Tag Archive for unsecured loans

Sources of funding for small businesses

Q: Can you please offer various options for securing, grants, loans and other financial aid for small businesses?

A: To be clear, there are virtually no grants to be had for a small business unless yours is a nonprofit entity. A search of the internet will help you locate information on grant writing and sources of funding.

However, for those businesses seeking loans and financial aid, the following are options you can pursue:

Family amp; friends are a good place to begin if you are just starting out with limited funds, anyone who may have an interest in seeing you succeed. Traditional sources of funding are hard to come by for a startup business.

Crowdfunding is where good people who want to give back pledge small amounts of money (typically $15 to $50) without expectation of payback. Crowdfunding websites include www.kickstarter.com and www.rockethub.co.

Micro lenders like www.Kiva.org make loans to minorities and low to moderate income individuals. Loans are up to $10,000 at no interest; however, they must be repaid within two to three years. www.us.accion.org lends to both startups and established small businesses. Interest rates start at 8.99 percent for terms ranging from six to 60 months.

Banks want to see a credit score of at least 650 with collateral to secure their loan and generally are prohibited from making unsecured loans. In addition to collateral you must show that you have the skills and background to be successful. A written and thoughtful business plan is a good place to start.

Small Business Administration loan guarantees will help member banks to be more accepting of your loan application. However, SBA fees will add 2 to 3 percent to the interest rate charged by the bank.

Credit unions are nonprofit organizations that, while still adhering to common sense underwriting standards, may be more flexible than banks in making loan decisions for their members.

Angel investors are individuals looking for a higher rate of return than they would receive from more traditional investments. They expect an average 26 percent annual return and most want a 5 to 25 percent stake in the business. Typical investments range from $150,000 to 1.5 million. In addition to their investment, you can benefit from their

advice.

Venture Capitalists are like Angel Investors, only they prefer bigger deals with established businesses. Generally their investments start at the $500,000 level and can go much higher. They will usually want a seat on your board, an equity interest, and expect the business to be acquired within five to seven years. Local angel and venture capital networks can be found online.

Note Some subject matter contained herein was taken from a document created by Doug Carleson, a former SBA lender and current Richmond SCORE volunteer. Gray Poehler is a volunteer with SCORE Naples. Counselors can assist and offer advice concerning management issues facing your small business. Counseling is free. If you would like to register for counseling or have a question, please call 239-430-0081 or fill out the form at http://naples.score.org/mentors. A counselor will contact you within 48 hours. Please include your name, email address and a contact phone number.

Unsecured lending jumps 30% ahead of interest rate caps

JOHANNESBURG – In the six months after government issued proposed caps to charges on loans, unsecured credit ballooned by almost 30%, suggesting that lenders were maximising prevailing high interest rates before lower legal limits rained on their parade.

Unsecured lenders embarked on a lending spree in the months before caps to interest rates and fees came into effect, data from the National Credit Regulator’s (NCR) Consumer Credit Market Reports (CCMR) reveal.

From levels above R21 billion for the quarter to December 2013, unsecured credit growth fell during 2014 and the beginning of 2015, before spiking upwards for the six months to December 2015 immediately after the Department of Trade and Industry (dti) first published the draft recommendations on caps to rates and fees towards the end of June 2015.

It was proposed that the maximum prescribed rate on unsecured credit transactions be slashed from 32.65% to 24.78%.

Short-term loans, which have also seen interest rates reduced, show a similar increase.

Source: NCR data, Moneyweb graph.

Credit providers warned of the unintended consequences of this dramatic reduction in interest rates, which they said would see the credit taps tightened and consumers forced to source loans from unregulated loan sharks.

They then promptly went on a lending spree, presumably to grant as much credit as they could at the prevailing higher interest rates.

Larger loans granted over a longer term picked up during this time, according to the NCR’s data.

Following widespread consultation with industry, the maximum prescribed rate on unsecured loans was changed to the repo rate plus 21% (currently 28%).

The final regulations were published in November 2015 and came into effect in May.

Pullback in unsecured lending

Unsurprisingly, new unsecured loans granted in the first three months of this year have fallen by 16% to R18.9 billion, as credit providers pulled back following a bumper six months and in a weaker economic environment.

That lending ramped up in the months following the release of proposed caps to rates and fees is also reflected in the total outstanding gross debtors book. This provides a snapshot of the total unsecured loans still to be repaid at a given point in time.

This book was on a declining trend, but has spiked upwards following last years lending (borrowing?) spree. From R162 billion at September 2015, it ended March 2016 at R165 billion.

Source: NCR data, Moneyweb graph

While some credit providers have cautioned that short-term and payday lenders are filling the gap left by a contraction in unsecured credit, the NCR counters that short-term credit is unlikely to fill such a large gap.

For the three months to March 2016, R3.2 billion in new short-term credit was granted, a decrease of 28.5% from the previous quarter. Short-term credit refers to loans of less than R8 000 granted over terms of six months or less.

Almost 52% of the amount granted was for loans of less than one month, according to the NCR’s head of statistics, Ngoako Mabebe. Some 63% of the numbers of accounts granted were for one month or less, he said.

“Larger credit providers account for a considerable chunk of the value of short-term loans being extended,” Mabebe told Moneyweb.

A number of smaller credit providers including, for example, those lending out of the boots of their cars, continue to go unaccounted for.

In an attempt to curb consumer abuse, all credit providers are now required to register with the NCR.

Previously, entities needed to either have loan books amounting to R500 000 or 100 credit agreements in order to have to register. This threshold has been scrapped.

“Consumers are advised to obtain credit only from duly-registered entities, as doing so will advance their rights as provided in the National Credit Act. Consumers who are in doubt about the registration status of any entity can contact the NCR for verification,” said Nthupang Magolego, senior legal advisor at the NCR.

SAD ex-minister Phillaur, son in the dock over multiplex project

Deepkamal Kaur

Tribune News Service

Jalandhar, July 7

Levelling allegations against SAD ex-minister Sarwan Singh Phillaur and his son Damanvir Phillaur, a UK-based NRI has said the duo had committed a fraud of Rs 9.1 crore with him and two other NRIs in a commercial project on the Jalandhar-Phagwara stretch of the National Highway No. 1, the work of which is lying halted for the past many years.
NRI Nirmal Singh Bajwa of Dyalpur village in Phillaur has forwarded his application to Deputy Chief Minister Sukhbir Badal, writing that he is an NRI businessman settled in the UK and came into contact with the ex-minister during his visit there.
Sarwan Singh Phillaur made false promises to lure me and others to invest in their upcoming multiplex project in Punjab-Grand Multiplex Projects Ltd, whose director was his son Damanvir Singh. They floated a public limited company for the purpose of the construction of a multiplex, shopping mall etc, he narrated.
Bajwa added that while he had invested Rs 4.5 crore, other two NRIs AS Toor and Shaminder Singh Dhaliwal pooled Rs 3.35 crore and Rs 1.25 crore, respectively.
Bajwa has alleged, The Phillaur father-son duo, who were in control of the management of the company, allotted 10.03 lakh equity shares of Rs 10 aggregating to Rs 1 crore to the applicant group againstour investment and misappropriated the rest of the money by falsifying accounts of the company to show it as the share application money or unsecured loans. They falsely assured us to allot further shares after seeking the necessary approvals, but eventually did not allot the same for reasons best known to them.
He further alleged that no company meetings were ever called and appointments and removal of directors were made on the basis of the forged documents of the company. He has sought registration of a case against them under Sections 406, 420, 467, 468 and 471 of the IPC.
Damanvir Phillaur, on the other hand, has countered all these allegations, saying the entire episode was politically motivated to tarnish his and his fathers image ahead of the elections. The man had gone to court and withdrawn his complaint earlier. Why is he raking up the issue seven years later now?

NewBridge Bancorp (NASDAQ:NBBC) Current Analyst Ratings

NewBridge Bancorp is a bank holding company. The Bank, through its banking subsidiary, NewBridge Bank and its branch network, provides a range of banking products to small to medium-sized businesses and retail clients in its market areas. The Bank provides services, which include interest-bearing and noninterest-bearing demand deposit accounts, certificates of deposits, individual retirement accounts, overdraft protection, personal and corporate trust services, safe deposit boxes, online banking, corporate cash management, brokerage, financial planning and asset management, and secured and unsecured loans. The Banks deposit products include noninterest-bearing checking accounts, interest-bearing checking accounts, money market accounts, certificates of deposit and individual retirement accounts. Its primary lending products are commercial, real estate and consumer loans.

Vancouver fintech startup helps immigrants land on their feet

She was inspired to launch her business, which offers unsecured loans, after her own experience immigrating to Vancouver from the US four years ago.

Pareto Limited restructures debt to achieve unsecured funding across its entire portfolio

Leading shopping centre investor Pareto today announced it has entered into new unsecured loans with Absa, achieving its ambitious goal of ensuring unsecured finance across its entire portfolio.

How to improve your credit score before applying for a home loan

It is advisable for home loan seekers to obtain a credit report, before applying for a large loan, such as a home loan. This report, which provides a person’s credit score, can be obtained from any one of the four credit bureaus operating in the country CIBIL, Experian, Equifax and Crif High Mark. A score between 750 and 900 is considered as excellent. However, if the score is below 675, one may need to improve the credit score before applying for a home loan.

“A good credit score can help you get a loan at a more attractive rate of interest. This can lower your interest burden by lakhs of rupees, during a loan tenure of 15-20 years,” asserts Sujit Kumar, a Delhi NCR-based lawyer, who improved his credit score, before applying for a home loan.

Immediate measures When it comes to improving your credit score, first check for any error in your lender’s record books. While you may have repaid a loan, the bank’s records may still be showing some credit outstanding against your name. Rectifying such mistakes, will improve your credit score.

Disagreements between a lender and a borrower may also be the cause of a poor credit score. Resolving such disagreements, paying the dues and closing the loan account can boost your score.

The most important thing for a good credit score, is to make all the payments on time. If you have missed a particular payment, make amends right away by paying up.

Consolidating your credit will also help. You may have taken five personal loans. Consolidating all these loans, into a single one, will look better on your records, by indicating that you are not excessively credit-hungry.

Also, when it comes to credit card bills, many borrowers pay up only the minimum amount and revolve the rest of their credit card loan. This is a bad practice, as the rate of interest on credit card loans is very high. If you have been doing so, replace the credit card loan with a personal loan, which will bring down your interest charges and enable you to meet your dues.

Long-term measures In case you have a delinquent loan against your name and you dont have the ability to repay right away; this is a situation that can only be remedied over a period of time. If you have a high proportion of unsecured loans, vis-à-vis secured loans, you should try to alter the mix over a period of time.

Another behavioural change that you must make, is to avoid shopping for loans excessively. In trying to bag the best possible deal, do not apply or make enquiries at 15-20 banks. Each time you make an enquiry, it gets registered against your name and indicates that you are credit-hungry.

Also read: These are the factors that decide whether you get a home loan or not

If a person is too hungry for credit, it reflects poorly on his credit score,” cautions Arun Ramamurthy, director, Credit Sudhaar Services.

Suppose that your credit card provides you with a credit limit up to Rs 2 lakh, dont use up the entire limit as this is also perceived as a sign of credit hunger.

Despite your best efforts, if you are not able to achieve a good credit score on your own, then, there are professional agencies that you can turn to, such as Credit Sudhaar, etc. These agencies can help you to achieve the right mix of secured and unsecured loans. They tell you about the right number of credit cards you should own, given your economic status. They also inform you about the maximum percentage of credit on your credit card, beyond which you should not go.

By: Housing.com/news

Here’s why politicians trying to kill Alabama’s payday loan industry are misguided (opinion)

Payday lending is often portrayed as a manipulative industry only concerned with preying on naïve consumers. Thus, it is no surprise that Alabama policymakers are calling for restrictions against the industry.

Without an understanding of economics and finance, however, well-intended regulators could harm the very payday loan customers they are hoping to help.

It is important to recognize that payday lending meets an important need in the community. According to a survey by Federal Reserve economist Gregory Elliehausen, over 85 percent of payday lending customers reported that they took out a payday loan in order to meet an unexpected expense. While we all face unexpected expenses, the typical payday lending customer finds these circumstances especially difficult since traditional lenders and even close friends and family are often reluctant-or unable-to make unsecured loans to them given their poor credit histories.

While the need for short-term lending often isn’t disputed, reports of Annual Percentage Rates (APR) of several hundred percent often invoke anger and hostility, and provide the impetus for calls to restrict this rate to under 40 percent. But this is an inappropriate portrayal. The typical payday lending loan is under $400, lasts under four weeks (even including consecutive new loans and renewals), with an interest charge under $19 per $100.

Where does the high APR come from, then? For example, let’s assume you take out a $400 loan for two weeks with a total finance charge of $76. That amounts to a nearly 495 percent APR using a common calculation. Basically, the APR is calculated by projecting the interest rate for an entire year! Looking at the APR, however, is extremely misleading because the vast majority of these loans last only two to four weeks. Limiting the APR to 40 percent would mean that a payday lender could only charge $6.14 for a two-week loan of $400.

Would you be willing to lend an unsecured $400 out of your own pocket to a financially risky person for two weeks for only $6? Certainly not! Especially if you consider that, as a payday lender, you would have to pay rent on a building, pay your electricity bill, make payroll, and incur expected losses on unpaid loans.

Even without interest rate restrictions, payday lending isn’t a very lucrative business; a Fordham Journal of Corporate #038; Finance Law study finds that the typical payday lender makes only a 3.57 percent profit margin. That is fairly low when you consider that the average Starbucks makes a 9 percent profit margin and the average commercial lender makes a 13 percent profit. Interestingly enough, the average bank overdraft charge of $36-an alternative option for payday lending customers-could easily result in an APR of several thousand percent.

In a review of the research on payday lending in the Journal of Economic Perspectives, economist Michael Stegman recommends that policymakers resist implementing legislation restricting the interest rate charged by payday lenders and instead examine ways to help prevent the small number of customers who are caught in a cycle of payday lending debt. This is because the vast majority of payday lending customers pay off their debts and voluntarily agree to the interest rates charged. In fact, Gregory Elliehausen finds that over 88% of payday lending customers were satisfied with their most recent loan from a payday lender. Almost no payday loan customers reported that they felt they had insufficient or unclear information when taking out their loan.

Christy Bronson, a senior economics student at Troy University, conducted a survey to see if these national results held true here in Alabama. The results from her study on payday lending customers in the Wiregrass area corroborated these national results. A full 100 percent of respondents reported being satisfied with their most recent payday loan experience and 78 percent reported being satisfied with their payday loan experiences overall. If most payday lending customers were caught in a vicious debt cycle, you would expect customer satisfaction to be much lower. Survey participants in the Wiregrass area also overwhelmingly indicated that they were satisfied with their knowledge and understanding of the terms and conditions of payday lending. The survey also found that payday lending customers in the Wiregrass area used payday loans moderately and found that the overwhelming majority of payday lending customers do not consider themselves to be in financial difficulty as a result of using payday loans.

There is a logical explanation for these findings. Payday lenders don’t profit from customers who can’t repay their loans. Cycling debt only increases the risk that the payday lender will not get their interest or principal back and will lose out to secured creditors in a bankruptcy. This is why many payday lenders in Alabama came together to form Borrow Smart Alabama, an organization designed to better inform payday lenders and to set a code of ethics and accountability for payday lenders in Alabama.

Running payday lenders out of business with severe interest rate restrictions or costly regulation won’t keep customers in urgent need of cash from borrowing money. We know from experience that banning goods or services that people want doesn’t prevent a black market from emerging. Just look at examples of alcohol, drug, and gun prohibition. Payday lending customers, lacking the credit worthiness required for traditional lines of credit, will only be forced to use less desirable-and more expensive-credit options such as loan sharks, online lending, or overdrawing their bank account or credit card.

Daniel J. Smith is the associate director of the Johnson Center at Troy University. Follow him on Twitter: @smithdanj1. Christy Bronson is a senior economics major at Troy University.

Can a mortgage lender claim it’s part of Indian tribe, offer home loans at 355 percent? Money Matters

Q: I heard a commercial for a bank offering mortgages but I was a little thrown off when the ad said their interest rates are too low to disclose on the radio. The phone number for the company is 877-860-CASH. Whats up with this company?

DS, Euclid

A: The name of the company is CashCall Inc./CashCall Mortgage. If that doesnt set off alarms for you right out of the gate, then I dont know what would.

First, if you look up the company through the Better Business Bureau, youll see it has a C-minus rating, primarily because its been sued or faced legal action from various state agencies in California, Florida, New York, Pennsylvania, Maryland, Colorado, Minnesota and a bunch of others.

Among the cases youll find:

In August 2013, New Yorks attorney general filed suit against CashCall Inc. forviolating the states usury and licensed lender laws. The companies charged annual rates of interest from 89 percent to more than 355 percent to thousands of New York consumers, the BBB says on its web site. These interest rates far exceed the maximum rate allowed under New York law, which is limited to 16 percent for most lenders not licensed by the state.

And in December 2013, the Consumer Financial Protection Bureau filed suit against CashCall Inc., saying the company issued loans to consumers but claimed it didnt have to obey consumer protection laws. The CFPB said CashCall said the funding for the loans was provided by Western Sky, which claimed to be part of an Indian tribe, and that that status would void any licensing requirements and other consumer protections.

The CFPB alleges however, that Western Sky was not in fact part of an Indian Tribe and was actually just a front to allow CashCall to violate state and federal laws, according to the list of government actions against CashCall. The CFPB suit seeks to order CashCall to forfeit these loans and award civil money penalties.

In both of these cases, the actions are pending.

And last year, the company settled with the Michigan Department of Insurance and Financial Services. The company was accused of servicing and collecting loans with interest rates that ranged from 89 percent to 169 percent. CashCall agreed to cease and desist and establish a $2.2 million settlement fund to be distributed to all Michigan consumers with Western Sky loans.

Other consumer complaints against CashCall say the company charged late fees on payments that werent late and took money out of customers checking accounts without authorization. (It apparently requires direct debit. Shocker.)

In one complaint, a customer said he borrowed $10,000 from CashCall 7-1/2 years ago and had been paying $333 a month. He checked his remaining balance and found it was $9,827.33. He had paid out $29,637 on a $10,000 loan and was told he still owed $9,827. So he had paid only $123 in principal in seven years?

As far as the company saying it couldnt disclose its interest rate, that should be alarming. Its also strange because the company states todays interest rate pretty prominently at the top of its home page. Today, its 3.38 percent, with no closing costs. (Another red flag.)

In any case, thats less than the national average, according to Freddie Mac. (Another red flag.) And its in line with local banks that arent shrouded in so much mystery and dont have such long records of complaints alleging egregious behavior. And the local banks are overseen by many layers of regulators, and they dont claim to be insulated from government regulation because of alliance with any Indian tribes.

Finally, Ill be honest; Im not completely sure whether the company is offering mortgage loans, or unsecured loans without the home as collateral. In my research, I found references to both. Maybe they actually offer both. It doesnt really matter.

I wouldnt take out a loan from a business with this many question marks.

Q: I received a call from my nephew, who gave me this sob story about him breaking his nose (so he would sound differently), getting arrested for DUI and needing $1,500 to get him out of jail.

Banks and Marketplace Lenders Absorb a Blow

In a blow to banks and the marketplace lending industry, on June 27, 2016, the US Supreme Court denied the petition by Midland Funding to hear the caseMidland Funding, LLC v. Madden (No. 15-610). That case involves a debt-collection firm that bought charged-off credit card debt from a national bank. The borrowers legal team argued that a buyer of the debt was subject to New York interest rate caps even though the seller of the debt, a national bank, was exempt from those state law rate caps due to preemption under Section 85 the National Bank Act. The borrower won on this startling argument and the debt collector appealed to the Supreme Court. The Office of the Comptroller of the Currency (the regulator for national banks), the US Solicitor General and various stakeholders in the banking and lending industries vigorously argued that the 2nd Circuits decision contravened established law. The fear was that, if preemption strips loans of their usury-exempt status when the loans are sold, then banks ability to sell consumer loans, including the common practice of banks originating and quickly selling those loans to investors and marketplace lenders, would be significantly limited, if not curtailed.

The Supreme Court denied the debt collectors appeal without explanation, which means the 2nd Circuits ruling is binding law in that Circuit, which includes New York, Connecticut and Vermont. However, the 2nd Circuits ruling is not the law outside of the 2nd Circuit.

As of today, these are some of the key takeaways for banks and the lending industry:

  1. For the immediate future, consumer loans originated to consumer borrowers in states other than New York, Connecticut and Vermont are not affected.
  2. Conceivably, the implications of the case could largely disappear, depending on what happens upon remand to the District Court. If the District Court decides that the loans were valid when made notwithstanding usury caps that only apply to a subsequent buyer of the loan, then the practical effect would be to return jurisprudence to its pre-Madden norm. It is likely that the OCC and the banking industry will vigorously pursue every opportunity to reach that result.
  3. Many marketplace lenders originate loans through state-chartered banks, which rely on interest rate and fee exportation under Section 27 of the Federal Deposit Insurance Act, not preemption under the National Bank Act. However, most industry observers are very concerned that future court challenges will not distinguish between exportation and preemption and will also discard exportation with respect to state interest rate caps.
  4. The Supreme Courts ruling makes New York, already a difficult state for a non-bank lender to make consumer loans, even less hospitable. An investor or marketplace lender that wants to buy New York consumer loans from a bank must have a lender license to charge up to 25% or be subject to the 16% rate for unlicensed lenders. This will make unsecured personal loans unprofitable for a large segment of consumers and accelerate the trend of many marketplace lenders avoiding New York altogether. Connecticut rate caps for unsecured loans range between 11% and 17%, which makes that state even less profitable than New York. Vermont has a similarly restrictive rate environment. All three states will likely see a substantial withdrawal from the market by a variety of consumer lenders. In addition to the withdrawal by non-banks, banks will see a steep increase in their costs to make or hold consumer credit in these three states. Banks will need to sharply discount consumer debt if they wish to sell it to a non-bank or, if the discount is too steep to be palatable, simply hold the debt on their own books. Either way, the increased costs and reduced profitability will make consumer lending less available and more expensive to the consumer.
  5. Securitization of consumer debt originated in the 2nd Circuit states is much more difficult (and probably impossible if the stated rates on the debt exceed state law usury caps for non-banks). The current practice is to use a national bank as the trustee of the securitized debt to rely on the traditional preemptive power of a national bank. If securitization is limited or stopped, this will also increase the costs of making these loans.
  6. Business purpose lending is not affected at all because state law usury caps only apply to consumers. In the future, we may see sole proprietor businesses attempting to assert consumer defenses, but so far this has not succeeded in a meaningful way. Similarly, real estate lending (including consumer mortgages), is generally not affected as such lending is generally excluded from state law usury caps.
  7. Some marketplace lenders are strategically pursuing their own lender licensing to give themselves the option of originating loans without a bank and to take advantage of the higher rate caps available to licensed lenders. Lending under ones own license also avoids a true lender lawsuit in which the consumer argues that the originating bank should be ignored and that consumer compliance should be evaluated solely based on the purchasing investor / marketplace lender.

So, while marketplace lenders and banks have taken a blow in the Supreme Courts refusal to hear Madden v. Midland, the blow is not as bad as it could have been because the effects are limited to the 2nd Circuit. And, even those effects may be muted depending on future developments in the case. Business practices can be adjusted. But, as is usually the case with bad law, consumers will pay the price in terms of more expensive and less available credit.

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