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Loan underwriting is the process through which a lender determines whether or not a loan application is creditworthy. This process analyses and assesses the borrower’s ability to repay the loan amount based on a set system which verifies, analyses and summarizes the applicant’s data in an effort to paint a true financial picture of the applicant. This system may differ slightly from lender to lender but the general idea remains unchanged.
 

Understanding the underwriting process for small business loans is important for every prospective borrower, especially first-timers as it will help you prepare your loan application adequately, which can even improve your chances of securing the loan. So, while borrowing for first-timers might appear to be daunting, knowledge of the underwriting process might just be the first step towards a successful loan application.
 

Steps to Underwriting Small Business Loans
 
Income to Repay the Loan
 
The primary function of underwriting is to determine the borrower’s ability to repay the loan. It is, therefore, very important to assess the business’ ability to repay the loan. Basically, the business should be able to make enough money to repay the loan plus the interest that accompanies it. Underwriters can determine whether your business can make this amount of money by analyzing the business’ financial statements. When it comes to small businesses, the key financial statement is the statement of cash flow which shows your monthly income and expenses. Expect to answer questions and provide information on your current assets and liabilities, net income, revenues and operating expenses. These will help him/her determine whether your business is worth the amount you are asking for. It is, therefore, important to be as open and honest as possible.
 

Credit
 
There is no doubt that this is one of the most important factors which underwriters take into consideration when considering your application for a loan. Credit here refers to your credit history. It looks into your loan repayment reputation. Usually, this information is contained in your credit report. The credit report carries detailed information regarding previous loans including how much was borrowed and whether the loans were repaid on time. The Fair Isaac Corporation (FICO) uses this credit report to create a credit score, which gives underwriters a snapshot of the applicant’s creditworthiness even before they take a look at your credit reports. Of course, it goes without saying that a negative credit score reduces your chances of securing the loan.
 
Capacity
 
Another factor which lenders take into consideration is the amount of money the borrower has to fund the project he/she wishes to carry out. For example, if you require a small business loan, the underwriter will need to look at the present equity (capital) of your business in order to judge whether or not you will be able to make enough return to repay the loan. Capacity can be in the form of how much money you have put into the company, how much retained earnings you have or in terms of personal assets invested in the business. The underwriter will also compare income against recurring debts and assess your Debt-to-Income (DTI) ratio. Other factors such as job stability and longevity are also taken into consideration.
 
Collateral
 
Collateral is a very influential factor when it comes to securing a loan. This is because collateral assures the lender that the loan will be repaid even if the borrower defaults on the loan. The concept of collateral allows the lender to possess the property mortgaged in the event that the borrower defaults on the loan.
 
Collateral is more of a safety net for the loan as it is only possessed in the event that the borrower defaults on the loan. The value of your collateral is determined by the underwriter. However, collaterals with values that double or triple the amount requested by the applicant increase the chances of securing the loan.
 
Other Considerations
 
Other factors which the underwriter may take into consideration may include other sources of income, the ability of the business owner to raise additional capital if required, personal guarantors and/or co-signers. One other very important factor is the honesty of the individual.
 
Underwriters are first of all human, meaning there is a human aspect to underwriting. In the end, the underwriter has the power to grant you a loan even with a less than average credit standing. Being prepared to offer explanations where necessary and show your strengths might go a long way to strengthen your application.
 
Take a look at how streamlined, yet detailed, our underwriting can be when we work with you to get funding through us here at FIN$. We’re ready to serve: Underwriting that works for you

 
In Finance, the word Capital is basically just another name for money. And of course, every business needs money to grow, become sustainable and survive, as do individuals. Just like we – individuals have a daily, weekly and monthly budget, companies and businesses do too. The name given to the money used by a company to run its daily operations is “Working Capital”.
 
So, what is Working Capital?
 
Financially speaking, Working Capital refers to the difference between the current assets and current liabilities of a business or company. In other words, it is the amount the money that is left after a business subtracts what it owes from what it has. Current assets simply refer to those assets that can easily be converted into cash including cash itself. These include cash at bank, short-term account receivables (unpaid bills of customers due within the year) and inventories of finished goods and raw materials. Current liabilities, on the other hand, are those debts a company is required to repay within the year, financially referred to as accounts payable.
 
So, the working formula for Working Capital is given as follows:
 
Working Capital can be used to measure the short-term financial health of a company as well as its operational efficiency
 
The Working Capital Ratio (WCR)
 
The Working Capital Ratio, as the name implies, is simply your working capital in ratio form. This means that when your current assets are divided by your current liabilities, the number you get is your Working Capital Ratio. It can be represented algebraically as follows:
 
The WCR represents the relative financial health of your company. A WCR that falls between 1.2 and 2 means that your company or business is financially healthy – you have just enough cash to pay off all your current liabilities. A WCR above 2 means that a good chunk of your current assets (cash) which you could be reinvesting is lying idle which is not good for business. A ratio below 1 indicates a negative working capital, which means that you do not have enough money to pay off your current debts.
 
The Working Capital Cycle (WCC)
 
Another important working capital concept is the Working Capital Cycle. This is the length of time a company takes to convert its working capital into cash. It is basically a combination of the length of time it takes to convert its inventory and receivables into cash less the number of time it takes to pay off its debts. Its formula is as follows:
 
A longer WCC means that cash is being tied up in working capital at the expense of investing and earning a return on it. This situation can be corrected by reducing the number of days it takes to collect receivables or increasing the number of days it takes to pay debts.
 
Working Capital Management
 
Because working capital plays a very important role in determining how financially healthy a business is, a concept which is of major interest to investors as it helps them decide whether their money will be better invested somewhere else; companies have to be able to use working capital themselves to make decisions. Such decisions are referred to as working capital management. Working Capital Management is the process of managing a company’s short-term assets and liabilities to ensure that the company can operate effectively and still have enough money to take care of its upcoming short-term debts and operational expenses
 
Importance of Working Capital
 
Understanding the concept of Working Capital is important for any finance professional as it helps in understanding the current financial position of the company. As has been discussed above, working capital can be used to measure the short-term financial health of a company. The concept of working capital can help one understand discounted cash flow analysis techniques and can also be used to create financial models. It can also be used to correct a company’s financial position to avoid potential liquidity problems which can eventually lead to bankruptcy.
 
To get more insight on just what FIN$ Funding can do for you in terms of working capital, check out the link now: Working Capital for your Business

 
Expansion capital (also referred to as growth equity or growth capital) is a type of private equity investment used by reasonably large companies seeking capital to finance growth and expansion by restructuring operations, entering a new market or fund a major acquisition without changing how the business is controlled. It is a flexible method of financing minority investments in a company in an effort to increase the amount of profit generated by the company. It is a great method of financing growth and expansion in companies that cannot afford to borrow any additional debt, due to their current debt levels or the stability of their earnings.
 
As a result, this method of financing is usually structured as preferred capital, even though some investors will use different hybrid securities that combine a contractual return (such as payment of interest) with an ownership interest in the company. Examples of companies that have made expansion capital investments include Softbank which made a $750 million investment in Uber rival – Grab and Airbnb which raised approximately $447.8 million in Series F round of funding which it plans to use in adding flights and services to its already existing online marketplace and hospitality service.
 
How it works
 
Companies seeking to finance transformational business events can seek expansion capital. Expansion capital can include funds needed to increase expenses, inventory, plant and equipment capacity, marketing costs and working capital levels. It can also include capital for business acquisition and transaction costs and any other corporate investments that support the growth of the company.
 
The good news is that it is actually easier to raise expansion capital than it is to raise start-up capital. This is because, at this point, investors will be able to see what your company is all about and will be able to judge whether or not you are a good investment.
 
Raising Expansion Capital
 
Because expansion capital resides at the crossroads of venture capital and private equity, it is provided by a number of different sources. Growth capital investors traverse a number of debt and equity sources such as late-stage venture capital funds, private equity capital funds, sovereign wealth funds, Business Development Companies (BDCs), family offices and mezzanine funds. Expansion capital can also be an interesting alternative in markets where startup business funding is very competitive or where leverage is limited to finance buyouts.
 
A company can also build up its expansion capital. As working capital keep on rising, companies can reinvest that money into the company. This money becomes growth capital (expansion capital) which accumulates over time. When the company needs to fund a major expansion or purchase new plant or equipment, it simply uses the expansion capital it has accumulated over time.
 
Importance of Short-term Expansion Capital
 
As has been mentioned earlier, expansion capital can be used to finance transformational investment projects such as major growth and expansion projects in a company, especially in companies that are unable to bear any additional financial leverage due to their current debt levels. In addition, it can also be used to restructure a company’s balance sheet by reducing the amount of debt (or leverage) present on its balance sheet.
 
Short-term Expansion Capital can also be used to extend a give a company additional time between financing rounds. Such additional time can be used to accomplish additional objectives that will increase the valuation of a company. No matter what you decide to use your short-term expansion capital for, it is important to always keep it separate from working capital (capital used for the daily running of the company).
 
If you and your business is in need of short term expansion capital to take the business to the next level up, no need to delay. Let FIN$ be the one who helps you to do just that: Lets expand your business today

 
Our nation’s small businesses are facing an unprecedented economic disruption due to the Coronavirus (COVID-19) outbreak.  FINS Funding continues to provide support to small businesses lacking funding resources and business development.
 
“The goal is to help small business owners gain traction to manage adequate staff and stabilize operations in order to ensure the future growth of business, which in turn lends support to the countries continued economic development.” FINS Underwriting Team
 
Notice: Now Accepting New Applications from all eligible small businesses and U.S. agricultural businesses

 
Nowadays, women entrepreneurs start more businesses than they did a decade ago. And even with this tremendous increase in the number of businesses founded and owned by women, it is noteworthy that just a handful of these businesses grow to full-flesh businesses. This can be accounted for by the fact that most businesses founded by women begin with limited capital which in turn leads to slow growth of the businesses.
 
Every entrepreneur understands how difficult securing funding is. Securing funding for women entrepreneurs is more difficult than it is for male entrepreneurs. According to magazines like the Forbes and the Fortune, only 10% of all venture capital funding goes to female entrepreneurs. This makes it difficult for businesses founded by women to grow and become large businesses.
 
Women entrepreneurs seeking expansion capital – capital used by businesses and companies to finance growth and expansion also suffers from this same difficulty. Nowadays, there are a number of firms that focus on funding businesses founded by women entrepreneurs. These firms seek to reduce the difficulties women entrepreneurs encounter in securing funding for their projects in an effort to make women-owned businesses grow larger and become more sustainable.
 
FIN$ Funding is helping women achieve the dream of entrepreneurship every day and theres no reason why you cant be next in line. Take a look here and lets help you out: Women in Business

 
People usually are under the impression that securing a loan from a bank involves walking into a bank, answering the few questions asked, and signing some paperwork. In reality, it is actually a lot more complicated than that. Securing a loan from a bank involves a lot of stress, documents and time, all of which can end up being for nothing as the bank reserves the right to turn down your loan request. In actual fact, every 4 out of 10 bank loan requests are rejected.
 
Most of the times, small and medium-sized businesses find it difficult to secure loans from banks because they lack the necessary assets (collateral) to convince the bank of their credit-worthiness. While, back in the days, failing to secure a bank loan meant no funds, nowadays, the situation is different, thanks to Alternative Lending.
 
What is Alternative Lending?
 
Alternative lending is simply a broad term used to refer to the wide range of loan options available to businesses and consumers, apart from the traditional bank loan. The increasing difficulty of getting a loan via the bank coupled with the stress and time it takes to secure a loan led to the rise of alternative lending options for both consumers and businesses which make the lending process less stressful and less time-consuming.
 
Types of Alternative Lending Options
 
The prevalence of alternative lending is primarily thanks to the availability of different lending options all unique in their own way. Some of these alternative lending options include the following:
 
Micro-loans
 
This is one of the most prevalent alternative lending options available to both businesses and consumers. This lending type is ideal for those in need of a relatively small loan amount. Usually, short-term in nature, these loans usually do not exceed $25,000 and tend to be spread out over a period of five years. This allows the business or consumer enough time to repay the loan. Micro-loans also carry an interest rate which is generally lower than the rates on bank loans and also offer a means through which consumers and businesses – especially small start-up businesses, can acquire funds within a short period of time.
 
Peer-to-Peer (P2P) Lending
 
The increasing popularity of alternative lending on the internet has led to the creation of more and more peer-to-peer networks. Peer-to-Peer lending acts almost like most social networks. It is built as a marketplace brings together individual borrowers and lenders together. This method of alternative lending allows individuals borrowers to be funded by individual lenders. The most important benefit of P2P lending is the availability of low-cost quick loans at an affordable rate. Examples of P2P lending companies include Harmoney, RateSetter, Zopa, Prosper and Funding Circle among others.
 
Crowdfunding
 
This type of alternative lending has gained grounds in recent years. This method of funding allows a project to be funded by small contributions of money from a large number of people, usually via the net. Two major types of crowdfunding exist – equity crowdfunding and standard crowdfunding. Both use the same method to raise funds. However, while equity crowdfunding requires that you let go of equity in return for funding, standard crowdfunding doesn’t really require much in return. Examples include GoFundMe, CircleUp, OurCrowd and MicroVentures.
 
Business-to-Business (B2B) lending
 
This type of alternative lending can be described as “P2P lending exclusively to businesses”. Used mostly by SMEs, this method allows them to fund their growth by borrowing funds from online investors (institutional and individual). With this method, SMEs can bypass banking intermediaries and significantly reduce the amount of paperwork and time they need for a bank loan. In addition, rates are very competitive, and it is very transparent and easy to use.
 
Other types of alternative lending include Merchant Cash Advance, Community Shares and Microfinancing (aimed at empowering SMEs), and Invoice Trading among others.
 
Benefits of Alternative Financing
 
Why is alternative funding gaining grounds in the 21st Century? Why are most business owners using alternative lending as opposed to traditional lending? Here’s why!
 
Ease of use
 
As earlier mentioned, it is relatively easier to be granted an alternative loan than a traditional one. Alternative loans come with less paperwork and less time spent on answering questions which allow the business more time to concentrate on growing and becoming sustainable.
 
Plethora of options
 
Most traditional banks do not consider loans below $200,000 as worth their time. This makes it difficult for them to give out loans to those in need of small amounts. Alternative lending has taken care of this problem by providing different means through which consumers and businesses can secure loans irrespective of the amount needed.
 
Reduced Interest Rates
 
Banks are generally less flexible with regards to interest rates and this is in large part, due to their bureaucratic nature. Alternatively, because of the competitive nature of the alternative lending marketing landscape, interest rates are more flexible and are generally less than the rates for traditional loans.
 
Easy Approval
 
While banks and other mainstream financial institutions take long periods of time to approve loans, alternative lending provides consumers and businesses with a means of getting quick loans which sometimes take only a few hours to be approved (especially for lenders who operate online).
 
FIN$ Funding is at the forefront of the alternative lending space and can help you meet your neeeds. If you need more information on just how we can be of service to you in your quest, go here now to get more information Alternative Lending and How it Works