Top 3 ways to get Bank, Fintech, and Mortgage loans
There are two kinds of loans, business and personal. So loans as a small business owner are not the same. Therefore as an employee, you get bank preference because for some strange reason employees are considered less of a risk. Small business owners are considered to have more risk. So I say this makes no sense especially on this day of the COVID where job security doesn’t exist anymore.
Rules of the game
I will show you how to play the game on your terms as a small business owner. First, we must understand what a Fintech is when it comes to loans because there are many Fintech or financial technology companies. A Fintech is a company that uses technology to give you free information related to many different categories like credit, www.creditkarma.com, or loans like www.paypalcapital.com. There are literally hundreds of these Fintechs out there published by Forbes magazine as the Fintech 50. https://www.forbes.com/fintech/2020/
Big Bank Lending
My largest banks like Wells Fargo and Bank of America, the SBA, small business administration through government loans, and Fintech companies like Paypal and Cancapital www.cancapital.com. Each has their Pro and cons since loaning money from the government through a bank usually will give you the best terms, 30 years at 3.5%. So if you want speed of delivery on your loan then the only way is through Fintech like Paypal Capital. Because you will get your approval and money in about 1 minute tops.
Now, this comes with a higher price of around 8% to 10%. So two years on the payback and that’s for a business that already produces income. This because Paypal can see you actually have a way to pay this loan off. The bank on the other hand uses your credit to guarantee your loan. Fintechs do not. Wells Fargo is more flexible because the government guarantees their loans. approval.
Lines of Credit
Bank lines of credit or credit cards will also give you the lowest rate compared to Fintech companies. The amount the bank will lend you for your business or personal is a fraction of what you actually have in the bank. So if you have $250,000 in cash in the lending bank, will start you out with maybe a $15,000 credit line.
Why is that? Because the bank wants you to know how difficult it is to get a loan. So even if you have 10X more in their bank, you still only get 1/10th in the form of a loan. I know it makes no sense which is why banks are losing out to Fintech companies. Therefore Fintech business is now a10 billion dollars a year. Therefore bank loan business is losing out daily to Fintechs. As a side note, FICO score in excess of 750 www.myfico.com .get the best rates
Mortgage loans for small business owners, on the other hand, are really tough. Jumbo and nonconventional loans are the hardest to get. I have secured both conventional and jumbo loans by using a mortgage broker/banker that specializes in bank statement loans.
Bank Statement Loans
The reason for using bank statement loans is because small business owners often don’t show big incomes. Therefore they keep their tax liability down to nothing. So If this is the case, then going with the bank statement loan is the best way to secure the loan. The problem is your rate will be much higher. Sometimes 2%, (there is no PMI insurance https://www.investopedia.com/mortgage/insurance/). So you can always refinance at a lower rate once you’ve secured the loan and bought the property.
You will need 2 years of tax returns if you decide to go with a conventional bank. So lower the Re-financing rate, which I have done and will need to bite the bullet, take the income on your tax return and pay the heavier taxes. The savings you will get from refinancing using tax returns will pay for itself in one year by lowering your interest rate. The largest and toughest mortgage lender to get approved with is Wells Fargo or you can use Quicken Loans which will get you the best deal with the best lender.
So these are the 3 ways to get loan money from banks, Fintech, and mortgage. The small business owner is at an advantage now because the competition to sell you a loan will only drive the cost of the loan down as more Fintech companies and banks compete for your business.