Who wants to be a millionaire? Learn about how to get a bank loan for your business without burning your “lifelines.”
By: Hitesh Khan/
Securing a bank loan is often one of the first steps to successfully owning and running a business. But even savvy borrowers can get trapped in a bad loan situation. A few precautions can help prevent common mistakes.
Get Everything in Writing
A lender may make oral promises and agreements, however borrowers should rely only upon written documentation. The Court will disallow any evidence of oral agreements if they conflict with the written loan documents.
Be Careful What You Offer as Security
Although there are few specific rules that can be applied universally to actual terms of a loan, one general guideline is: never offer something as security that you cannot live without. Cautious lenders may ask for more security than necessary. All assets pledged as security are at risk of loss should the bank loan default. Oftentimes lenders ask not only for security from the borrower, but also a guarantee from a corporate officer of the business, perhaps a deed of trust on their property. In such a case, if the loan should default, both the borrower and the guarantor are at risk of losing their collateral because the terms of the loan legally allow foreclosure.
Understand the Loan Agreement Before Signing
Legal doctrines intended to prevent fraudulent lending can sometimes inhibit the borrower’s legal remedies should something go wrong. Therefore it is imperative to fully understand the agreement before signing it. Lawyers are among the few people besides bankers who can readily sort through and understand the details of a loan. If you have questions about the loan or your rights, find legal counsel. Lawyers can be expensive, but you are hiring an expert who will protect your best interests. The downside of hiring a lawyer is, should there be litigation, the bank may say that because a lawyer examined the documents, they could not have taken advantage of you.
Avoid Signing Releases, or Arbitration Clauses
Loan agreements often contain an arbitration clause. When agreeing to such terms, know that you are giving up possible significant legal recourses. Similarly, if a lender is worried about a possible claim, they may ask the borrower to sign a liability release. By signing such a release, the borrower forfeits rights to a claim, so it is important that if there is suspicion of improper activity, consult a lawyer about the matter before signing a release.
Use a Mortgage Broker
Mortgage brokers work with clients who are interested in borrowing money to purchase real estate or who are seeking opportunities to refinance property that they already own. Brokers function as intermediaries between lenders and consumers who are seeking real estate financing.
Because brokers are able to represent multiple lenders, they are able to work with clients to find the best financing option for their particular situation. When meeting with an individual who is interested in taking out a mortgage loan, mortgage brokers are responsible for providing information about the various types of loan programs that are available based on relevant factors including, but not limited to:
- The individuals credit history
- Down payment availability
- Property location and value
Mortgage brokers also educate customers about what to expect throughout the loan process, including details about guidelines for loan programs, interest rates, and the fees and expenses associated with taking out a mortgage loan. It’s important to provide prospective customers with all of the facts necessary so they can make a wise decision regarding the best real estate financing option to pursue.
A Mortgage Broker Defined
A Mortgage Broker is a real estate financing professional who, as their business, puts together a lender and a borrower. This is done after thoroughly reviewing the needs and capabilities of that borrower, the characteristics of the subject property and the various lending programs available from a wide range of lenders. This is done in compliance with and under the restrictions of all state and federal laws.
Finding a mortgage loan for your home can be confusing experience. With so many options to choose from, it can be difficult to find your way. That is why a Mortgage Broker is your number one source for a loan. A Mortgage Broker will guide you through the lending process, provide you with any help you need, and try to simplify the process. You will get the service and selection you want from a Mortgage Broker.
- Full-time residential real estate professionals.
- Experts at working through the mortgage lending process to save you time.
- Your representative to many lenders.
- Providers of loans that comply with industry standards and requirements.
- Specialists with competitive up-to-date loan rates.
- Resources of knowledge on current trends and terms in the industry.
Your Real Estate Financing Professionals are the key to your new home or debt consolidation
Why use a Mortgage Broker? Because using a Mortgage Broker can make a difference in the interest you pay, the points you are assessed, how difficult it is for you to qualify for a loan, the length of time it takes for your loan approval, and even whether or not you can get a loan.
If you had to do it yourself, where would you start? How many mortgage sources are you familiar with? How many of the hundreds of bank loan variations do you fully understand? Your real estate financing professionals can guide you through this potentially disastrous maze, and lead you to a lender and the loan that best fits your specific requirements.