Business loan in Wisconsin, in particular for short-term loans, is one of the main sources of external finance for small businesses and is key to helping small firms maintain cash flow, hire new employees, purchase new inventory or equipment.
Such loans have historically been important to small businesses. Unlike big firms, small businesses do not have access to government institutional debt and equity markets, and the vicissitudes of small business profits make retained earnings inevitably a less stable source of capital. About 48% of business owners report a large bank as their main source of funding, and another 34% say a regional or community lending companies is their main partner in capital financing.
Loan amount in Wisconsin
The loan amount is determined on the basis of an assessment of the client’s creditworthiness and legal capacity, his credit history and the specifics of the loaned project. The presence of accounts and a positive credit history, if the borrower has been credited earlier, is considered an advantage.
Business loan security in WI
The lenders accept the following collateral for loans:
- mortgage of real estate, client’s fixed assets, inventories, property rights;
- pledge of liquid securities;
- guarantees of reliable banks or solvent enterprises;
- debt obligations of the counterparties of the borrower and other assets.
The amount of collateral must cover the amount of the principal debt on the loan, the interest due to the lender, as well as possible expenses associated with the compulsory sale of the collateral.
Both banks and payday lenders have their own advantages and disadvantages in terms of issuing borrowed funds by the small business companies. Below we will tell you more about them.
Speed and convenience
In practice, the waiting time for a decision on an application for a business loan in a bank is calculated in weeks, sometimes the process takes more than a month. The client provides a large list of documents, and the bank carefully analyzes the received array of information about the borrower. Delay entails lost profits for entrepreneurs, and in the current economic realities, it can even become fatal for business. Microfinance organizations understand this and offer a technologically advanced (often completely online) and fast interaction, a preliminary decision on an application can be received in a few hours. Thus, in terms of speed, the advantage is clearly on the side of payday lenders in Wisconsin.
When purchasing a product or service, customers are ready to pay for a high level of service, and financial instruments are no exception. By this parameter, banks and MFIs have now reached the same level and compete mainly in e-services for existing and new clients.
Cost of funds and associated costs
The rates offered by lenders will usually be higher than bank rates. But if earlier the cost of borrowing differed by an order of magnitude, now the gap has decreased significantly, in the amount of the monthly payment this difference will not be noticeable. Higher rates for MFIs are due to the cost of raising funds for themselves. In general, getting money today is always more valuable for entrepreneurs than tomorrow. The conclusion of a promising contract or a profitable purchase of goods on an urgent offer is quite capable of compensating for the difference in overpayment in interest rates.
An important point: before applying for a business loan in Wisconsin, it is worthwhile to carefully study the current programs of state support for business in your state, they can be provided both at the municipal and federal levels. Perhaps it is your activity that is considered systemically important, and there are programs with which you can get a subsidized loan or a guarantee from a local support fund. This will allow you to reduce the rate and quickly agree on the application. Here banks have an advantage, since not all participants in the microfinance market work under such programs.
As for the associated costs, they mean additional financial products that affect the final cost of the business loan, in particular, insurance. Since the rates here are set by the insurers, their cost for all lenders will be comparable.