Many small business loans are secured by collateral, such as property or equipment, to provide security to a lender in case a borrower is unable to repay. The collateral coverage ratio (CCR) is used by lenders to set maximum loan limits on a borrower. It compares the collateral’s discounted value to the amount borrowed. Most…
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Quick Ratio: What It Is & How To Calculate It
The quick ratio is also known as the acid test ratio. It measures whether a company’s current assets are sufficient to cover its current liabilities. The quick ratio formula takes a company’s current assets, excluding inventory, and divides them by its current liabilities. A quick ratio of 1.0 or higher indicates that a company can…
The Prime Rate: What It Is & Why It Matters
The prime rate is used as a base rate by banks to which an additional percentage of interest is added based on both the creditworthiness of the borrower and the risk represented by the type of debt. It’s used for loans offered by banks and, in many cases, by alternative lenders. The prime rate is…
The Current Ratio: What It Is & How To Calculate It
The current ratio, also known as the working capital ratio, measures if a company’s current assets are sufficient to cover its current liabilities. The current ratio divides a company’s current assets by its current liabilities. Current assets are defined as cash and other equivalents that can be converted to cash within one year. Current liabilities…
SBA Form 1368: What It Is & How To Fill It Out
When you apply for an SBA disaster loan such as the Economic Injury Disaster Loan (EIDL) or Military Reservist Economic Injury Disaster Loan (MREIDL), you’re required to fill out SBA Form 1368 as part of the application process. SBA Form 1368 allows small business owners the opportunity to provide details about the economic impact of…
How To Terminate a ROBS 401(k) Plan
Ending your ROBS 401(k) plan requires following a series of steps to ensure you’re in compliance with the IRS. If it’s not carefully executed, the termination of a ROBS 401(k) can result in fines from the IRS due to filing mistakes or other errors. Communicating with your ROBS administrator, outside legal counsel, and your certified…
SBA Form 413: How To Fill Out the SBA’s Personal Financial Statement
SBA Form 413 is a personal financial statement used to apply for SBA 7(a), SBA 504, and Small Business Administration (SBA) Disaster loans. Your lender will incorporate the personal financial information you report into its analysis of your company’s creditworthiness and repayment ability. To complete SBA Form 413 quickly and easily, have your financial paperwork…
The 5 C’s of Credit: What Lenders Look For
Most lenders incorporate the 5 C’s of credit to understand how likely you’re to repay your debt. The five C’s of credit are: Character: This measures your reliability and trustworthiness as a borrower. Generally, lenders will evaluate your credit score, credit history, and how you’ve handled your debt obligations. Capacity: This considers your level of…
6 Best Unsecured Business Loans for 2022
While many lenders require business loans to be supported by collateral, such as real estate or equipment, there are several good options available for unsecured business lending. A line of credit can provide a business the ability to access funds on a repetitive basis to cover occasional cash flow needs while a short-term loan will…
SBA Line of Credit: CAPLine Rates, Terms & Qualifications
Small Business Administration (SBA) CAPLines (SBA lines of credit) provide businesses with up to $5 million for recurring cash flow needs. The SBA offers four CAPLine programs that are meant to fill different business needs, including seasonal funding, specific contract financing, funding to construct residential or commercial real estate, and general working capital financing. SBA…
SBA Express Loans: What They Are & How to Apply
A Small Business Administration (SBA) Express loan provides up to $350,000 in financing and is ideal for businesses seeking a smaller amount of working capital or equipment financing more quickly as compared to an SBA 7(a) loan. SBA Express loans feature interest rates of 4.5% to 6.5% above the prime rate and typically have a…
SBA Microloans: What They Are & How To Apply
The Small Business Administration (SBA) microloan program is one of the most popular in the United States. An SBA microloan is a small business loan ranging from $500 to $50,000 that’s provided by an intermediary lender. The SBA provides microloan funds to the intermediary at a discounted rate. The intermediary then makes loans to small…