Small Business Loans

1
Small Business Loans

• We Deserve the Money, See our Business Plan!

2
Citizens BankPrimary Lending Services
http//www.citizensbank.com/small-business/default
.aspx

• Small Business Mortgages
• You will own your property, not rent
• Terms of Loan
• Amount_________
• Between 100,000 and 500,000
• Interest Rate (APR) ____
• Between 4.29 and 8.03
• Length of Loan_____

• 2. Line of Credit
• Liquidity to acquire short-term assets and
  prepare for long-term success.
• Terms of Loan
• Amount__________
• Between 100,000 and 500,000
• Interest Rate (APR) ____
• Between 4.29 and 8.03
• Length of Loan_____

3
Understanding the Terms of a Business Loan

1. Higher the APR, the more you pay for the money
   you are borrowing
2. Longer the loan, the more you pay for the money
   you are borrowing
3. Excellent credit score lower APR
4. Poor credit score higher APR
5. You pose a greater RISK to the bank

4
What is Credit?

• derived from the Latin word credo meaning I
  believe.
• Credit is when goods, services, or money is
  received in exchange for a promise to pay a
  definite sum of money at a future date.

5
Lender and Borrowers

• A lender is the person or organization who has
  the resources to provide the individual with a
  loan.
• The lender trusts the borrower to repay the
  money.
• banks, mortgage companies, car manufacturers
• A borrower is the person or organization that is
  receiving the money from the lender
• When the privilege of borrowing has been
  extended, the borrower is usually expected to pay
  interest or some fees, such as processing.

6
Credit Worthiness

• When a lender is considering granting credit to
  the borrower, he/she needs to believe the
  prospective borrower has both the
• willingness and ability to pay the money back.
• When a person applies for credit, there are 5 Cs
  of credit.
• When evaluating an individuals credit rating,
  lenders look at a persons character, capital,
  capacity, collateral, and conditions.

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• CREDIT WORTHINESS IS DETERMINED BY ANALYZING YOUR
  5 Cs

8
The 5
S

• Character is a persons honesty and reliability
  determined by their history of repaying bills on
  time.
• Capital is an evaluation of a persons net worth.
• Capacity is the income a person has available to
  repay the loan determined by job longevity and
  having few other loans.
• Collateral is property and assets which can be
  seized if a person does not repay the loan.
• Conditions refer to the general state of the
  economy.
• If an individual has these qualities, he/she is
  more likely to be perceived as having the ability
  and willingness to pay back a loan and will be
  granted one by a lender.

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Loan Calculator

• http//www.bankrate.com/calculators/business/busin
  ess-calculator.aspx
• Complete these scenarios
• Person 1
• Loan 250,000
• APR 5.03
• 15 years
• Monthly Payment _______________
• Total cost of loan __________ (payment
  12)15
• Person 2
• Loan 250,000
• APR 8.03
• 15 years
• Monthly Payment _______________
• Total cost of loan __________ (payment
  12)15
• Person 3
• Loan 250,000
• APR 8.03
• 30 years
• Monthly Payment _______________

10
Part 11 Write a Memo to a Citizens Bank Loan
Officer 20 pts

• Find a Commercial Property to Buy in your desired
  business location
• http//www.homes.com/Real_Estate/Counties/PA/Type-
  COMMERCIAL/stay
• Find a Commercial Property for Sale!
• Borrow the full amount of property
• But see how 3 different interest rates (APRs)
  will greatly affect your Monthly Loan payment and
  overall loan amount

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The Assignment

• Download the Memo template from Chapter 19 on
  website
• Find a property no more than 600,000
• Here are the interest rates (APRs) assigned to 3
  different credit scores
• Person with Excellent credit 4.03
• Person with Average credit 6.15
• Person with Poor credit 9.35
• Calculate the different loan terms using this
  financial calculator
• http//www.bankrate.com/calculators/business/busin
  ess-calculator.aspx