Tag: loans

Loans are money that is expected to be paid back, usually with interest.

What Are Liens and How Do They Work?

Most of us will have to deal with liens at some point in time or another. If you’re a homeowner with a mortgage, you almost certainly have one now. However, unlike liens associated with homes, some liens can be quite damaging and impact your business’s ability to grow and succeed.

On this page, we’ll dig into how liens work, various types of liens, how they impact you, and what you can do about them if they’re impacting your business.

What is a Lien?

Liens give a company or person legal claims to another person or company’s property. They’re often used when a lender wants to ensure they receive payment from a debtor. It gives the creditor recourse if the debtor doesn’t make good on his agreement to pay.

If you’ve heard the terms “secured debt” and “unsecured debt,” the difference is the lien. Secured debt has a lien and is secured by an asset.

How Does a Lien Work?

Because a lien grants someone else interest in your property, you generally cannot transfer property with a lien to another party without the lien holder’s permission. Liens can also impact your credit score and access to credit.

Beyond this, how it works depends on the type of lien. There are three broad categories: consensual, statutory, and judgment.

Consensual Lien

When you voluntarily agree to a lien, it’s called a “consensual lien.” These are quite common with personal property, such as mortgages and auto loans.

In the case of a home, the property serves as collateral and the lienholder, or mortgage company, has the legal right to liquidate the property if the property owner does not make payments.

Consensual liens are visible on credit reports, but they don’t have a negative impact unless you fail to make your payments.

Statutory Lien

Sometimes a lien is implied by or created by operation of law and does not require your consent. This is a statutory lien.

For example, if you pay a warehouse to store your goods and don’t pay for the storage, the warehouse owner can liquidate your goods or take other actions depending on what your state allows.

Statutory liens reflect negatively on your credit report because they signify an unmet financial obligation and can stay on your report for seven years.

Judgment Lien

Sometimes a court steps in and grants a financial interest in business or personal property, giving lien holder status to a third party. This is referred to as a judgment lien.

This might be the case if someone filed a slip-and-fall lawsuit against your business, the plaintiff won, and your insurance doesn’t cover the full damages awarded. It’s common with car accidents too.

Judgment liens are often considered the most severe and also reflect negatively on your credit. They’ll stay on your credit report for seven years.

Liens and Bankruptcy

Liens against you or your business can impact bankruptcy proceedings because they involve repayment of debt and secured loans.

Many liens can be discharged in bankruptcy, meaning you do not have to pay creditors back. However, government liens, such as tax liens, are usually exempt from this. You’ll be required to pay the debt back even if you file bankruptcy. If you’re unsure whether this or any information outlined on this page applies to you or you have additional questions, be sure to contact an attorney or financial advisor who specializes in liens.

Different Types of Liens

Within each of the three broad lien categories, there is a multitude of lien types. A few of the most common that impact business owners are outlined below.

Bank Lien

Bank liens are a type of consensual lien. They’re put in place when you take out a loan to purchase an asset, such as a vehicle or major equipment. In these cases, ownership and control of the property remain in your hands as long as you make the agreed-upon payments, and the lien is removed when your loan is paid in full.

Real Estate Lien

Real estate liens give a third party the legal right to seize and sell real estate property when a contract is not filled. Most real estate liens are consensual, as is the case with a mortgage. However, some are placed when a creditor is not paid and may be judgment liens instead.

Mechanic’s Lien

Mechanic’s liens are a form of statutory lien. They’re placed when a mechanic or contractor is not paid for work performed and grant the individual financial interest in the business, vehicle, or home in which the work took place.

Tax Lien

Tax liens are another form of statutory lien. They’re often placed by the Internal Revenue Service (IRS) for non-payment of federal taxes but can be placed by any tax authority. Tax liens can impact homes, vehicles, banks accounts, businesses, and business assets. That means if your business owes taxes and a lien has been placed, the IRS has an interest in your receivables too. Therefore, many businesses turn to factoring to finance an IRS lien.

Can a Lien Be Removed?

Liens can be removed in two ways.

1. Contest the Lien in Court and Prove That it’s Invalid

If the lienholder cannot prove that their lien is valid, the court will remove it.

2. Have the Lien Voluntarily Removed

Sometimes lienholders will voluntarily lift a lien or remove restrictions if the lien is impacting your ability to pay them back. You may also be able to negotiate a pay-off amount to clear a lien immediately. However, more often than not, a lien is removed when the related debt is paid off.

Ways to Avoid Liens

Not all liens are “bad” and harm your credit or business, but it’s best to avoid having them placed whenever possible. Thankfully, there are many ways to avoid liens.

Don’t Take on Debt

Pay in cash whenever possible. If you’re experiencing a cash flow shortage or need a quick injection of working capital, look for debt-free ways to get funding such as invoice factoring.

Budget Wisely

Avoid common cash flow mistakes such as focusing on profit over inflows and plan for your slower seasons to ensure you can keep up with payments.

Manage General Contractor Relationships Carefully

Sometimes payments don’t trickle through from general contractors to subcontractors and result in a mechanic’s lien. Vet the payment histories of your general contractors carefully, pay on time and in full. Consider requiring payment bonds from general contractors and/or issuing joint checks that require signatures from all receiving parties. You may also have general contractors collect conditional lien waivers with pay applications. If your state allows it, you can file a notice of completion too.

Boost Your Working Capital with Invoice Factoring

If your business needs a quick cash injection to keep up with payments, you’re trying to pay off debt related to a lien, or you simply don’t want to take on debt, invoice factoring can help. Factoring offers immediate payment on your B2B invoices, so you’re no longer tied into 30, 60, or 90-day waits. To get started, request a complimentary rate quote.

July 23, 2021
Are Big Banks Giving Small Businesses Service or the Cold Shoulder?

Everyone naturally wants to feel their patronage is valued and welcomed when they do business with a firm. Grocery shoppers want to be appreciated when they check out; drivers want to be gratefully acknowledged when they have their car serviced at the shop, and so on. Businesses feel the same way when they conduct business with each other.

Small businesses have been feeling underappreciated as of late. Not by their customers. Not by the government’s Small Business Administration. Not even by the news media. No, they’re feeling that they are not getting the welcome and the services they feel that they are due from the firms and institutions they rely upon to grow and expand. They feel they’re being ignored by banks, especially by big banks.

It’s been shown time and again that small business is the real engine that drives the American economy. Small businesses combined generate more revenue and employ more people than big business. Yet when an individual small business owner goes into a big bank to ask for a loan or for financial assistance, it seems many walk away with frustration and anger rather than with money or help.

Are big banks giving small businesses service or the cold shoulder?

First, here are some numbers. Small businesses are investing to meet growing demand for their products and services in a strong economy. Borrowing by these companies has reached recent highs. Big banks report they have loaned record amounts to small businesses, continuing a trend since the end of the last recession. Forbes has even run a helpful article identifying the top 10 big banks loaning the most to small businesses. So everything is fine and dandy, right? Yet horror stories still abound about how big banks seemingly give small businesses the back of their hands on a regular basis.

Both scenarios can’t be true. It can’t be a boom time for big bank small business loans, yet, in the same instance, be a time when small businesses bewail about bad treatment at the hands of big banks. But that seems to be the case.

Small Businesses Don’t Receive What They Need from Big Banks for Many Reasons

Rather than provide anecdotal stories that reflect individual experiences, let’s look at some firm reasons why a small business owner may not get what he or she wants at a big bank. In other words, why might you be turned down for a loan even though, according to published reports, big banks are loaning more than ever to small businesses?

Credit Score/Credit History – Credit score and past credit history are the first things banks look at. If your score is too low or your history reflects a slowness to pay, this will put any potential loan in jeopardy from the start.

Little or No Collateral – No matter if a bank is big or small, it’s not extending a loan for its health. It expects something in return, preferably more money coming back in than it lent out. If it can’t be repaid, then it expects some type of collateral it can take instead to settle the loan. If you can’t offer collateral to secure a loan or what you have to offer isn’t worth much, your chances for a loan are greatly diminished.

Risk – Nothing lasts forever. But a small business may not even last a year. That means a big bank loan to a small business involves increased risk, and risk is something banks are quite averse to. They prefer a sure bet. If they do not view your small business as a sure bet but rather a risky proposition, your chances at a loan start to quickly dwindle.

Interest Rates – You can’t get something for nothing. A bank may charge a higher interest rate to recoup a riskier loan. Of course, that higher interest rate may, in turn, make it harder for the borrower to repay, causing either the small business or the bank to walk away.

Not Enough Return – Related to the above. A bank is a business like any other. They have owners and stockholders who expect to turn a profit. A small business loan, even at a high interest rate, may not provide enough return (profit) to cover its costs to the bank. In that case, the bank may figure, “Why bother?”

You – It’s not personal. But you may not have made a good enough presentation, provided enough information or just not been convincing or confident enough to overcome the bank’s reluctance to engage in what it views as a risky activity.

You Have Options Even if You’ve Been Denied a Traditional Small Business Loan

So what can you do when you walk into a big bank looking for a loan and encounter each of these points? It’s on your shoulders to address each of them and to show the bank you have a sound and workable business plan, that your plan will result in a strong and growing business that will be able to satisfy its customers, pay its employees and vendors, and repay the bank in a reasonable period of time at a minimal cost to the bank.

Of course, unless you’ve come up with a product or service that sells itself – like a cure for baldness or a way to turn straw into gold – that’s often easier said than done. No one ever said running a small business was a cakewalk… not even a baker.

Be Mindful About the Dangers and Risks of Alternative Small Business Funding

There are alternative methods of small business funding if you do not wish to engage with a big bank or have already done so and have been turned down. However, some of these alternative sources often have hidden or high costs associated with them that may make using such a source more expensive or more trouble than it’s worth. For instance, online small business loans/ cash advances can provide fast money, but often at a high price.

Explore Other Credit Alternatives to Big Bank Loans

One alternative gaining traction is working with community development financial institutions (CDFIs) or community banks, which often have more flexible underwriting standards and a better understanding of local market conditions. These institutions may be more willing to approve loans to small businesses based on their operational strength rather than rigid credit thresholds. However, they still typically require a credit score of at least 600, and often greater than 650. Plus, CDFIs exist to help underserved populations and promote economic development. If your business has access to opportunity and financial services, it is unlikely to qualify for a CDFI loan. Furthermore, the process can be slow. So while CDFIs can help certain marginalized businesses, they still come with many of the same barriers big banks have,

Another approach is asset-based financing, where a business leverages existing receivables or inventory instead of taking on new debt. This is where invoice factoring comes into play, offering fast access to capital without the lengthy approval process required by many lenders. As credit standards tighten and approval rates shift, small business owners must adapt by exploring funding partners who align with their needs.

Streamline Your Funding with Invoice Factoring

If a bank doesn’t seem to want your business or to help, and credit-based options are not ideal, you may want to take a closer look at invoice factoring. What is invoice factoring and what makes it a great option for small businesses?

Basically, invoice factoring is a time-tested and proven way for a small business to get immediate funding on its outstanding customer invoices. For example, you may have a slow-pay customer who takes 60 to 90 days or more to settle an invoice for products or services rendered. This delay can cause a small struggling business many hardships as it awaits payment. By employing an invoice factoring company, the small business can receive immediate funding for all its outstanding invoices. Rather than waiting to collect payment from its customers, the small business can put that money to work straight away, either to grow, pay current workers, hire more workers, or settle invoices of its own. In turn, the customer sends invoice payments to the factoring company in the normal course of business.

Charter Capital USA has been providing fast, efficient invoice factoring services for more than 20 years. Our company understands the funding challenge small business owners face. We have the experience and know how to help small businesses overcome those financial challenges and improve cash flow. We are a partner you can trust. To learn more, talk to a factoring specialist.

September 9, 2019
Considering Online Funding? Don’t Get Played for a Sucker

Considering Online Funding : As a small business owner, no one needs to tell you that getting a loan from traditional banks can be a real crapshoot, whether it’s a business or a personal loan. Far more often than not, when a small business rolls the dice and asks for a loan, they get double sixes and walk away empty-handed. Nationally, banks reject small business loan applications 80 percent of the time, on average.

A new form of online funding has arisen in recent years. This source promises to be more willing to loan small businesses the money they need to start a company, hire employees, pay your employees’ next paychecks, expand operations, and buy or lease new equipment. Online funding/loan and cash advances have filled a big gap in the capital pipeline, but in several cases, the payout has not been worth the gamble. Many small businesses have been stuck with high-interest loans laden with hidden fees and sky-high monthly payments.

This isn’t to say there aren’t good online lending companies. There are those who are more lenient with their repayment terms. But as with anything on the Internet, there are a lot of unscrupulous operators online and they aren’t looking to help you or your business. Quite the opposite… they’re out to scam you. Like a crooked card dealer, they want to deal you a bad hand so they can steal your credit, your good name and anything else they can grab before you catch on that you’ve been had.

No one likes being played for a sucker, especially when you are just trying to handle your business’s financial needs. So, how can you protect your small business and even the odds so that, when you make an online funding/loan application or apply for a cash advance, you’re not really funding someone else’s scam?

Here are five things to keep vigilant for when investigating any online funding or cash advance company:

No contact information:

Before you do anything else, the first sign to look for to see if an online lender is legit is the simplest task to perform. If you can’t easily find the company’s address and telephone number on the website, that’s a very bad sign. When you do find the info, if the address is only a P.O. Box, leave. If there’s a physical address, look it up on Google Maps Street View feature. Is it an office? Or is it a home, apartment or worst of all, an empty field? If an office, how many other companies share that same address? Believe it or not, there are firms that lease the same office suite to dozens of companies so that they will have a physical address. No one is ever in that office, of course.

Closely related to that is the email address. A legitimate company will have its own email address that matches the firm’s URL. If the contact information is for a generic address, such as g-mail, y-mail, Hotmail or some other free email service, bail out.

Guaranteed loan:

This should be an obvious red flag. No legitimate lender would ever guarantee a loan before knowing anything about you. Read the fine print… this loan is sure to come with an interest rate in the stratosphere or have fees for nearly everything under the sun. Even worse, they may promise a guaranteed loan but leave you instead with a guaranteed nightmare when they steal your information. Save yourself the trouble. Walk away from any “deal” like this.

Too aggressive:

Who hasn’t bought a used car at some point in their life? If you’ve ever had a pushy salesperson, what was your instinct? To run, right? Same with online loans. If you’ve contacted the lender and that person seems pushy, wants you to make a quick decision, seems hesitant to answer more than a few questions, or gets angry when you ask for additional options, then you’re very likely dealing with someone out to pad their bank account, not yours. Take a pass.

Money upfront:

If you’re asked for money upfront to get a loan, flee immediately. No legitimate lender will ask for money upfront before approving a loan. When you pay money upfront, what’s very likely to happen is that money – and the lender – will quickly disappear. Don’t do it. Ever.

The best advice of all – if it sounds too good to be true, it probably is:

We saved the best one for last. Actually, this is the only one you really need, isn’t it? Like any other business, lenders need to make money on their services. As a small business owner, you certainly don’t begrudge anyone for making money. But if someone offers you a “deal” that sounds like a dream come true, you need to ask yourself is it really a dream, or a nightmare waiting to happen. Why would someone offer a loan that seems to offer all the benefit to you? They wouldn’t. Any business needs to make a return. Even unsecured loans, which don’t ask for collateral, still look at your creditworthiness (if you have a good credit history) to determine risk.

If you’re staring at a loan deal that sounds to good to be true, you can bet it is. The lender will get something in return – something you may not have counted on. For example, online lenders often express interest as “simple interest.” The truth is “simple interest” is anything but simple and the actual APR (the annual percentage rate) can often be four to eight times the amount stated. And, in some cases even more! Make sure that your terms are not expressed as simple interest, so you know your true cost of borrowing. This is not to say every “too good to be true” deal is a scam. Just like not every online lender that matches one of these tips is a scammer. But do you really want to take that chance? Move on while you can.

If you are considering an online loan or cash advance, do your due diligence. If something doesn’t seem right, if you aren’t comfortable, then that’s your intuition warning you of danger. Heed those warnings.

There is another, less-risky way to raise money for your small business. This option is called invoice factoring. Invoice factoring allows you to “sell” your accounts receivable invoices to a third party. This third party pays you upfront for outstanding invoices, giving you the cash you need today to run your business, and eliminating the worry and hassle of slow pay collections, leaving you free to run your business.

Invoice factoring is a convenient alternative to a traditional commercial bank loan or fee-laden online loans. Factoring gives you the money you need when you need it with a flexible term length and no long-term obligations. You can also get cash quicker through invoice factoring – usually within a day or two. You also don’t need to worry about having excellent credit because factoring companies will look at your customers’ credit profiles rather than that of your business. A factoring company will also not require you to have a specific loan purpose: if you sell your invoices, you can spend the money on what your business needs, whether it be for payroll, equipment, or maintenance.

If you would like to learn more about how invoice factoring works, simply call toll-free 1-877-960-1818 or email [email protected]. You may find it to be the best hand you’ve been dealt in a long time.

May 21, 2019
Online Small Business Loans/Cash Advances – Fast Money, But Often with a High Price

Navigating Your Small Business Financing Options & Cash Advances

When it comes to finding the right loan for your small business, the landscape can be bewildering, especially when considering options like an SBA loan or business credit cards. With the advent of online lenders offering small business loans and financing options, entrepreneurs now have a wealth of opportunities at their fingertips. Whether you’re seeking a merchant cash advance, a business line of credit, or the best small business loans available, understanding your options is critical. The key is to find a financing option that not only meets your immediate business needs but also supports your long-term growth, such as a business credit card for smaller expenses or a substantial SBA loan for larger projects. Small business financing can take various forms, from business term loans to business cash advances, each with its advantages. For those looking to apply for a small business loan online, the application process has become more accessible than ever, offering a streamlined path to funding options like SBA loans and business credit. However, it’s essential to weigh the pros and cons of each type of small business financing, including interest rates, repayment terms, and eligibility requirements. By doing so, you can find a business loan that aligns with your cash flow and helps you grow your business. Remember, the best business loan is one that fits your specific needs, enabling you to capitalize on opportunities without overextending your financial resources.

Online Small Business Loans/Cash Advances

As a small business owner, it’s not news to you that companies need capital to get started, to buy essential equipment and inventory, to grow and if everything goes according to plan, prosper. And it shouldn’t be a surprise to you that sources of capital can sometimes be hard to come by for small businesses.

But what you may not know is that an increasingly popular new source of small business funding – quick online business loans – might not be the boon cash-starved entrepreneurs had hoped would be their salvation.

The Internet has certainly been a boon for small business owners, especially smaller ones. It has often enabled the startups to effectively compete with the giants of commerce in terms of creating a market presence. It has also helped small businesses establish cost-effective ways to do business with their customers and eliminate the expense of a big sales force, brick-and-mortar stores or offices. Over the past several years, a new phenomenon has been sweeping the Web that promises small businesses greater access to much-needed capital through online loans and cash advances.

Small business entrepreneurs once had a limited choice on raising capital to start a company, to keep one going or to help it grow. They could tap into their own savings, ask friends or family for money, fill out an application with the Small Business Administration (SBA), or walk into a neighborhood bank and seek a loan.

Related Article: It’s Small Companies, Not Big Business, That Create Jobs

Some of these methods are easier than others. The easiest, of course, is tapping into personal savings. However, how many people have sufficient savings to keep loaning their businesses money? Asking friends or family for funds can be problematic. A federal loan means you have to deal with a slow government bureaucracy. Going to the bank entails proving your business plan and your creditworthiness (credit score), and banks are becoming more risk-averse, meaning they’re loaning less and less to small businesses. If your credit check shows your business as bad credit risk, it will be near impossible to get a line of credit through a bank.

Enter the online loan industry. Now you can fill out a form on a website and if approved, quickly get much-needed cash for your business. Sounds great, doesn’t it? Perhaps it may even sound too good to be true? And we’ve all heard the old adage that famously says, “If it sounds too good to be true, it probably is.”

Is that the case when it comes to online small business loans? Is a cash advance a bad thing? That depends on factors such as your business credit and time in business. How fast do you need the money, what price are you willing to pay for it, and are you willing to place yourself at risk?

Taking out an online business loan is often much easier than applying for a loan from the SBA or a traditional lender. There are fewer forms, fewer questions, and less documentation. The sites are typically written in easy-to-understand language and can be quickly navigated by anyone. So that may be a competitive plus when compared to the SBA or most banks, but at what cost?

There are potential pitfalls small business owners need to keep in mind should they decide to pursue a business loan online.

For one, fees and interest rates generally tend to be much higher for online loans than for traditional loans from a bank. There are often more fees attached to the online loan than loans from other sources.

“Caveat emptor”—let the buyer beware. The internet is swamped with alternative lenders using gimmicks to gain attention, making it challenging to find a reputable business lender. One such gimmick is to express the interest rate in terms of simple interest as opposed to APR (annual percentage rate) – a more realistic measure of the cost of funds. Expressing the interest rate as “simple” rather than as APR can be confusing, even misleading because the actual interest rate can be much more expensive than it appears.

Repayment terms are another important item to consider. Many online loans have set repayment provisions, and these provisions could wind up making the loan more of a hindrance down the road than a help. If you are expecting a traditional monthly payment plan, for example, you may be surprised to learn the online lender you’ve taken a loan from actually requires payment every week, or in the worst cases, even daily. Can your cash flow handle these strict requirements?

Finally, there is the security issue. News reports come out almost daily about online scams of all kinds. Just because someone has put up a website advertising online business loans does not automatically mean it’s a legitimate firm. There’s the possibility it’s a fly-by-night outfit looking to steal your information and good name for their own nefarious uses or a lead gather who will then sell it to online lenders.

If you are going to use an online lender to obtain a small business loan, here are a few ideas on how to protect your company and find a safe lender. First, make sure the lender has a real physical address, which is crucial whether you’re looking to get a small business loan or open a business bank account. If the site does not provide one, run away. If the site does give an address, use tools like Google Street View to confirm it is an actual location and not an empty field.

Next, search for third-party verification from such sources as the Better Business Bureau and other rating services. One additional tip is to find out who owns the website, how long they’ve been around, and if they are actually an online lender. You can do this using WHOIS.

It’s always best to do strict due diligence on the lender and read all the fine print before taking out any loan, be it online or through a traditional source. Not doing so could put your small business at risk. Yes, small business loans are increasingly harder to come by through traditional lending sources and businesses need capital, sometimes quite quick capital. But by investing a little time, you can save yourself and your businesses from tripping over avoidable pitfalls.

Why Factoring is a Smart Financing Choice for Small Businesses

When it comes to small business financing, factoring emerges as a superior option for many businesses due to its unique advantages over traditional and online loans. Unlike conventional loans, which often require extensive credit checks and collateral and can take time to be approved, factoring provides immediate access to funds by allowing businesses to sell their outstanding invoices at a discount to a third party, known as a factor. This method is especially beneficial for businesses with strong sales but slow-paying customers, as it improves cash flow without the need for taking on new debt.

Factoring stands out for several reasons:

Immediate Liquidity: Factoring converts accounts receivable into immediate working capital, enabling businesses to cover operational costs, take advantage of growth opportunities, and manage cash flow gaps without waiting for customer payments.

Credit Extension Not Required: Unlike business loans, which depend heavily on the business and owner’s creditworthiness, factoring focuses on the creditworthiness of the business’s customers. This makes it an accessible option for new or rapidly growing businesses that may not qualify for traditional financing.

Reduces Administrative Burden: The factor often assumes responsibility for managing the receivables, including collections from customers, which can reduce administrative overhead and allow business owners to focus more on core business activities and growth strategies.

Flexibility: Factoring agreements can be more flexible than traditional loan contracts, with businesses able to choose which invoices to factor and when. This provides businesses with more control over their finances and avoids the long-term commitments often associated with loans.

No Additional Debt: Since factoring is not a loan, it does not add to a company’s debt load. This is crucial for maintaining a healthy balance sheet and can be especially advantageous for businesses looking to keep their debt-to-equity ratios low.

By embracing factoring, small businesses can navigate the challenges of growth and cash flow management with greater ease and flexibility. This financing option supports sustainable business operations by offering a practical solution to the common problem of delayed invoice payments, ensuring that businesses can continue to invest in their growth and stability without the burdens often associated with more traditional financing routes.

January 31, 2018