Corporate Loans – Funding Industrial Growth

If individuals thought that they were the only ones who had the use for loans, then corporate loans will show them that they are incorrect. The corporates, who are deemed to have a large surplus of cash, too find themselves at the mercy of the loan providers (though not in the strictest sense of the word).

The use for corporate loans may emerge out of two reasons. Firstly, there maybe a shortage of cash and the loan is required to substitute the cash shortage. Secondly, they feel that the cash balance will find more productive uses if the task at hand is accomplished with a loan.

The position of the corporates is not as vulnerable as that of ordinary individuals, when it comes to getting Corporate loans. Because of an increased bargaining power, corporates are able to grab a much better deal than individual borrowers.

Finance is the lifeblood of any business. Therefore, while it will be prudent not to make an injudicious use of corporate loans, it will neither be advantageous to starve the business of the much needed capital. Corporates risk its capital by taking business decisions- the grounds for profit. The risk taking capacity is severely stunted in the event of shortage of capital. A stunted risk taking capacity has its repercussions on the future of the corporate house.

Finding it too shocking to digest. This is however true. Shortage of funds was particularly behind many corporates not being able to complete assignments on time or not up to the quality standards stated.

Corporate loans come in a variety of forms. In this article we shall discuss about some of the most important corporate loans that businesses are making use of in the UK.

· Real estate financing:

Offices and factories are an important asset for the enterprises as all operations are conducted from this place/places. Banks and financial institutions finance the construction or purchase of an already built premise through real estate financing. Corporate loan of this form is similar to what is known as a mortgage. The important loans that are offered under real estate financing include land loan, property development loan, bridging loan for corporates and banker’s guarantee.

· Performance bonds and guarantees:

Larger enterprises have to show that they are credible enough to get access to certain contracts. Corporate loan providers offer to guarantee the trustworthiness of the enterprise by issuing letter of guarantee, letter of indemnity, banker’s guarantee and similar other documents pertaining to the credibility that a business house enjoys in the market. This becomes particularly important in modern day economy where business is conducted on a global scale. Businesses may be well known on a regional scale but globally it might be a minuscule. With the corporate loan provider vouching for the business, the standing of the business house greatly improves.

· Stocks and shares financing:

This facility is available for all types of enterprises whether private or public. Businesses can use the service at any stage of their life. Shares or unit trust, initial public offers (IPOs) and substantial shareholders are some of the methods used for financing business plans.

· Debt capital market products:

The method is again for public as well as private sector enterprises. This includes tasks such as underwriting or managing a variety of debt instruments. These can be suitably used for medium and long term financing. Some of the important components of these methods are syndicated loan facility, fixed rate bonds, floating and variable rate notes, and commercial papers. Syndicated loan facility can reduce dependence on one particular lender. The loans may be structured to meet the borrowers financial needs in the best possible manner.

The corporate loan will be repaid in the manner decided by the entrepreneur. The cash flows are the principal source of funding the repayment of corporate loans. Banks and financial institutions demand a guarantee or collateral from the borrower as a show of commitment to the project. Different lenders may define the clause of collateral amount and form differently. As with the loans offered to the individuals, corporate loan providers have a lien on the collateral offered. This will be exercised only when the loan has not been paid in full.

The dreams you ever saw for your business that were shelved because of the lack of adequate finance get a platform through which to be realised. Corporate loans provide this platform. Whatever be the needs of the business, from providing a continuous source of working capital to business expansion needs, corporate loans will always be useful.

The Path to Corporate Loans With Out Personal Guarantees

All this talk about corporate loans, but what is truly involved in obtaining a true corporate loan that does not require a personal guarantee?

It was common for banks to lend money to businesses using their personal credit in the past 10 years. The bank simply added a business name making the customer believe that it’s a business loan when the reality was it was a personal loan with the businesses name at the top of the page.

A true corporate loan does not report against your personal credit whatsoever.

A ghost guarantee corporate loan does not reflect against your personal credit i.e. debt to income ratio etc.. However in the event of default a ghost guarantee is just that, you have guaranteed the business loan and will be held liable, but will be a ghost in the event there is no default.

So how to we obtain a true corporate loan?

You must have a plan to methodically and precisely build business credit. this is easily done by using a proven system that is designed to build corporate credit following a precise and proven path.

Corporate credit is simple when using a system, and incredibly frustrating with how using a system.

In example would be trying to find a address with out having any directions.

I think most people will agree having basic directions can eliminate significant frustration and certainly of arriving to your destination.

In terms of business credit nothing is more true, except you also have the problem of choosing lenders. Most business lenders who extend corporate loans do not report to Dun & Bradstreet and the other business credit bureaus.

So it is important to know which lenders will report your good credit while you’re in the stages of building a Paydex score.

This is another reason for using a good business credit system that is updated often with the most likely to approve business lenders. Having access to years of research is certainly worth the money and will help anyone seeking corporate loans arrive to their destination with ease.

The fact is business credit has never been easier and small businesses today that have mastered business credit strategies have a significant advantage over their competitors. Having the ability to take advantage of opportunities using credit lines and other financial resources is considered being prepared at the right time

Wilshire Credit Corporation Loan Modification With Obama’s Government Plan – Get the Details

Homeowners having trouble making their mortgage payment may be eligible for a Wilshire Credit Corporation loan modification with Obama’s government plan. The lender is one of the approved banks who can offer the very aggressive loan terms under this federal program. If you are at risk of losing your home, or facing a financial hardship that is causing your current mortgage payment to be unaffordable, find out the details of how this plan works and how you can apply for help.

Wilshire Credit Corporation has signed an agreement with the Treasury Department that allows them to actually get paid to modify loans using the standard criteria of the federal program. Each loan that is successfully modified using this criteria will qualify the bank to receive an incentive payment, that is a big reason for homeowners to apply now because the bank is very motivated to help as many borrowers as possible stay in their home.

What are the basic requirements for homeowners to be eligible for this federal plan called Home Affordable Modification? There are 5 basic guidelines you must meet before you can submit your formal application:

You must live in the home as your principal residence
Your loan must have been initiated before January 1, 2009
Loan amount must be less than $729,750
Current payment must equal greater than 31% of your gross monthly income (including your property taxes, homeowners insurance and any homeowners dues)
You must be facing a financial hardship situation-due to lower income, greater expenses or other acceptable reason

Once your pass the initial questionnaire, you will be asked to submit an application that includes your financial information. You will have to prepare a financial statement or budget that details your monthly income and expenses. This is very important-you must prepare your forms correctly so that you clearly prove you are a good candidate for a loan modification. You should work on this form before you call the lender-you do not want to be caught off guard and unprepared when you have your lender on the phone. Take the time to learn the program guidelines and work on your forms ahead of time so you can make the necessary adjustments and increase your chances of approval.

Wilshire Credit Corporation will use the standard methods of loan modification set forth by the government to lower your mortgage payment to the new target payment. First, they will reduce the interest rate to as low as 2%, then they will extend your loan term to 40 years, and finally they may defer or forgive part of the principal balance. The goal is to achieve a new payment that equals just 31% of your gross monthly income. Your new target payment will be affordable now and in the future, and enable you to be able to stay in your home.

If you are facing difficulties and at risk of losing your home, you need to begin the Wilshire Credit Corporation loan modification process now. This government program enacted by President Obama is available for a limited time and funded by $75 billion in stimulus money. Do not miss your chance for the help you need and deserve. Make sure you understand how to apply and qualify so you have the best chance of success.

You can get the help you need to apply and qualify for a loan modification by ordering the best selling handbook for homeowners, The Complete Loan Modification Guide. This is a low cost, easy to read home edition loan mod kit that will provide you with everything you need to prepare a professional and acceptable loan modification application. You are provided with all of the necessary forms and given detailed directions on how to complete them properly. The Complete Loan Modification Guide will take you step by step through calculating your debt ratio, completing the financial statements, writing your hardship letter and then putting it all together to submit to your lender. Learn how to apply and qualify for the Obama federal program too. Get started today on the path to secure home ownership, order and download The Complete Loan Modification Guide.

Want to Give Your Spouse an Interest-Free Loan From the Corporation? Tax Considerations

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only (and is only current to the date that it was written). If you need legal advice with respect to tax issues, you should seek professional assistance.

So you have a Canadian corporation and you want to give your spouse and interest-free loan? What could go wrong, you say? Well, the tax implications may not make it worth your while.

For starters, s. 15(2) of the Canada Income Tax Act provides that if a person is “connected” with a shareholder of a corporation and receives a loan from that corporation, then the amount of that loan is to be included in that person’s income for the year (and hence tax must be paid on it). Here, the word connected is defined in s 15(2.1) to include person with whom the shareholder does not deal at arm’s length with (which includes your spouse).

What about the interest free part of the loan, you say? Well, under s.80.4(2), the spouse may have to include the amount of interest that would have otherwise been paid in their income tax (and hence pay tax on it): once again, if a person is “connected” with a shareholder of a corporation (i.e. which includes a spouse) and receives a loan from that corporation, then that person will be deemed to have received a taxable benefit (i.e. must pay tax on) equal to the difference of the interest they paid in the year and the interest they should have paid in the year (i.e. a prescribed rate).

Overall, therefore, a shareholder of a corporation who offers his or her spouse an interest free loan could be doing more harm than good: the principal and the interest might end up being included in the spouse’s income for tax purposes.

Please keep in mind, however, that there are other provisions in the Canada Income Tax Act which modify or make these sections inapplicable; it really depends on the particular situation. One such example deals with repayment of the corporate loan within one year. Section 15(2.6) of the Canada Income Tax Act provides that, if the corporate loan to the spouse is repaid by the spouse within 1 year after the end of the taxation year (of the lender/creditor in which the loan arose), then it would not need to be included in the spouse’s income (and hence no taxes would need to be paid). So, the spouse would not need to include the amount of the loan in his or her income and pay taxes on it so long as the loan was repaid within 1 year from the end of the corporation’s taxation year. To better understand this situation, take the following example. A corporation’s year end is August 31. A shareholder’s spouse took out a loan on December 31st, 2008. The clock would not start ticking until August 31st, 2009 and the spouse would only need to repay it by August 31st, 2011 to avoid including it in his or her tax return.

The Canada Revenue Agency Interpretation Bulletin (IT-119R4) on shareholder loans helps explain what is meant by the phrase “series of loans or other transactions and repayments” (found at the end of s. 15(2.6):28. It is a question of fact whether or not a repayment of a loan is part of a series of loans or other transactions and repayments. In most cases, when there are only a few loans or other transactions and a few repayments made during a taxation year of a lender, there is no such series. However, when only one loan or other transaction and one repayment occur in each taxation year of a lender, a series of loans or other transactions and repayments may still be in evidence. This could occur, for example, when a repayment is of a temporary nature, such as a loan that is repaid shortly before the end of the year and the same amount, or substantially the same amount is borrowed shortly after the end of the year. Such a repayment of a temporary nature is not considered to decrease the loan balance in applying subsection 15(2) and paragraph 20(1)(j) to a series of loans or other transactions and repayments.

So if a shareholder’s spouse were to take out a corporate loan and repay that amount before the year end (e.g. August 31st), and then shortly thereafter take out “substantially the same amount” as was repaid before the corporation’s year end, then the Canada Revenue Agency may deem such transactions to be “a series of loans or other transactions and repayments” – for which the spouse will need to include the amount as income under s. 15(2).

The Pros and Cons of Corporate Bank Loans

The first thing that comes into a prospective business owner’s mind when sourcing for money to start up their business is to go to the bank. It’s convenient, safe and regulated, why would you go anywhere else?

But people must keep in mind that for most things in life, there are its pros and cons. Before you jump on the corporate banking business loan bandwagon, take a while to consider your options and make an informed decision.

The Advantages

Convenience and multiple loan options – Besides a standard business loan, banks can provide a selection of loan choices for you to consider. Even non-commercial loans that are able to be used for business purposes including personal and home-equity. What’s more is that there’s probably a commercial bank no more than 10 minutes from your house.

The bank has little to no control over how you spend the money – If the bank reviews your business plan and approves the loan to you, the money is essentially yours to do with as you wish. Since you are already in agreement with the bank on the interest rate for them to earn from you, they have little to no say what you do with the money. If you decide to use it all to travel the world instead of starting a business, well that’s your choice (although not a very good one).

This is a non profit sharing arrangement – Unlike business partners, venture capitalist funds or any other sources of capital, the bank is not entitled to any of your profits. Besides repayment of the loan plus interest, you do not need to split your profits between any other investors.

Interest rates may be low – The interest rates the bank can offer may be lower than other sources of financing such as credit cards and finance companies. Although not as low as borrowing from friends and family of course.

Commercial loans payments are often tax-deductible – You will need to check with your local tax department, but you may be able to get tax deductions related to the interest payments you are making on your business loan.

The Disadvantages

It may be hard to get a loan – Banks will probably require you to show them your business plan and convince them that your business has a chance of making a profit. If they don’t believe in your product/ service they could easily refuse you the loan. This is to ensure that when they loan out money, they are sure to get it back. Also, standard business loans are often limited to pre-existing businesses that have a financial history of success.

Application for a loan can be lengthy – Bank loans may require more information and a longer review process compared to other types of sources.

Collateral is usually required – A commercial institute usually requires collateral on the business loan, although this would probably not be required from other types of lenders. This may be quite risky if the collateral that you have to put up is your house or other family possessions.

You may not get all you ask for – Unlike a housing loan, which barely needs any persuasion to qualify for, you may not be able to get 80-100% funding for your business. The return on housing loans is so much better for banks that for a business loan, unless it’s quite small, you may only receive 75% of what you ask for. This varies from bank to bank.

So weigh your options before taking a corporate loan from a financial institution such as a bank, it may actually be better for you to find other sources of funding. Friends and family are always a good place to start. Just consider the pros and cons as laid out above and it will help you to come to an informed decision.