Loans
Loans are fixed sums borrowed to a customer that is
repaid in equal with interest. There are two categories of loans secured and
unsecured loans.
The repayment is done on monthly installation at a fixed
amount agreed by both parties. Once repayment is followed to the letter and
fully paid the loan conditions is fulfilled.
The borrower pays a fixed amount and failure would cause
a deduction of interest from the account or penalties. The borrower needs to
meet the loan conditions and has the right to cancel or repay the loan early.
Things
to Consider before Securing a Loan
The terms and conditions to acquiring a loan cover the
amount of credit and total amount payable. A loan could be serviced
individually or jointly.
You have the right to withdraw and to request a statement
of account at any time. You also have the right to repay early such as partial
early repayment or full early settlement.
There are interests for late payment and loan is serviced
through an account opened under the loan provider. The financial institution
usually deducts the money from the account monthly and does credit checks.
This is usually carried out before the loan disbursement.
It is advisable to run the full tenor of the loan to gain the full benefits of
the loan.
- Understand the terms and conditions
- Amount of credit
- Total amount payable
- Right to withdraw
- Request a statement of account
- interest for late payment
- servicing the loan
Why companies
use Loan Brokers
Many companies find it difficult getting loans for their
projects. This is mainly due to certain conditions attached to loan approval
and servicing.
To get a loan the financial institution providing the
loan would conduct a credit check. They also require collateral, guarantors and
other conditions.
Meeting theses conditions could be challenging and many
companies are not appropriated loan facilities. This is where a commercial loan
brokerage company comes into the picture.
Commercial
loan Brokerage Company
A commercial loan brokerage company arranges loans and
funding for companies. Brokers are the intermediaries between loan provider and
businesses.
They find lenders through their network or through active
searches. They receive a small percentage of the amount as payment for their
services. Loan brokerage companies are private establishment and earn
significant amounts from brokerage deals.
Learn
the Trade
You need to have a deep understanding of loans and
financial instruments. Other knowledge involves proper bookkeeping, accounting
and banking knowledge.
You should decipher your client’s financial needs and the
company’s financial health. You can learn the trade by attending a finance
institution, seminars, or workshops.
Increase your knowledge through books, tutorials, online
courses. You could try an apprentice program, work in a brokerage firm or find
a mentor.
Another way is to work in a financial institution that
facilitates loans. Join a commercial loan brokerage firm or banking
institution.
Broker
Services
Brokers represent clients based on their investment
needs. They act as strategic advisers and consultants to provide market
knowledge to achieve the client’s objective. They work closely with financial
institutions and take advantage of referral deals with partner organizations.
Commercial
Brokerage Service
- Strategic advisers
- Middlemen
- Consultancy services
- Provide market knowledge
- Supply leads
- Take advantage of referral deals
- Partner organizations.
How
to Get a Business Loan
Financial institutions look for specific documents before
accepting a loan request. Common criteria are credit score, debit income ratio
and established companies.
Lenders prefer businesses older than two years in
operation. They also estimate industrial risks and examine cash flow and
margins.
They evaluate the business plan and reason for loan
application. The borrower needs to draft a letter of intent explaining the
purpose for the loan.
Documentation needed to process a loan is the company’s
financial information, balance sheet, lease, article of incorporation and tax
identification number.
The company seeking the loan also needs to provide
collateral. They should include savings account history, equity and business
plan.
- Credit score
- Debit income ratio
- The Prefer old established company’s
- Estimate industrial risks
- Examine cash flow and margins
- They evaluate the reason for application
- Study the company’s financial information
- Balance sheet
- Lease
- Article of incorporation
- Tax identification number
- Savings account history
- Equity and business plan.
How to
Use a Broker’s Service
To get started the company seeking loans need to approach
a brokerage firm and fill the broker form. They need to conform to broker’s
agreement before accessing their services.
The brokerage company assesses the company’s needs and
sends leads to the company. They broker provides weekly updates on status of
deals.
Choose
a Niche
There are different markets in which a loan broker can
operate. We have the mortgage brokers who facilitate mortgage loans and loan
Note brokers.
Mortgage
Lenders
There are different types of mortgage lends that provide
financing or home loans. Common types are wholesale lenders, correspondent
lenders and retail lenders.
Others include mortgage brokers, hard money lenders, direct
lenders and portfolio lenders. Commercial
brokers work closely with many mortgage lenders to achieve the best rate and
terms.
The lenders sometimes discounts the loans facilitated
through partner brokers.
Commercial
Loan Broker Compensation
A commercial broker should associate with a credit
partner. Find a commercial credit firm that supports partnership that offers
flexibility and good commissions.
They should offer fast transactions, good commissions and
close deals. Some commercial loan brokers offer 12% commission for life of the
loan transaction.
They pay $100 referral fee paid monthly on qualified
leads. Others offer incentives, bonuses and direct payments monthly on all
commissions.
If you run a commercial brokerage company you need
structure your commissions. Commissions are only possible when a lender accepts
a loan proposal.
The percentage value of the commission could be between
1-10 percent. The broker also earns through application fees ranging from
$1000-$2000.
The commission is paid either from the lenders side or
borrower. You need to clearly state in you contractual agreement the terms and
conditions.
Licenses
Some states do not require a license to operate as a loan
broker. However you need proper networking and knowledge of the industry.
You could join an association and do some examinations.
Find out from your local authorities about any licensing or certification.
If you run Brokerage Company incorporate the business as
a limited liability company. You also need to have a tax identification number.
Draft
an Agreement
To operate a brokerage firm you need to draft an
agreement. The agreement is a binding contract between the borrower and your
company.
The agreement should have terms of service and commission
structure. You could hire an attorney to draft a comprehensive agreement.
How to
start a Commercial Brokerage Company
- Learn the trade
- Incorporate the business
- Build your network
- Draft an agreement
- Ensure proper documentation
- Obtain licenses and permits
- Market your services
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