While owning a business offers rewards, the job is not
easy. Entrepreneurship has its problems, and a
critical—and sometimes fatal—one for small businesses
can be the lack of access to the financial resources to
keep the dream going.
USExpress serves business owners or entrepreneurs who
are seeking outside financing to use for working
capital, machinery and equipment, acquisition of real
estate and expansion.
USExpress also brings potential borrowers into a
common trading area where lenders—banks, local
development corporations, business investment groups and
other financing sources compete on the loan
The first and most common reason why businesses
borrow is to purchase assets. A loan to acquire
assets could be for buying short-term, or current,
assets—such as inventory—and would be repaid once the
new inventory is converted into cash as it is sold to
customers. Or the funds could be for the addition of
long-term, or fixed, assets, such as equipment.
The second reason is to replace other types of
credit. For example, if your business is already up
and running, it may be time to take out a bank loan to
repay any borrowed money. Or you may wish to use the
funds to pay suppliers more promptly to get a discount
on the price of the merchandise.
The third reason is to replace equity. If you
wish to buy a partner's share in your business but you
don't have the cash to do it, you may consider
Common Loan Features
Loans are long term or short term.
Interest rates vary depending on the term, type, size
and risk of the loan.
Repayment may be a lump sum or on a monthly or quarterly
Payments may be delayed until the funds help your
business generate cash flow.
The loan may be committed, meaning the bank agrees to
lend to you under certain terms as you need funds
without requiring you to re-apply each time.
Some loans require that you maintain compensating
balance levels in a deposit account.
Loan Agreements/Common Loan Restrictions
Be aware that a lender will expect you to agree to
certain performance standards and restrictions in order
to ensure that your business can repay the loan. These
restrictions, known as covenants, representations and
warranties, commonly include the following.
Maintenance of accurate records and financial
Limits on total debt.
Restrictions on dividends or other payments to owners
Restrictions on additional capital expenditures.
Restrictions on sale of fixed assets.
Performance standards on financial ratios.
Current tax and insurance payments.
To new or expanding companies and the lenders who
want their financing business, USExpress provides the
means to get together.
to creditors for goods and services on an open account.
from customers for merchandise or services purchased on
an open account.
owned by a business or individual that has commercial or
statement that presents a "snapshot" of what the
business owns, what it owes, and what equity it has on a
to the business less the outgoing cash during a given
period. Also used to refer to the figure derived from
net income plus noncash items charged off in the accrual
pledged to secure a loan.
Collection period ratio
quickly your customers pay you. Average accounts
receivable divided by net sales, multiplied by 365.
Community Reinvestment Act (CRA)
provisions of the Community Reinvestment Act of 1977,
banks and thrift institutions seek opportunities to help
meet the credit needs of their local communities,
including low -- and moderate -- income neighborhoods,
consistent with safe and sound operation of the
Money a bank
requires a company to leave in a deposit account as part
of a loan agreement.
Corporate Visa Expense Cards
Visa Expense cards are held under the name of the
business for use by employees. A company should ensure
that all authorized cardholders have a clean credit
history. Typically, established companies have unsecured
Visa cards where the assets of the company and personal
net worth of the owners are pledged as security. Start
up companies and companies with minimal assets should
expect to secure the Visa cards through hard security
such as cash.
business ownership that is a legal entity on its own and
puts stockholders and the board of directors in control.
Owners have limited liability for the corporation's
actions. A corporation has unlimited life and in most
cases is taxed as an entity on its own.
representing the cost of buying raw materials and
producing finished goods.
Cash or other
assets you expect to use in the operation of the firm
within one year.
expect to pay within one year.
firm's ability to pay its current obligations from
current assets. Current assets divided by current
purchases in accounts payable ratio
quickly you pay your suppliers for inventory purchases.
Average accounts payable divided by the cost of goods
sold plus change in inventory, multiplied by 365.
sell inventory ratio
firm's efficiency at matching purchases to expected
sales. Average inventory divided by the cost of goods
sold, multiplied by 365.
firm's debt level, or leverage. Total liabilities
divided by total liabilities plus capital.
of the cost of a fixed asset, such as plant and
equipment, over several years, or the "depreciable
of earnings to shareholders.
Credit Opportunity Act (Federal Reserve Regulation B)
lenders from denying your application on the basis of
race, color, religion, national origin, sex, marital
status, or age, or from discouraging you from applying,
or giving you less favorable terms than any other
applicant, on such a basis. Regulation B also contains
specific rules governing credit transactions.
interest in a business remaining after its liabilities
are deducted. Also known as common stock plus retained
earnings, or capital.
nonrecurring event that must be explained to
shareholders or investors, such as a manufacturer's sale
of a building.
of commercial banks in providing credit to households
and firms. Unlike banks, they do not accept deposits.
the future financial performance of a firm.
record of the financial status of an individual or
organization. Commonly include profit and loss, or
income, statement; the balance sheet, which includes a
statement of the company's retained earnings; and the
cash flow statement.
assets such as buildings, equipment, or property that
are not expected to be converted to cash in the near
revenues of the firm before consideration of its
operating expenses. Net sales less cost of goods sold.
firm's profitability. Gross profits divided by net
less cost of goods sold. Installment loan: Loan type
that is paid in periodic payments, such as an automobile
Value of a
firm's raw materials, work in process, supplies used in
operations, and finished goods.
who takes an ownership position in a company, thus
assuming risk of loss in exchange for anticipated
requirements for a lease are similar to a term loan as
the risks to a financial institution as identical. There
can be tax benefits applied to leasing. Leased goods are
generally owned by the financial institution or a 3rd
party. The amortization period should closely match the
useful life of the asset purchased (a lease for
computers should have an amortization period of not more
than 3 years). The value placed on an asset varies
depending on resale value and the type of asset leased.
firm's use of borrowed funds versus those funds provided
by the shareholders or owners (equity).
a contract, a bank's promise to lend to a specific
borrower up to a pre-agreed amount during a specific
time frame. Usually reviewed annually and subject to
cancellation without notice.
that can be readily turned into cash.
ability to quickly turn assets into cash.
that are easily sold.
risk applies to unsigned Visa drafts such as taking
orders through the Internet or telephone. Risks occur to
financial institutions due to fraud. Shop around, many
Banks do not require security for Merchant Visa and many
E-Commerce Internet sites have online applications for
This is a
term loan secured by a building on a piece of land. The
maximum amortization period varies greatly between Banks
- from 10 to 30 years. Your business must still meet
standard lending criteria such as debt serviceability.
In general, a business mortgage is more complicated and
more expensive than your personal mortgage; many Banks
will require you to pay for a full property appraisal,
environmental audit, and legal fees in additional to
regular Bank fees.
remaining after all expenses have been met or deducted.
Also called profit.
minus returns and allowances.
assets over debt.
specialty in which a firm has gained a large market
associated with the day-to-day activities of the
loans are also called working capital loans, Line of
Cedit over or overdraft protection. They are loans that
fluctuates with the day-to-day cash flow needs of a
business. The maximum amount you may borrow for an
operating line is primarily based on accounts
receivable. Cash businesses such as restaurants and
retail stores generally do not qualify for an operating
line. Inventory is not generally financed (but
exceptions are made frequently).
Operating profit (loss)
loss before taxes and extraordinary items resulting from
transactions other than those in the normal course of
Operating profit margin
firm's profitability by examining the pre-tax profit
generated from primary operations (versus extraordinary
items) in relation to net sales. Operating profit
divided by net sales.
general or limited, but in either case the general
partners are in control. The tax burden is shared by all
the partners at their personal rate, and the general
partners have unlimited liability. Limited partners have
unpaid balance of a loan, not including interest owed.
Also can refer to a primary owner or investor.
an entrepreneur receives for the assumption of risk in a
business venture. Also called net income.
and loss statement
the revenues, costs, and expenses for a business over a
period of time. Also called the income statement.
forma financial statements
statements for a business where certain amounts shown
are hypothetical, or estimated, for the period depicted.
ratio that focuses on the firm's most liquid assets by
excluding inventory. Also known as the acid test ratio.
Cash, marketable securities, and accounts receivable
divided by current liabilities.
kept to accumulate in a business after dividends are
A loan made
for the purpose of meeting predictable and periodic
funding needs, such as funding of camping gear inventory
before summer purchases.
Business Administration (SBA)
agency created in 1953 to provide management and
financial assistance to small businesses. Mainly, the
SBA guarantees loans through financial institutions. The
loans may be used for working capital, machinery and
equipment acquisition of real estate, and expansion.
This is a loan where the Government partially guarantees
repayment to the Bank. SBA loans are used when the
business is slightly outside a Bank's standard lending
criteria. A business must qualify for financing through
a bank (using regular banking guidelines) and gain
further approval from the SBA prior receiving any money.
SBA's 7(a): Used to assist
most types of small business loans up to $1 million
including: equipment, real estate, working capital or
purchasing existing businesses. In most cases the SBA
will guarantee no greater than 75% of loan value and a
maximum amortization of 6 years. SBA loans are targeted
at existing and growing businesses; it is difficult to
finance a start up business through this product.
SBA's MicroLoan: Targeted at
very small and start up companies to purchase computers,
equipment and materials required to launch a business.
You may borrow up to $25,000 for up to 6 years. Interest
rates do not exceed prime plus 4%.
SBA's 504: Used to purchase
real estate for businesses that are likely to increase
the level of employment at the company. The guarantee
value may be as high as 90% of the appraised value of
Loan: Some large, national Banks are able to approve
loans up to $100,000 without consulting the SBA. The SBA
may guarantee up to 50% of the loan value.
Loans (Canada) renamed CSBFL
These loans are similar to SBA loans in the United States
where the Government provides a guarantee. Maximum loan
value is $250,000 where the chartered Bank's approve the
loan without consulting a Government agency. These loans
are targeted to both existing and start up businesses.
While the program is more
flexible on paper we notice the following guidelines.
Uses of funds: To purchase
computers, equipment or renovations (cannot finance
Repayment: Maximum 5 years
(3 years for computers)
Personal guarantee signed by
the owners: 25% of the loan value
Percentage of assets
financed: Up to 90% of the asset value depending on the
type of asset being purchased and strength of the
business. It is rare for a restaurant to receive
financing greater than 50% of the asset value.
upfront fee to the Government, legal fees, and interest
rates cannot exceed prime plus 3%.
A type of
business where the owner has full control and unlimited
liability. A sole proprietorship is taxed at the
personal income tax rate.
term loan is a loan that has monthly principal and
interest payments. The outstanding principal amount
decreases each month. Generally, term loans are
established to assist in financing long term assets such
as computers or equipment. The amortization period
should closely match the useful life of the asset
purchased (a term loan for computers should have an
amortization period of not more than 3 years). Most term
loans have an amortization period of 5 years or less
(but there are exceptions).