It’s So Easy to Get Loans for Doctors

Doctors, by all accounts, have to pass through a huge number of tests and certifications before they can actually be licensed to practice. They have to spend 4 years in a good college, and then pass a test to go continue their studies. Then they have to spend another 4 years of medical school, after which they need to pass the medical board. Then they specialize.

But at least this profession has its rewards, and we’re not just talking about the satisfaction of helping people get better. We’re talking about ample compensation, and easy ways of borrowing money for whatever reason.

Benefits of Special Loans for Doctors

Here are some of the advantages doctors get when they’re trying to get a personal home mortgage loan:

  • The process is expedited. This is quite an improvement over the usual glacial loan process with banks.
  • Approval is almost automatic. Even recent medical graduates can get these special loans for doctors, despite the high level of student-loan debt.
  • Loans with no down payments are common. This is very hard to find these days, but it’s not a problem with doctors. For new doctors, loans for up to $500,000 may have no down payment requirements. A $1 million loan may require only 5% in down payment.

With just a year of post-residency, there may be no down payment for a loan of up to $650,000 and only a 15% down payment on $1.5 million.

  • There’s no private mortgage insurance. This is the insurance that a borrower pays to protect the lender in case of default. But doctors don’t need to get mortgage insurance, which lowers the cost of the loan considerably.

Why It’s Easy to Get Loans for Doctors

Haven’t you heard that rich people who don’t really need money are the people that banks love to lend money to? In the case of doctors, that’s absolutely true. Banks lend money to people who are able to pay their debts, and doctors fit that description well.

According to the Bureau of Labor Statistics, in 2012 primary care physicians get a median annual compensation of $220,942. Those who practice medical specialties receive a median annual compensation of $396,233. Those who specialize in anesthesiology received a median annual compensation of $431,977.

Now when you consider that physicians and surgeons as a group has one of the lowest unemployment rate among all jobs at only 0.8%, you begin to understand why banks feel safe lending to doctors.

There’s another bonus for banks too. They can require doctors to open other accounts with the bank as well. So when the doctor borrows money for their medical practice and for their home mortgage, they put their medical practice’s money in the bank, and they put their own personal finances there too. And when a new doctor is looking for a bank recommendation, the doctor who got the loan from the bank can recommend that bank to him.

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Important Details about Purchase Order Finance Lenders

The general description of Purchase Order Finance is easy enough to understand. Let’s say you have a customer with a purchase order for $100,000 worth of items. The problem is that you don’t have the capital to pay suppliers for the materials needed to make those items. This is where purchase order finance lenders come in.

They verify the authenticity of the purchase order and check that the customer can pay for the merchandise. They investigate the capabilities of your supplier, and they check your capabilities as well.

If everything’s good, they then approve your request for purchase order financing. Your suppliers get paid, your customer gets their order, and you and the lender get the payment from the customer. The lender gets their cut, while you still enjoy a nice profit.

But the general description doesn’t’ touch on the specifics and some of the details are truly important. When you have your discussions with PO finance lenders, here are some details you need to find out:

  1. How do the lenders pay your suppliers? PO finance lenders don’t actually give you the money directly. Instead, they pay the suppliers on your behalf. This is usually done through letters of credit.

A letter of credit is a document issued by a bank, which guarantees a payment if specific conditions are met. For example, the supplier gets paid if they actually deliver $100,000 worth of items according to a specified delivery schedule. The letter of credit is given before the delivery, and once the delivery is done then the suppliers get their money.

This is a very safe method of payment for your lender, which is why when foreign suppliers are involved this is the payment method usually used.

But the problem is that some of your local suppliers may not be quite at ease with letters of credit. That’s because they can easily lead to complications, such as disagreements as to whether certain conditions are actually met. From the point of view of your supplier, they may send your supplies and they may not actually get their payment.

So ask your lender if they can also do wire transfers or even make cash payments. If they don’t, this can really limit the available suppliers you can use.

  1. What about prepayments? Many suppliers guard against not getting any money at all by requiring a deposit before they work on a given order. But some finance companies refuse to make a deposit. That means you need to ask if your lender can accommodate these requirements, should your suppliers ask for a deposit.
  2. Can they deal with guaranteed payment clauses? This is when your customer includes in your sales contract a guarantee that if they only sell X number of items, then they can return the unsold items to you and get a full refund for them (it’s considered a consignment).

You may negotiate better terms for these clauses, but it will help a lot if the PO finance lender has some experience with this kind of arrangement.

Working with purchase order finance lenders means you have to know all the details especially the ones we’ve mentioned above. They’re not as unimportant as you think.

 

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Loans for Doctors: Choosing the Right Lender

When it comes to borrowing money, doctors have it easy. This is true when they’re trying to get a home mortgage loan, or if they use the money for             their medical practice.

But the problem is that doctors aren’t really business-minded for the most part. That means they don’t often know how to choose the best banks that offer the right finance tools with the most suitable terms. This is understandable, but that doesn’t make it right.

So if you’re a doctor, here are a couple of basic rules to remember:

Shop Around

If there’s one rule that doctors need to know about, it’s this: don’t just go to your personal bank or the nearest bank and apply for a loan. You have to talk to more banks. You have to shop around and interview banks. This may be a strange idea for you, but you have to accept the necessity of it.

It’s a bit like interviewing a partner for your medical practice, and in a sense this is actually an accurate description. The bank will really want to be your partner. They want you to borrow from them for your medical practice, they want you to use their bank to finance your company and for your personal needs, and they want you to get a mortgage from them. And when other doctors ask you for bank recommendations, they of course want you to mention their company.

So how do you choose a bank? First, of course you should try to see which ones offer the best terms. But you should also make sure that they have ample experience in lending money to doctors so that they’re already familiar with your industry.

And if you want to take out a loan that’s SBA-guaranteed, the bank should also be familiar in dealing with the complications brought by SBA lending.

Choose the Right Type of Loans for Doctors

Too many doctors seem to think that a line of credit—or a credit card—is the right type of finance tool for just about anything. But that’s not exactly true.

For example, a line of credit may not be the best tool when you’re paying for medical equipment. Perhaps you can pay for the equipment through an installment agreement. You may even ask if it’s possible to just lease the equipment.

The rule of thumb for medical practices is that a short term loan should be used for a short term need. Conversely, a long term loan that lasts for more than a year is better for your long term needs.

If you use a line of credit or a credit card for your business, you need to pay it off right away or else you will be slapped with finance charges and high interest rates. It’s a better idea to get a term loan that extends past the expected useful life of the equipment you want to get.

Borrowing money for your medical practice can really help you out. But if you don’t even try to educate yourself financially, then you may not get the maximum benefits from your loan. The loan may even hurt your medical practice.

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Popular Misconceptions about Purchase Order Finance

Most people who own credit cards and pay mortgages are quite familiar with how loans work. You borrow money, and then you pay the lender each month for the principal amount and interest. It’s very straightforward. Sometimes you may have to put up collateral, and this is called a secure loan.

But for many businesses nowadays, traditional loans are no longer reliable as a source of funding. This has made alternative forms of financing such as purchase order finance very popular. Unfortunately, there are still a lot of misconceptions going around about it. So let’s take a closer look at these misconceptions and add some clarity to the discussion:

  • Purchase order financing is hard to get and takes too long. Just because traditional bank loans are actually time-consuming and hard to get does not mean non-traditional lenders do things in the same way.

Another reason for this misconception is that lenders are not interested in your company’s stability and your ability to pay the loan. Instead, they’re interested in the customer’s (the one who’s making a purchase using a PO) stability and ability to pay the purchase order. The lender is also interested in the capabilities of your suppliers, and of course your ability to fulfill the order is looked into as well.

Although that seems like a lot of investigative work, the truth of the matter is that it only takes two weeks or so before a lender can grant or deny your request. That’s in stark contrast to how banks work, which can take months.

  • Purchase order financing comes with inordinately high interest rates. Admittedly, the cost of this type of financing is more expensive than what traditional bank loans charge. But the fees are always low enough that you will still gain a nice profit when you fulfill the purchase order.

The interest rate may be more similar to credit cards or to the interest rates charged by banks to high risk borrowers. That may be high, but at least you can fulfill the purchase order.

  • You need high value collateral. Now this is absolutely not true at all. In fact, it may seem as if the purchase order, after it has been verified, is enough to secure the loan. No other collateral is

necessary. It’s actually the absence of collateral which makes this type of financing so appealing to many companies.

  • Only shady or unstable companies make use of purchase order financing. The truth of the matter is that with banks so reluctant to lend money through traditional loans, a lot of perfectly reputable companies are availing this type of financing.

One recent example is Nate’s Food Co, which just got a $3 million purchase order financing in November 2014. And this company isn’t shady at all, as it is valued at more than $2.15 million.

So before you dismiss purchase order financing as an option, do your homework first. It may help you get the money you need to help keep your company afloat.

 

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How to Convince Lenders to Approve Construction Working Capital Loans

Despite the easing of the recession, banks are sometimes not amenable to granting loan applications. In fact, the approval rate for small business loans dropped from 20.6% in September 2014 to 20.4% in October.

In any case, what that means is almost 80% of small business loan applications are rejected.

So what should you do? There’s always the option of alternative financing, of course. But if you’re determined to get a loan from a bank, what you need to do to increase your chances of approval is to be prepared.

Prepare the Minimum Requirements Beforehand

Different lenders have different requirements, but it will help your cause if you already have the following paperwork with you when you ask for a construction working capital loan:

  • A summary on how you plan to use the loan and the impact to the income statement
  • Your tax returns or year-end financials prepared by your accountant
  • Your current year to date financial statement

These three steps are paramount. You can’t hope to boost your chances if you don’t even have this ready right away.

Furnish Additional Details

Now if you really want to go all out and impress the bank officials, you should offer the following info as well:

  • Account analysis bank statements for the last two months, which includes the deposit history
  • Any details of any business succession plan
  • Personal financial statements on all the important owners (more than 20% ownership) of your construction company
  • A summary of the ownership percentages
  • An organizational chart of your company, along a short bio of the top echelon leadership
  • An internally generated current financial, along with a comparison with the previous year to date financial statement
  • Prior 4 year-end tax returns or financial statements prepared by your accountant
  • An expansion of the summary on loan use, with additional documents such as invoices, contracts, budgets, and other documentation

Answering the Crucial Questions

Before a bank gives final approval for a working capital loan, they really want to make sure that they will get their investment back. That’s the reason for all the paperwork. These documents give the bank a clearer idea of how likely it is that they’ll get their money back plus interest.

So the first question they will want answered is if you will have working capital in the near future (such as payments from late-paying clients or guaranteed contracts) to meet the payment schedule. It will make these bank officials feel better if you can assure and prove that you will have the money needed to pay your monthly obligations with them.

The next question is whether you have an additional source of funding. This is where collateral (such as your equipment) or your personal guarantees come in. If the money coming to the company won’t be enough to service the debt, then you better make sure that you have an ace up your sleeve.

Banks want to lower their risks, which is the primary reason for the paltry 20.4% small business loan approval rate. Make them feel secure in doing business with you, and you will get your construction working capital loan.

How to Find a Bank for Construction Working Capital Loans

For most people nowadays, finding something means going online and using Google to get the info they need. So if you are in need of construction working capital loans, you just enter that particular phrase and Google will give you pages of results which you can check out.

But while this method has its advantages—it’s certainly easy and convenient for you—it may not always be ideal. After all, quite a lot of the information on bank websites is designed to attract customers. The info may not always be complete, and the fine print may not be to your benefit.

So how should you find these banks instead? Here are some tips:

  • Ask your friends in the construction industry where they got their working capital loans. You’re probably not the first person in your network who needed an infusion of cash for their working capital.

Once you find these friends, inquire about their experience and satisfaction. What are the requirements? What type of loan can you get, how much money can you borrow, and what will it cost you? How well were your friends treated by the bank? Your friends will be much more honest about these things.

  • Check out online news reports about lenders offering these types of loans. For example, if your construction company is in Minnesota then you may be interested to know about the case of Bald Eagle Erectors. The owner, David Bice, was able to get a $200,000 working capital loan to tide them over until they were able to get a job working on the Minnesota Vikings stadium project. The company had about $1 million in receivable, but the client wasn’t paying them on time. So he had problems paying his crew until he got his loan.
  • Approach a bank that you already have a relationship with. Banks like to deal with people they already know, and if you know some bank officials on a first name basis, perhaps you can talk to them.
  • Don’t just go to one bank. Try to approach 2 or more banks. Just be honest and tell them that you are thinking of getting a working capital loan and that you’re also negotiating with other banks. Then note down the offers of the banks you talk to.

If you are the type of person or company that banks like to deal with, then the competition may spur them to offer more generous terms. You may be able to negotiate for lower interest rates. Even some requirements such as security or paperwork may be scaled back or waived.

  • Work with the SBA. The SBA and other similar eco-development groups are not just for companies who have poor credit and can’t get bank loans. These institutions can help you receive better terms for your loan too.

While getting a loan online is becoming much easier, sometimes you need personal negotiations and face-to-face meetings. Personally going to a bank can help you forge better relationships, and that bodes well for you should you ever need another loan in the future.

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What is Inventory Finance?

Retailers and wholesalers don’t always find it easy to get financing for their business. Banks are not always the most ideal lenders. And besides, their loan application process can be long, complicated, and ultimately futile.

Small business loan applications to large banks have dipped to an approval rating of just 20.4% in October 2014. Even smaller banks have become more recalcitrant in giving out loans, as the approval rating for loans has dropped to 50.3% in September 2014.

So it’s always great when several forms of alternative financing are available. One of these is inventory finance.

What’s Inventory Finance?

When you borrow money from a bank so that you can purchase inventory, it may be hard to secure a loan if you don’t have any notable security or asset to serve as collateral. With inventory finance, you don’t have to have these assets. The inventory you buy with the loan amount you will receive will serve as the collateral for the loan.

In some cases, you may already have the inventory in hand, and you use that inventory as collateral while you use the loan for another purpose. You may increase your inventory to meet an increase in demand, improve your delivery services, or hire more workers.

Types of Inventory Considered

Once you sell your inventory, you can then pay back your lender with the money you’ve received. The loan in other words acts like some sort of advance against the value of your inventory. If you are unable to sell your inventory, then the bank takes the inventory instead.

Of course, the bank will have a problem when this happens. If the inventory is not selling, then the bank may not get back its money.

Thus, there are conditions as to what kinds of inventory are approved for this type of financing. One possible condition is that the inventory should be very popular and easy to sell. The demand for the product must be high, so that the bank can be assured that the inventory will sell after all and the loan can be repaid.

Another possible condition is that the item should also have a steady clientele. For example, if your inventory is bought by the same people on a weekly basis, then financing may be possible. So if you’re the only gas station in a town where there are a lot of cars then getting this type of financing is going to be very easy. That’s because you (and the lender) know that your items will sell quickly and steadily.

Advantages of Inventory Finance

One of the first advantages you’ll notice when you apply to a lender that offers this type of financing is that the approval period can come very quickly. It will take just two weeks or so, which is fast compared to bank processing times.

This type of financing is ideal when your supplier expects payments in a shorter period of time than it takes you to sell your inventory. If your supplier expects payment in a week while it takes a month to sell your products, then the loan can come in handy to pay off your supplier.

 

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The Case for Long Term Construction Working Capital Loans

While in theory a construction working capital loan can be used for just about any purpose, its most popular use is for paying off all bills and supply purchases required for normal operations. For a construction company, that usually means paying salaries of workers, office expenses, and equipment and supplies.

Construction working capital loans are usually needed to help a company deal with a temporary lack of funds. The construction company may end up earning a lot of money over a course of the year. But sometimes there are dry spells, and some customers do pay late. A construction company then gets a loan when revenues are not currently available.

When the clients pay, then the working capital loan is repaid because the company doesn’t need the extra money anymore. This is why construction working capital loans are usually for the short term only. Another advantage of short term loans is that you pay less in interest.

Yet despite all these arguments for short term loans, long term loans (or even intermediate term loans of up to three years) do have their advantages as well:

  1. Long term loans are easier to get. Everyone knows that traditional bank loans are quite tedious affairs. They take a very long time to complete, and there’s a great deal of paperwork involved. And often, the process doesn’t end in approval for the loan application.

That’s the advantage of working capital loans in general. Usually, the process is much easy and quick, and the approval rate is pretty high.

But the process may be faster and the approval may be higher when you ask for a long term loan. That’s because the lender gets more money back from its loan. Banks, like other finance institutions, like it when they earn more money for their services.

  1. You focus beyond making loan payments. With short term loans, repayment periods are short, but the payment amounts are high per month. Long term loans, on the other hand, require you to pay lower amounts per month. That has its advantages, even though you’re required to pay back the loan for a longer period of time and consequently pay more in interest.

When you’re required only to pay a small amount, then it’s easier for you to pay back the loan on time. You no longer have to wonder about where to get the money for the monthly payments. It’s more likely that you can get the money ready, so you can focus on your construction business more.

  1. It lowers your stress levels. Trying to figure out where you can get money to pay your loan can be truly stressful. You may also end up having to borrow more money to pay back a loan.

With long term loans, you also don’t have to worry about any unexpected expenses that can come up. You can sleep soundly at night knowing that your working capital can cover even unforeseen expenses.

So if possible, try to get a long term loan. By going this route, you don’t have to worry about making large payments, and you can focus your energy into doing what you do best: growing your business.

 

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Purchase Order Finance Lenders: Better than Credit Cards

Using a credit card is one of the most popular options for getting additional finance. Everyone’s familiar with them (more or less), and for that reason even small business owners are using credit cards (personal or business) to finance their operations.

The National Small Business Association reported that in the years 2007-08, about 44% of small business owners used credit cards for financing.

But there are other alternative options for small businesses when it comes to financing. Purchase order financing may work in your case, and you may find that with the help of purchase order finance lenders you may actually help your company get more business.

How PO Financing Works

The concept of PO financing is very simple. If you have a sizable purchase order but do not have the capital to fulfill it, then purchase order finance lenders can step in and provide you with the financing you need.

They pay your suppliers so you can fulfill the purchase order. You may get only about 50% to 70% of the value of the purchase order towards paying your supplier. When your customer pays up in full, you then get the rest of your money, minus the fees charged by the lender.

Why PO Financing is Better than Using Credit Cards

In some ways, PO financing is better compared to using your credit cards.

  1. Using PO financing doesn’t affect your credit score. Using your credit cards can really harm your credit score, especially when you max out and have trouble paying your debt. In fact, credit card misuse is one of the more common reasons for plummeting credit scores. Too many people don’t know how to use them properly.

But with PO financing, the deal doesn’t even qualify as a debt, and therefore it doesn’t affect your credit score. PO financing is more like getting an advance on the eventual value of the purchase order.

  1. You pass on the risk to the purchase order finance lenders. There are many possible reasons why the deal may be successful. The customer, for example, may refuse to pay for any number of reasons. They may say that the items were not in the quality they want, they may declare bankruptcy, or they may just simply change their minds.

But that’s the lender’s responsibility. They’re in charge of the collection, not you. And if they are unable to collect, you don’t have to return the advance you got for paying your suppliers.

Now if you used credit cards, you have to pay back what you borrowed, even if the customer didn’t pay up.

  1. PO financing comes with reasonable costs. Even though the risk is all on the lender, the fees for the advance are actually comparable with the rates charged by credit card companies. And what’s more, you usually get more funds to pay for suppliers through PO financing than what you can get from credit cards.

PO financing may only be a short term solution, but it’s better than not being able to fulfill a purchase order at all. You forge better relations with your customers by providing them what they need, and you earn a profit in the end. That’s much better than not getting the business at all.

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Uses for Construction Working Capital Loans

Construction working capital loans are perhaps one of the most versatile loans you can take advantage of. It may seem like an exaggeration to say that a loan like this can be used for anything, but it’s the truth. Just take a look:

  1. Basic business expenses. This includes the rent for your facilities, utilities, office supplies, computers and other IT stuff, and office furniture. Every type of business needs all these things, and a construction company is no exemption.
  2. Heavy equipment. Unlike other companies in other industries, a construction company often requires the use of heavy equipment. Buying these machines or even just renting them can be very expensive. This may make it difficult for you to complete a project if you don’t have the budget for needed equipment.

And when you add the extra construction supplies, the expenses can really stack up.

  1. Your workers expect to be paid on a regular basis and on time, and they won’t really care that business is slow or that a payment from a client has been delayed. You have to pay them promptly, and in this regard a shortage in your working capital can be disastrous. A construction working capital loan can avert this disaster.

Some projects may also require you to hire more people, so you may need a fresh infusion of working capital as well to cover the extra costs of new hires.

  1. Having no insurance for construction workers working in the field where accidents are liable to happen is not a good idea at all. If you foresee having trouble coming up with insurance payments, it’s better to get a working capital loan than to risk not having insurance.
  2. Business taxes. It’s not just your civic duty to pay your taxes. The tax officials can actually seize your assets if you fail to pay. The tax man is the last person you want to deal with so pay your construction taxes promptly and in full.
  3. There was a time when construction companies relied mainly on word-of-mouth and personal networks to market their brand. Nowadays, construction marketing has become more sophisticated. This is especially true online, because more and more people use the Internet to find the construction company they want to do business with.
  4. Unforeseen expenses. Construction is an industry in which Murphy’s Law is pretty much in effect all the time. Schedules get delayed, problems appear out of nowhere, and accidents happen. Nothing is ever done on time and within budget. And when something goes wrong as it always does, you need to have sufficient working capital to cover the extra expense.

Since by definition you can’t foresee when such expenses will crop up—you only know that they will, sooner or later—you may want a construction working capital loan to shore up your ready funds.

Get a construction working capital loan, and be surprised at the many you ways you may be able to use it.

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