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WHERE
DO YOU FIT IN THE MONEY PUZZLE
Before
your approach to the money sources you must ask yourself the question;
Where do I fit in the money puzzle?
Find your place and you will solve a most basic and fundamental
question. How do you find
that place?
Following
are some basic categories of borrower profiles that will help you find
your place:
1. Personal Loan
2. Business Loan
3. Commercial Loan
At
the risk of oversimplification, we will assume that all loans somehow
fit into one of the above categories.
Where the confusion arises is the number of different loan
types within each of these categories. Lets review each of these categories separately:
Personal Loans
This
may be a small loan for $1,000 from a consumer loan company or bank.
It may be a $15,000.00 executive or professional signature
loan. It may be a first
or second mortgage loan on your home or to buy a home.
The amount may be $10,000 or $200,000.
It is still for your personal benefit.
You may buy furniture or an automobile that is financed on an
installment sales contract but it is still for your personal benefit.
No matter what type of loan you secure if it is for your
personal use and benefit it is a personal loan.
Business Loan
Many
lenders find it difficult to separate a small business loan from a
personal loan if the business is a sole proprietorship.
Some lenders cannot see past a corporation and insist upon
personal guarantees, in fact most will. This linking of personal
guarantee to business funds sometimes causes some confusion.
But if the funds are for start up, expansion or acquisition of
a mom and pop business or a multimillion-dollar corporation, it is
still a business loan if the funds are to be used for business
reasons.
Commercial Loan
Everything
from the big developer to the industrial borrower to the large venture
enterprise can come under this category.
Most of the definition of a "prime" rate of interest
originates here. The
large banks define a prime rate as the rate, which they charge their
prime commercial borrowers. Of
course most of these are corporations.
So it would be safe to say that the very large corporations,
industrial borrowers and large venture enterprises could claim the
title of a commercial borrower. Also
it is here where the real estate mortgage loans fit if the property is
not residential in use. Most
mortgage lenders will refer to one of two types of real estate loans,
either residential or commercial.
While
this is a generalization, the borrower can find the lender he needs
within these three categories. This
definition together with the description of loan types in part two of
this volume should lead you to the lending institution that makes your
type of loan.
At
this point you have only solved part of the puzzle-that being who the
lenders are for your type of loan and perhaps what type of loan you
are seeking. Next you
must categorize yourself in your own unique borrower profile.
That takes some self-evaluation, which includes a number of
factors. If you are going
after a personal loan you will have to evaluate the following about
yourself:
1. Credit History
2. Job and Income
Status
3. Debt Ratio to
Income
4. Length of time
in the community
5. Other
considerations (most for real estate mortgages)
If
you are going after a business loan or commercial loan, the list
lengthens considerably. In
addition to the above, add this to the list:
1.
Business operating history
2. Current Balance
sheets and financial statements
3. Ability to
service your total debt including this loan
4. Management
experience
5. Competition and
product demand
6. Marketing or
business feasibility study
7. Other
considerations (unique to the loan or business)
No
matter if your loan request is personal, business or commercial all of
the above will be like lining up ducks on a fence without any of them
flying on you. If you
have none flying on you then you are in command and demand.
If you have one or more ducks flying on you then you are not in
command. This means you
will likely not be the "A" borrower, which will get the best
term, rate or treatment at the "A" lending institutions.
So you likely will have to find a "B" lending
institution and consider yourself a "B" borrower.
If you have several ducks flying on you plan on finding a
private investor who will charge you a healthy fee and interest rate
for your funds. If you
have most of your ducks flying on you, then you need professional
help. This help can be
found in the ranks of a financial consultant or financial broker who
has seen it all and knows where to guide you.
You may be a candidate for the hard money industry.
Regardless
of how you fit, you will eventually have to find your place and
recognize that place and then market yourself accordingly.
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