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Traditional vs Non-Traditional Business Loans
A list of the types of Loans available for a Business to get approved on through Traditional and Non-Traditional lenders are listed here: What Small Business Loan is Right for You?
There are different types of loans available in the world of finance, and creativity is key in designing the right plan to fund a business model.
Each type of loan has its own underwriting guidelines that are determined by that Lender's standard policies on how they approve their loan applications including the loan amount, the interest rates, the time frame, and also the repayment method.

Again, creativity is key for any business owner to understand the power of leveraging their business in order to expand their income.

A list of the types of Loans available for a Business to get approved on through Traditional and Non-Traditional lenders are listed here: What Small Business Loan is Right for You?

Traditional Lenders can include bigger banks like your standard S&Ls ranging from JP Morgan Chase, Bank of America, CITI Group, Wells Fargo, Goldman Sachs Group, Morgan Stanley etc.…

Non-traditional Lenders have a much broader network of lending platforms with business models that differ from traditional banks and credit unions. This makes it possible for Non-Traditional lending methods to offer more tailored business solutions to fund a small business loan that may otherwise not qualify under Traditional bank underwriting guidelines.

The amount approved for a business loan is based on the amount the lender agrees that the business can afford to repay back. This entails the lender to have some form of measurement that shows how the borrower can justifiably take on the risk of borrowing a set amount from the lender and repaying that amount plus any given interest whether through a Term Loan or even through a Line of Credit.
 

TRADITIONAL LENDING

Traditional bank loans are more restrictive in their underwriting guidelines, meaning they want to see more in-depth analysis of the borrower's financial profile.

For Amounts under $100,000, most bigger banks and lenders follow these underwriting guidelines to approve a Term Loan or Line of Credit application:
 
  • 2 years personal and business tax returns
    • At least 1 year showing profit
  • 6 months of Bank Statements
  • Profit and Loss Statements
  • Balance Sheets
  • Personal Financial Statement
  • Personal FICO Credit Scores
  • Debt to Income Ratio

The same Traditional Loan standards can be applied for amounts higher than $100,000 including a minimum percentage amount of cash to invest into the loan from the borrower's own bank account.

Under Traditional Bank Loan approvals, most big banks will allow for roughly 10% of the gross yearly revenue to be given as a Term Loan and also a Line of Credit that the business can expect to borrow.
 
NON-TRADITIONAL LENDING
Non-Traditional bank lending techniques have allowed for less restrictions in place to approve a business loan. This can be applied for Term Loans and also Lines of Credit. Most loans can become approved through the following:
 
  • Personal FICO Credit Scores ranging from Okay to Excellent.
  • Utilization and Available Credit Balances
  • Debt to Income Ratio
  • Years in Business
  • Projected Revenue and Income
In general, a business can leverage itself from the following C's of Non-Traditional Lending:

1. Cash Capacity to repay the loan back (how much money one has in the bank to show capability of repaying)

2. Credit or Character of the borrower (Personal FICO Credit scores showing payment history, available credit space, and credit history to measure the character of the borrower)

3. Collateral or property type (Any available equity in a collateral or asset that can be leveraged for a loan and, if needed, liquidated to repay the loan in case of a default)
 
In conclusion, with the right business loan and business plan, a business can leverage its resources for their business plans to take flight and create the projected revenue for the business model to reach its long term financial goals.
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