreneur has a hard time understanding the important facts about their loan. Loan advisors can quickly summarize loan documents and make sure you are aware of the relevant terms and conditions.
Connect borrowers to professional tools
Business loan advisors are experts in the field of business financing, which gives them professional access to many tools, applications, and formulas. Some of the financial tools available to borrowers that work with loan advisors include:
Types of loans for businesses
The type of loan you are interested in getting will help determine which business loan advisor is right for you. There are many types of loans available to small business owners including the following common financing options.
- Term loan â Term loans give approved borrowers access to the maximum loan amount upfront and are repaid with monthly payments consisting of interest and principal. Businesses can be approved for long-term financing or a short-term loan through a term loan application.
- Business line of credit â A line of credit works similar to a business credit card, where the borrower is approved for a maximum credit line. The borrower can then withdraw funds anytime they need funds.
- Equipment financing â Equipment financing or equipment loans are a way for small business owners to purchase expensive equipment by financing the total amount. The value of the equipment acts as collateral for the loan, so the repayment terms are surprisingly flexible.
- Commercial Real Estate (CRE) loans â CRE loans work like term loans. The borrower makes a down payment and then borrows enough money to purchase land, a building, or another piece of real estate. Payments are made monthly and may be principal and interest, or interest-only for a period.
- SBA loans â There are multiple loan programs backed by the S. Small Business Administration intended to help small business development while boosting the economy. The SBA 7(a) loan program is the most common for entrepreneurs but requires a long application and approval process.
- Merchant Cash Advance (MCA) â MCAs give borrowers access to funds and use future credit card or debit card sales as collateral. Payments are made frequently and are usually calculated based on a percentage of credit card sales.
- Invoice Factoring â Invoice factoring and invoice financing are two financing options available to small business owners that carry accounts receivable balances. A cash advance is received by the borrower and the loan is repaid using the proceeds from uncollected invoices.
Where to find a business loan advisor
There are four commonly used methods for finding a business loan advisor. The key to finding the right advisor is to connect with a person or company that understands your businessâs trends and your individual borrowing needs.
A simple internet search for a business loan advisor, or loan consultant, will generate many results for local and online loan experts. If you choose to find a business loan advisor in your Google search results, be sure to screen their qualifications using the questions below.
A great place to learn about experienced business loan advisors near you or that specialize in your industry is by asking your fellow entrepreneurs. Talking with other business owners in your network can give you some great places to start. If you are still building a business network, consider reading online testimonials about business loan services.
Traditional lenders are banks and credit unions. Typically, traditional lenders have a brick-and-mortar location and may even be the same bank that you have a personal checking or savings account with. Most banks will also provide loan advisory services for their in-house loan products.
Alternative lenders, also called online lenders, are private lending institutions. Most often alternative lenders, like Biz2Credit, work through online lending marketplaces to help borrowers find the right loan for their business needs.
Choosing the right business loan advisor
Narrowing down the right business loan advisor to work with is almost as important as understanding your complete list of financing options. Once youâve connected with a company or individual you think youâd like to hire to help you through the small business lending process, consider asking the following questions to assess if they are a good fit for your business needs.
Do you partner with other lenders?
Learning how many lenders or loan officers your business loan advisor works with is important because an advisor that partners with more lenders is more likely to find the most competitive loan terms.
What is required from the borrower?
Find out which documents and background information you will be required to provide the loan advisor before completing an actual loan application. Some entrepreneurs are uncomfortable giving out financial information over the phone or online, so it is important that you are comfortable with the advisorâs loan process.
What are the fees?
Some business loan advisors charge fees based on time spent with clients and other advisors provide the service as part of their job description. Youâll want to know the expenses upfront so ask about the rates for advisory services before completing any paperwork or signing any documents.
What is the advisorâs specialty?
Talk with potential loan advisors about their experience. Some consultants work exclusively with nonprofit businesses or even only in specific industries. Youâll want to determine if your loan advisor has the experience that matches your business financing needs.
Finding the right financing tools for your business can be a challenging task but connecting with an experienced business loan advisor can help you quickly navigate the process. If youâre unsure where to start, reach out to Biz2Credit today. Their expert advisors are always providing timely information so that small business owners can make more informed decisions about their loans and financing options.
Do you want to learn more? Take a look at Ratton Soniâs story about how the advisors at Biz2Credit helped facilitate her commercial franchise loan.