Welcome to Get A Loan

Get A Loan is your go-to source for information on how to obtain a small business loan in these difficult economic times. Due to the economic downturn, over the last several years new businesses and small businesses have found it much more difficult to obtain funding from traditional banks. Instead, they’ve come to rely on non-traditional, or alternative, lenders.

Basic Terminology of Business Financing

If you’re going to be involved with financing for your small business, you absolutely must have an understanding of the terminology that will be bandied about as you meet with financial institutions — whether these lenders be traditional big banks or alternative funding sources such as private lenders.

Return on Equity: Companies that are generating profits more efficiently than others are obvious favorites. One number that can identify such companies is Return on Net Worth, which is known internationally as ‘Return on Equity’ (RoE). It is PAT as a percentage of total shareholders’ funds or net worth. ‘Equity’ in this case is net worth and is calculated by adding reserves to equity capital.

RoE shows how profitable the business is for shareholders and how efficiently the company is using the shareholders’ funds. RoE is an important driver of long-term value, subject to market moods and fancies. A rising RoE helps investors determine if a company is earning enough money on an incremental basis.

Return on Capital Employed: RoCE is calculated by dividing profit before tax and interest by capital employed. Capital employed is the total of all equity and preference capital, reserves and all debt. As opposed to RoE, which measures only the return on shareholders’ money, RoCE measures how the entire money invested in business is doing. RoCE is best compared to the cost of borrowing. If you’re a business owner and your financial indicators are weak, it may be a good time to consider selling your business. Small companies such as healthcare services and dental practices are often in demand by firms that buy businesseshr.

If the interest on fixed deposits is earning 11% whereas a company is earning just about 13% as RoCE, clearly it is not a great business for shareholders. RoCE is low for companies that are capital-intensive. For companies with insignificant debt, RoE and RoCE are the same. RoCE has little impact on stock prices by the time it is known and is used only in case of valuing companies during a takeover.

Return on Assets: This is a measure of how much the assets are producing for the company. RoA is simply net profits divided by total assets and reflects the efficiency in making its assets sweat. As in case of RoE and RoCE, the benchmark for RoA is interest rates or the cost of company’s capital. RoA also exposes whether the company has too much of debt, a fact that RoE may not be able to capture. RoA, like RoCE may be best used in valuing assets for buying and selling.

Merchant Account: A type of business bank account that allows a business to accept and process debit and credit card transactions. Merchant accounts are necessary accounts for many businesses, and are essential for online businesses. There are different types of merchant accounts to choose from for businesses. For instance, some merchant accounts are designed specifically to handle online sales.

As forbes.com points out, new, small businesses just starting out, should investigate credit card processors for high risk businesses — many traditional processors will not issue merchant accounts to new small businesses do to a greater risk of the new establishment failing.

Dividends: Regular dividends to shareholders gives them confidence that the company is in sound financial health. When dividends are increased, the message is that the company is prospering. This in turn stimulates greater enthusiasm for the stock. The payout ratio shows the percentage of net earnings being paid as dividends. It can range from zero at companies that pay no dividends to more than 100% when companies are earning lots of cash and cannot re-invest them.

Other Indicators: One key indicator of superior operational strength is how fast the company is turning over its inventories and receivables, which reflects the efficient use of capital. These can be measured by a specific ratio: number of days of average inventory or debtors. The first is arrived at by dividing the cost of goods sold by average inventory while the second is arrived at by dividing sales by average debtors. The average figure comes from adding the opening balance and closing balance of inventory/debtors and dividing it by 2.

The lower the number of days for which inventory and debtors are held, the better it is. Even better, if the number shows a falling trend, it means that the company is squeezing more and more out of debtors and stocks. If a company’s collection period is growing longer, it means that it has dumped its products on the market and is unable to recover the money now. These numbers really make sense when compared to other companies in the same sector.

Federal Financing Impacts The Housing Market

Federal financing guidelines have had considerable impact on the nation’s housing market and the character of its communities. Government actions, from the legal doctrines governing property transactions to investments in infrastructure that make private development possible, are essential to the efficient functioning of the economy.

Alternative Funding

Federal housing finance regulations, including direct subsidies, tax deductions and mortgage guarantees, play an enormous role in determining what type of housing gets built, where it is located and who can afford to live in it.

Virtually every home in America is reliant either directly or indirectly on some aspect of federal housing rules and funding. Forty-seven percent of homeowners receive a federal tax deduction on their mortgage. Thirteen percent of rental homes are directly subsidized. All of these fuel a large secondary mortgage market, allowing circulation of an exponentially larger amount of private capital reinvested in housing construction, but almost entirely for single-use residential homes.

The definitions and framework of federal regulations affect home prices and rents even for homeowners or renters who don’t directly benefit from tax deductions, subsidies or other elements of the federal housing programs. America’s current suburban landscape has been developed through a perfect storm of socioeconomic trends and intentional policies. Postwar preferences for single-family homes were reinforced by cheap energy and land that made single-family developments in open space less costly than infill development.

The creation and maintenance of interstate highways made autocentric, low-density suburbs accessible, and HUD and FHA programs and the mortgage interest tax deduction subsidized, and continues to support, the purchase of single-family homes at a massive scale. Middle- and upper-class baby boomers flocked to the suburbs, reaping the benefits of these programs.

Small Business Loans

Many low-income populations, especially of color, were barred from moving to the suburbs due to discriminatory regulations such as exclusionary zoning and redlining. As wealthier residents moved out of cities, poverty was further concentrated in urban centers. The primary housing programs simply were not designed to maintain older, mixed-use areas.

Because of the difficulties in securing loans in this depressed economy many people have turned to alternative funding sources. When the traditional big banks won’t come through, people, and small businesses, turn to private lenders who have lower requirements to secure a loan.

Federal housing programs through HUD, FHA, and the federally-sanctioned Fannie Mae and Freddie Mac programs continue to favor single-family home ownership. Since 1934, FHA and HUD have insured mortgages for 34 million homes, of which only 7.4 million were in multifamily buildings. These programs have, perhaps unintentionally, given disproportionate financial support to single family homes in mono-use suburbs, while discouraging development in mixed use, urban areas and suburban downtowns. This Wall Street Journal article sums up the current state of small business financing.

The lion’s share of federal loans and guarantees also support single-family home ownership. As shown in Chart 1, of the $1.363 trillion in loans and loan guarantees issued by the federal government between 2007 and 2011, 81 percent went toward single-family loan programs, while only 8 percent of these funds were used for multifamily loan programs. These figures do not include loans made by Freddie Mae and Freddie Mac, which further support the production and ownership of single-family homes.

Infiniti Funding
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 2 reviews
 by Steven S.

It's fairly depressing to get turned down by bank after bank for a small business loan. I ended up going with a private lender (Infiniti Funding), and it worked out nicely. It seems like alternate lenders are about the only option if you're starting a small business and your credit/finances aren't perfect (mine weren't).

 by Charles

I've used the services of Infiniti Funding in Atlanta for my small business. Got a hard money loan with good terms. Regular banks wanted no part of dealing with me - my business was too new, too small.