Lending Library

SBA loans are managed by banks as well as various online and nonprofit lenders. The Small Business Administration (SBA), which oversees this program, provides annual reports detailing the number of loans approved by each lender. Below, we highlight the SBA lenders that issued the highest number of SBA loans in 2023, categorized by program.

Best SBA 7(a) lenders for 2024.

The SBA 7(a) loan program remains the most sought-after option, offering flexible terms and various uses like working capital, equipment purchases, and real estate. Here are the top SBA 7(a) lenders (excluding Express and Community Advantage) by loan approval count, along with key details:

Best for speed to funds.

BayFirst National Bank

BayFirst offers standard SBA 7(a) loans and a specialized "BayFirst Bolt Loan" product--a loan up to $150,000 with expedited processing times. They are an SBA-approved lender.

Funding amount: Up to $5 million- General; Up to $150,000- BayFirst Bolt Loan

Term length: Up to 25 years- General; Up to 10 years - BayFirst Bolt Loan

Minimum credit score: 675 - General; 700-BayFirst Bolt Loan 

Time to funding: 2 weeks - General; A few days - BayFirst Bolt Loan

Best for a comprehensive business solution.

Newtek Small Business Finance

Newtek provides comprehensive solutions for businesses from SBA loans to business insurance and payroll processing. They are an SBA-approved lender.

Funding amount: Up to $5 million. 

Term length: Up to 25 years. 

Minimum credit score: Not disclosed

Time to funding: Not disclosed

Best for large loan amounts.

Live Oak Bank

Live Oak Bank is an online financial institution that specializes in providing a substantial volume of larger SBA loans, with an average loan size of $1.7 million in 2023. As an approved SBA lender, they are well-positioned to support businesses seeking funding.

Funding amount: Up to $5 million. 

Term length: Up to 25 years. 

Minimum credit score: Not disclosed

Time to funding: Not disclosed

Best non-bank lender.

Ready Capital

Ready Capital is a non-bank lender focused on SBA and USDA loans. They are an SBA-approved lender.   

 Funding amount: Up to $500,000 through IBusiness Technology Platform

 Term length: Up to 25 years. 

 Minimum credit score: 640

 Time to funding: As soon as six days after approval

Best for customer care.

Cadence Bank 

Cadence Bank provides a variety of SBA loan products backed by excellent customer service, and they are an SBA-approved lender.

Funding amount: Up to $350K

Term length: Up to 10 years. 

Minimum credit score: 650. 

Time to funding: As soon as two weeks

Best Community Advantage lenders.

A Community Advantage loan is a type of SBA 7(a) loan specifically designed to assist underserved markets by financing small businesses that may not qualify for traditional bank loans.

Below, we detail three noteworthy lenders who funded the most Community Advantage loans in 2023:

Best for businesses in major cities

CDC Small Business Finance Corporation

Small Business Finance Corporation provides loans to startups and small businesses across several major metropolitan areas. They serve a variety of industries, with dedicated specialists focusing on home healthcare and childcare sectors. Additionally, they offer complimentary business counseling to support their clients.

Funding amount: $10K-$350K

Term length: 6-10 years

Locations: Arizona; Atlanta, Georgia; California; Dallas-Fort Worth, Texas; Detroit, Michigan; Miami, Florida; Nevada, Washington, D.C. Metro Area

Requirements: No minimum credit score, sufficient cash flow to meet payments, business projections for early-stage/startups

Works with startups? Yes, with a 10% downpayment and management or industry experience

Best for businesses in Southern states

LiftFund

LiftFund provides access to capital for small businesses and startups throughout the Southern states. LiftFund also partners with other organizations to offer specialized loan programs to veterans and businesses in certain cities.

Funding amount: Up to $350K 

Term length: Terms usually range from 7-10 years.

Locations: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Missouri, Mississippi, New York, New Mexico, Oklahoma, South Carolina, Tennessee, and Texas.

Requirements: Cash flow sufficient to meet payments

Works with startups? Yes with 20% owner injection.

Best for businesses in Wisconsin

Wisconsin Women's Business Initiative Corporation 

This nonprofit organization specializes in providing financial and educational resources to entrepreneurs in Wisconsin. In addition to loans, the nonprofit offers one-on-one business coaching and operates as a Veterans Business Outreach Center.

Funding amount: Up to $350K

Term length: Up to six years 

Locations: Wisconsin

Requirements: Business plan with three years of financial projections

Works with startups: Yes- if the owner has extensive industry experience.

Top SBA Express Loan lenders.

A subset of the SBA 7(a) program, SBA Express loans are designed to provide rapid access to financing for small businesses, with approval times significantly shorter than traditional SBA loans. Below are the top three SBA Express loan lenders of 2024 based on number of SBA Express loans approved in 2023:

The Huntington National Bank

Huntington National Bank is one of the most experienced SBA lenders having approved the most SBA Express loans in 2023. Current customers can apply online for a loan of up to $350,000. The bank also runs the Lift Local Business Program which supports minority, woman, and veteran-owned small businesses through business planning support, free financial courses, and loans with reduced fees and lower credit requirements. They are an SBA-approved lender.

TD Bank

TD Bank provides SBA Express Loans of up to $350,000 and features an online application for loans up to $250,000. Beyond their loan program, the bank also manages an equity fund specifically designed for SSBICs and CDFIs, aimed at offering small business loans to minority-owned and women-owned enterprises. As an SBA-approved lender, TD Bank is committed to supporting diverse business initiatives.

U.S. Bank

U.S. Bank also offers Express loans up to $350,000 with an online application available for amounts up to $250,000. The bank also offers a Business Diversity Lending program for minority, women, and veteran-owned businesses for loan products outside the SBA program. They are an SBA-approved lender.

Top SBA 504 Loan lenders.

SBA 504 loans are designed to provide financing for major fixed assets, such as real estate and equipment. SBA 504 loans follow a 50-40-10 model where 50% of the total loan amount comes from a bank loan, a Certified Development Company (CDC) provides 40% in the form of a debenture or bond, and the remaining 10% is the down payment from the small business owner. 

A Certified Development Company (CDC) is a nonprofit organization that facilitates the SBA 504 loan program. Each CDC operates within a designated area and is tasked with working closely with small businesses and lenders to approve and process 504 loans. We list the CDCs with the greatest amount of CDC loans approved in 2023 below. You can search for a CDC that operates in your state on the SBA website.

How to find an SBA microlender.

An SBA microloan is a loan of up to $50,000 administered by a nonprofit lender. Similar to a CDC, these lenders operate locally. To locate an SBA microlender, start by visiting the SBA’s official website where a list of approved lenders and resource partners is available. You can also utilize the SBA’s local district offices as they often have details on microlenders in your area.

How to choose an SBA lender.

Selecting the right SBA lender involves considering several factors. Here's how to make an informed decision:

Evaluate Your Needs 

Determine the type of SBA loan that best suits your business needs. Whether it's a 7(a) loan, a 504 loan, or a microloan, understanding your requirements will help narrow down your choices.

Compare Lenders 

Research and compare lenders based on their loan offerings, interest rates, terms, and customer reviews. Look for lenders with a strong track record of supporting businesses similar to yours.

Seek Personalized Service 

Choose a lender that offers personalized support and guidance throughout the loan process. A dedicated loan officer can help you navigate the complexities of SBA lending and increase your chances of approval.

How to Get an SBA Loan through Lendio.

Lendio is an online marketplace that streamlines obtaining SBA loans for small businesses. By connecting users with a network of lenders, it allows business owners to compare financing options through a single application. Lendio's loan experts help gather necessary documents, making the process easier. Loans are typically funded in under 30 days, depending on the lender and documentation completeness.

Methodology

Top lenders were selected based on the number of SBA loans approved in 2023 as reported by the Small Business Administration. Lenders were also evaluated based on their lending criteria, application process and whether they are an SBA-Preferred lender.

*The information contained in this page is Lendio’s opinion based on Lendio’s research, methodology, evaluation, and other factors. The information provided is accurate at the time of the initial publishing of the page (August X, 2024). While Lendio strives to maintain this information to ensure that it is up to date, this information may be different than what you see in other contexts, including when visiting the financial information, a different service provider, or a specific product’s site. All information provided in this page is presented to you without warranty. When evaluating offers, please review the financial institution’s terms and conditions, relevant policies, contractual agreements and other applicable information. Please note that the ranges provided here are not pre-qualified offers and may be greater or less than the ranges provided based on information contained in your business financing application. Lendio may receive compensation from the financial institutions evaluated on this page in the event that you receive business financing through that financial institution.

Small business associations provide many benefits, including networking, training events, information on industry trends, and discounts on items like insurance, office products, training, and conferences. 

Finding the right associations could be the difference between getting a foot in the door, having emails or calls answered—and can ultimately help you build relationships that change the trajectory of your business.

Types of small business associations

Small business associations can range based on who is backing them, what industries they serve, what type of owners they cover, and much more.

There are government-backed associations, private associations, non-profit associations, and a wide range of more specialized groups.

Membership costs vary. Some organizations are free, while others require a nominal annual membership fee.

List of small business associations

General business associations

Some small business associations aren’t niche or industry-specific. They can dispense advice to owners of any type of small business. 

Often they know who you should know, can connect you with mentors, or direct you to other associations for your industry. 

Cross-disciplinary interaction is another upside to being a member of a general small business association. By mingling with business owners outside your area of expertise, you might find a solution to a business problem from someone who thinks differently than you do. Or you may find a partner to collaborate with to create a new product or service.

For general small business associations, the US Small Business Association (SBA) and its local partners should be your first stop. 

Most cities and many community colleges offer programs via an SBA partnership, including:

• Small Business Development Center (SBDC)
• SCORE (local chapter)
• Veteran’s Business Outreach Center (VBOC)
• Association of Women’s Business Center (AWBC) (local chapters)

Other general associations to consider include:

• Business Network International (BNI) (local chapter)
• National Federation for Independent Business (NFIB)
• Entrepreneurs’ Organization (EO)
• International Council for Small Business (ICSB)
• National Small Business Association (NSBA)
• StartupNation
• National Association for the Self-Employed ( NASE)
• Alumni association for your college or university

Chamber of Commerce Small Business Council

Chambers of commerce deserve a special spotlight based on their purpose: to advocate for local businesses, to build a community, and to support the local economy.

Most states and cities have a chamber of commerce. Oftentimes, this is a great place to start when searching for new groups to join.

Membership isn’t limited to your physical location, so consider joining wherever you’d like to grow your business. Your business can be a member of multiple chambers of commerce.

To find a specific state or city chamber of commerce, either check the list on ChamberofCommerce.com or search online using the keywords “Chamber of Commerce + [your state/city].”

There are also chambers of commerce for specific minority groups:

• US Black Chambers, Inc. (USBC)
• US Hispanic Chamber of Commerce, Inc (USHCC)
• US Pan Asian American Chamber of Commerce (USPAACC) (regional chapters)
• Association of Latino Professionals for America

Veteran-owned business associations

If you’re a veteran-owned small business looking for veteran-owned support, you should consider the following groups:

• National Veteran Small Business Coalition (NVSBC) (local chapters)
• National Veteran-Owned Business Association (NaVOBA)
• Office of Veterans Business Development Resources

Woman-owned business associations

• National Association of Women Business Owners (NAWBO)
• American Business Women’s Association (ABWA)
• National Association for Female Executives (NAFE) (local chapters)
• Women’s Business Enterprise National Council (WBENC) 
• Women’s Business Development Council (WBDC)

Minority-owned business associations

Minority-owned businesses can join these associations: 

• Minority Business Development Agency (MBDA) (business centers)
• National Minority Supplier Development Council (NMSDC) (local chapter)
• Black Business Association (BBA)
• Hispanic Business Enterprise (HBE)
• Asian Business Association (ABA)

Industry-specific business associations

Learning from other disciplines has its perks, but sometimes you need to hear from your peers (and learn what your competition is up to), so don’t overlook associations specific to your industry.

Examples include:

Marketing

• American Marketing Association (AMA)
• Association of National Advertisers (ANA)

Construction

• Associated General Contractors of America (AGC)
• American Subcontractors Association 

Retail

• National Retail Federation (NRF) (memberships for startups)
• Retail Merchants Association (RMA)

Small business communities

For something less formal, though still helpful, you can also join small business communities and online groups.

Whether that’s visiting the r/smallbusiness thread on Reddit, or joining more specialized small business communities, you can hear and learn a lot from your peers about entrepreneurship, real estate, SEO, and a range of other topics related to growing your business.

Online groups are also great for networking. They offer virtual as well as in-person events. Consider joining both industry-specific and location-specific groups. 

Search for options on:

• LinkedIn groups
• Facebook groups
• Meetup groups

Tips for reviewing business associations

As you consider which associations to join, keep an open mind about how an association’s location or niche fits your business needs. 

For example, both the local and national chapters of SCORE provide value. The local chapter can provide in-person connections while the national chapter can help connect you with other businesses similar to yours that aren’t direct competitors. 

From a niche perspective, it can be useful to join cross-industry associations. If your business sells outdoor equipment, perhaps joining both a retail association and an outdoor association like the Outdoor Industry Association could boost your revenue.

And don’t “join and forget” the club. Spend time building relationships with other members as those business contacts could evolve into customers, partners, or mentors. The value of associations comes from being an engaged member.

It takes time and might cost a bit to join small business associations, but your business can reap the benefits of networking and advocacy opportunities in the long term.

Whether you're looking to sell your business or not, it’s always important to understand how to value your company. Small business valuation methods, however, can vary in complexity, accuracy, and acceptance amongst buyers.

Here, we’ll highlight the 3 small business valuation methods you can use to make sure you have an accurate understanding of your company’s true worth.

How to value a small business

There are a few so-called “rules of thumb” for valuing small businesses, but you’ll want to use them in conjunction with other business valuation methods to get the most accurate calculation.

One common rule of thumb: Use a multiple of percentage of annual sales.

The multiple depends on your business and requires research. Multiply the sales from the past 12 months of business by the multiple to get a quick, sales-based valuation. You can see valuation multiples by industry here.

Another rule of thumb: Use an SDE (seller’s discretionary earnings) multiplier. This varies based on industry and similarly requires research. For this valuation, you multiply your SDE by the multiplier. See multiples by sector here.

Along with your valuation method, there's a lot of prep that goes into valuating your small business:

1. Do you have all of the necessary numbers and information at your fingertips? Be sure to have an understanding of SDE, EBITDA, revenue, debt, and market capitalization.
2. Do you have the right paperwork available? Business valuations will require balance sheets, tax returns, deeds, licenses, and anything else related to finances.
3. Are you familiar with the state of your industry? Know your comps and the growth potential of your market.

With all of this in place, you can adopt a business valuation method.

3 methods for small business valuation

According to business acquisition platform BizBuySell, the average American business sells for 0.6 times its annual revenue.

Of course, this should only be seen as a baseline—the actual value of your company is deeply impacted by your specific situation, industry, and location.

The three methods you can use to analyze these impacts and get a true valuation of your company include comparable analysis, adjusted net assets, and discounted cash flow (DCF) analysis.

1. Comparable company analysis

Comparable company analysis, commonly shorthanded as “comps,” is a small business valuation method that evaluates a company based on the value of other companies. 

Because of this commonsense approach, it is a very common and accepted form of valuing a company. Also referred to as “public market multiples,” “trading multiples,” “equity comps,” and “peer group analysis,” this method is very similar to market-based valuation and precedent transaction analysis.

Comps often focus on multiples of EBITDA, meaning Earnings Before Interest, Taxes, Depreciation, and Amortization. 

EBITDA multiples are usually used to determine value for large corporations, while smaller businesses often look at multiples of Seller’s Discretionary Earnings (SDE). SDE is a company’s annual EBITDA plus the annual compensation paid to the business’s owner.

As the name suggests, comparable company analysis calculates a business’s value by comparing it to the value of comparable businesses. 

Region, industry, and size are common ways businesses are grouped together. Small businesses are commonly compared based on enterprise value to sales (EV/S) and price to sales (P/S).

To value your company via comps, you should research the sale price of businesses similar in size, sales volume, and revenue. In most cases, you can get this information from quarterly and annual reports—or by paying for a market intelligence platform (though that can be pricey).

If you’re having a hard time gathering this information, an appraiser can ensure accurate comps analysis.

This video gives a solid rundown of how to carry out a comps analysis.

2. Adjusted net asset method

An assets-based valuation of a company will look similar to a balance sheet. For a slapdash “back of the envelope” value of your business, add up all your company’s assets and subtract all liabilities. This can give you a starting value, but it doesn’t take into account the wider market or future earnings.

The idea of the adjusted net asset method is to identify the fair market value of all of your assets, and subtract your liabilities (tangible and intangible).

The most difficult part of this method are the adjustments themselves. Adjustments can be made on the asset or liability side to reflect market value. For example, you can adjust for:

• Property: Whether real estate or personal, property book value is not always going to reflect its market value.
• Inventory: The speed of items sold, when they were stocked, and how they are accounted for (see LIFO vs FIFO, for example) are all levers when identifying the true market value of your inventory.
• Accounts Receivable: If your company has outlying collectibles, you can adjust based on whether those collectibles are expected to be paid in full or not.

Even if it doesn’t take into account the totality of your venture, an asset-based valuation can at least set a starting price.

Tim from MoneyWeek does a thorough job explaining the adjusted asset method here.

3. Discounted cash flow (DCF) analysis

To conduct a discounted cash flow (DCF) analysis, you must complete a complex formula that uses past data to predict future revenues for your business. The formula compares a company’s cash flow to its cost of capital. 

The components of the formula are:

• Cash Flow (CF)
• Discount/Interest Rate (r)
• Period number/time period (n)

A buyer looks at a DCF analysis to understand the potential future revenue of a company in comparison with the risk involved with the business.

Because the DCF analysis formula requires an intensive forecasting model, it is the most detailed and information-intensive method available to evaluate a company.

DCF analysis can be very useful for young small businesses—a new company might have a great probability of earning profits in the future even though it runs at a present loss.

Watch Warren Buffet break down the DCF approach.

How do you value a business quickly?

The most simplistic way to find the value of a company is to look at your balance sheet and subtract your total liabilities from your assets—similar to the adjusted net assets valuation method, simply without the adjustments.

“Depending on the business, the balance sheet might show tangible and intangible assets and a variety of long-term liabilities, some of which you might be able to reduce through negotiations and invoking early-termination agreements,” writes Steve Milano in the Houston Chronicle. “If it’s a complex balance sheet, you can simply take the assets you think you can sell quickly and subtract the liabilities to determine the company’s net worth for a fast sale.”

While you’ll want to get an appraiser involved and do more financial modeling before any agreement is reached, a balance sheet can give a pretty basic sense of a company’s value in a pinch.

If you have the time, it’s important to do your company the proper justice in identifying its worth, however.

You should consider much more than just physical assets and sales numbers. The value of your business could partially derive from aspects that don’t appear on a balance sheet, like your ideas, customer base, location, and curb appeal.

Even though the acronym UCC sounds like a college of some sort, it stands for the Uniform Commercial Code (UCC). And rather than hand out diplomas, the UCC was developed to regulate how commercial transactions operate.

OK—But what's a UCC filing?

UCC filings are how lenders establish their right to the assets you, the borrower, use to secure a loan. The filing serves as a lien, so that there's public record of your efforts to take out a loan.

UCC filings are made up of UCC-1 and UCC-3 filings, explained in more detail below.

What is a UCC-1 filing?

A UCC-1 is the official original UCC filing that gets made by a lender, referring to the UCC1 form that's needed in order to do so. It's effectively a public announcement lenders make that either a borrower has taken out a loan with them or is looking to take out a loan with them.

This filing defines the collateral the borrower puts up to secure financing, which prevents a borrower from using the same collateral for multiple loans (a move that would put the lenders at much higher risk).

You could think of it as the financial version of “going public” on social media with a new relationship. Once you change that relationship status, other people who might be interested can see you’re already committed to someone else. They allow lenders to see how you’ve treated other loans in the past.

What is a UCC-3 filing?

A UCC-3 filing is simply an amendment to the original UCC-1 filing. 

This might be used to update the information of the borrower or lender, add or change collateral, terminate a filing, or reassign or terminate creditor interest.

What is the difference between a lien and a UCC filing?

Put simply, a UCC filing serves as a lien, whereas a lien may not always be a UCC filing.

Liens can span everything from personal property, to real estate, to tax liens, child support, and much more. UCC liens fall within this list as another subcategory.

Oftentimes, liens arise from legal issues, and can be created involuntarily—for instance, with a property lien. UCC liens are intentionally created by creditors to establish a security interest.

When does UCC filing happen?

This step depends on the lender and the loan product.

Some UCC filings happen after you’ve secured funding. Others are actually filed when you apply for funding so lenders can protect themselves from borrowers trying to get multiple loans at the same time without the lenders knowing about it.

SBA UCC filings

As a security measure, the SBA will file a UCC lien on EIDL loans of more than $25,000. In this case, the SBA establishes the right to any assets you use to secure your EIDL loan, in the case that the loan goes unpaid.

Is a UCC filing bad?

No. UCC filings aren’t bad, nor are they good. They are used as a safety blanket for lenders to secure loans they provide to borrowers. If you take out a loan that goes unpaid, the fact that there is a filing can become a bad thing, but the UCC filing itself does not impact your credit or ability to obtain future loans.

How do you know if you have a UCC filing?

To find if you have a UCC filing, or simply search UCC liens in general, you can use a public record lien search tool, which are usually available on a State-level.

Most states provide public databases of UCC filings. Click below to learn more about accessing UCC filings in your state:

(Note: In some cases, a subscription might be required for access.)

• Alabama UCC Search
• Alaska UCC Search
• Arizona UCC Search
• Arkansas UCC Search
• California UCC Search
• Colorado UCC Search
• Connecticut UCC Search
• Delaware UCC Search
• Florida UCC Search
• Georgia UCC Search
• Hawaii UCC Search
• Idaho UCC Search
• Illinois UCC Search
• Indiana UCC Search
• Iowa UCC Search
• Kansas UCC Search
• Kentucky UCC Search
• Louisiana UCC Search
• Maine UCC Search
• Maryland UCC Search
• Massachusetts UCC Search
• Michigan UCC Search
• Minnesota UCC Search
• Mississippi UCC Search
• Missouri UCC Search
• Montana UCC Search
• Nebraska UCC Search
• Nevada UCC Search
• New Hampshire UCC Search
• New Jersey UCC Search
• New Mexico UCC Search
• New York UCC Search
• North Carolina UCC Search
• North Dakota UCC Search
• Ohio UCC Search
• Oklahoma (individual counties keep UCC records)
• Oregon UCC Search
• Pennsylvania UCC Search
• Rhode Island UCC Search
• South Carolina UCC Search
• South Dakota UCC Search
• Tennessee UCC Search
• Texas UCC Search
• Utah UCC Search
• Vermont UCC Search
• Virginia UCC Search
• Washington UCC Search
• Washington, DC UCC Search
• West Virginia UCC Search
• Wisconsin UCC Search
• Wyoming UCC Search

How can you remove a UCC filing?

A UCC termination filing requires an amendment be made to the original UCC-1 filing, completed using the UCC-3 form.

Thing is, a UCC-3 form can only be submitted by the lender. To get a UCC lien removed, you must ask your lender to file a UCC-3 form, which then comes at their discretion.

In most cases, liens are not removed until you’ve fully repaid a loan.

In the end, UCC filings typically serve purely as an informational guideline—a “just in case” stipulation. It helps to be aware of any UCC filings you might have, but in general, if you’re paying your debts, UCC liens should not bring you any harm.

The pandemic proved that necessity can be the mother of adoption, as millions of patients have turned to telehealth to reach providers despite distance, time, and social-distancing guidelines.

Since then, it's become clear that telehealth is here to stay.

While small practices have taken longer to adopt and integrate telehealth, it has proven to help practices of all kinds and sizes retain current patients and attract new ones.

Benefits of telehealth for providers

There are plenty of reasons that some healthcare providers have thus far resisted the spread of telehealth, including concerns related to patient confidentiality, payment, and a range of regulatory obstacles.

When implemented successfully, however, telehealth can be a major contributing factor to the success of your practice.

The benefits of telehealth for provider's include:

• Better patient engagement: Traveling to an office can be enough of a burden for patients that it decreases attendance for follow-up appointments. By allowing them to connect with you from the comfort of their homes, you’ll often notice better adherence to treatment plans and medication management.
• Better flexibility: It’s hard to get two people together in the same room at the same time—especially during standard office hours, when many patients have work or other obligations. Telehealth makes it possible for you to see patients on a more flexible schedule and from just about any location with available internet.
• Better access for disadvantaged patients: Patients in rural areas often find it difficult to reach an office for consultations. This also applies to low-income patients nationwide, as limited resources and inconsistent work schedules make doctor visits challenging. Additionally, patients with mental health challenges and other stigmatized conditions often struggle to visit offices. In all of these scenarios, telehealth provides a convenient solution.
• Better revenue opportunities: Overhead costs drop substantially when you hold consultations from your home. You’ll also lose less money because telehealth usually decreases the number of office-visit no-shows.
• Better ability to compete: When your practice provides telehealth as an option, you can attract patients who prefer (or even insist upon) this option. The rise of urgent care centers and other treatment options makes it crucial for you to attract new patients with offerings designed to simplify their lives.
• Better patient loyalty: Offering telehealth services improves patient satisfaction. When patients don’t have to deal with inattentive receptionists or frustrating long waits in your waiting room, they’re more keen to reward you with their loyalty.

How to set up telehealth for your practice

Your first objective: research what regulations apply in your region or state.

The Center for Connected Health Policy provides a wide range of resources to help you comply with telehealth-related laws and regulations. Check out this helpful resource to review the rules that determine how you utilize telehealth in your practice.

Once you have an understanding of that, you can set up an integration plan, using the phases below as your guide.

Phase 1: Do your research

1. Start by getting your patients’ opinion: Send out a survey or have in-person conversations to gauge your patients’ interest level in telehealth. Learn what time of day they would prefer to hold consultations and what telehealth services most interest them.

Taking this collaborative approach allows you to cover two goals at once: announcing to patients that you will offer telehealth and gleaning key insights for how to best implement it.

2. Get your staff in the game: You should also seek various perspectives from your staff. First, they’ll have valuable ideas to consider for the implementation.

For example, your front-desk employees might anticipate possible issues with patient scheduling that you simply wouldn’t think of on your own. The bonus of enlisting your team in the process: they’ll be more likely to support the telehealth initiative because they were involved from the onset.

3. Hone your plan: Armed with insights from your patients and staff, you’ll be able to create a plan for how your practice will handle this telehealth component.

Consider questions like:

• Will you make the technology a centerpiece of the practice, or will it be more of a backup option when emergencies or scheduling difficulties arise?
• Will you only use telehealth for follow-up appointments, or could new patients have initial consultations that way?
• Are you going to use telehealth for full synchronous meetings, or more faceless interactions?

By outlining how you want to use telehealth and what you hope to accomplish, you’ll have a roadmap that will help you navigate obstacles and reach your goals.

Phase 2: Configure your systems and workflows

1. Choose your software: Some telehealth software products are so loaded with features that they’ll practically do everything but cook your breakfast. If you’re experienced with these technologies, you might place a lot of value in a robust option.

If you haven’t had the opportunity to use telehealth systems in the past, however, you should look for more user-friendly software that eliminates any unnecessary factors that could complicate your ability to communicate with patients—at least at the start.

“Small practices and solo providers have to think carefully about virtual care, considering that they generally lack the resources to experiment and the overhead to survive a failed project,” says healthcare technology expert Eric Wicklund. “They should not look to replicate the programs in operation at large hospitals and health systems; rather, they should look at their own patient populations, pick a service that can be easily moved online (such as non-acute primary care, follow-up visits or chronic care management), and match the technology to the service.”

There are three major considerations to keep in mind when choosing telehealth software:

• Look for tools that can fully integrate with the EHR or practice management system already in use at your office. This compatibility allows you to schedule appointments and transmit patient communications without any additional effort.
• The best telehealth software can operate even with weak internet connections. This criterion is essential: you don’t want to compromise the quality of a consultation if you run into connectivity issues.
• Make sure you can add your practice’s branding elements to the telemedicine software. By customizing the look of the system, you’ll create a more consistent experience for your patients and continue to build brand equity with them.

2. Figure out billing: In order to make sure that telehealth is beneficial to your practice, you should first establish billing guidelines. Relevant rates and reimbursements can be more delicate since virtual care is a newer, different medium of healthcare.

How do you plan to receive co-pays and out-of-pocket payments from your patients?

You could collect their credit card details at the time of scheduling and then charge them after the appointment, or you could utilize a software platform that allows them to pay through the system during the appointment. Part of this can be addressed when surveying patients. The rest is up to your own determination.

Phase 3: Communicate and grow your offerings

1. Spread the news: While you should already have had conversations with your patients about telehealth as you gear up for launch, it’s advisable to create a marketing campaign that spreads the message thoroughly.

“Many telehealth networks were built on a premise that came from an old movie: ‘If you build it, they will come,’” explains Northwest Regional Telehealth Resource Center. “Telehealth providers soon found that simply building a network wasn’t enough.”

Your marketing efforts can utilize many different approaches. Perhaps you start by adding a new banner on your website that prominently announces your telehealth service. You could also add an FAQ section to address any questions or concerns your patients might have, then link to answers directly from the web banner.

Other marketing options include putting signage on your building or investing in paid ads on social media.

You can also utilize email, SMS, direct mail, and any other digital messaging systems you use to interact with patients to keep them up-to-date with your telehealth integration plans.

2. Start small: Don’t worry about diving headfirst into a wide-scale telehealth initiative. Start by focusing on your existing patients and the specialties where demand will be the highest.

You can determine these areas of focus based on the insights you obtained from patients, as well as industry best practices.

As you find success in the early stages of telehealth implementation, you can then consider adding new telehealth services to fuel further growth.

Just be wary of the temptation to offer everything to everyone—it’s best to move slowly and let strategy and analytics be your guide.

Phase 4: Make sure you are remote-ready

1. Set up your location(s) to be remote-friendly: Where will you base your telehealth operations? Part of the appeal of this technology is that you can conceivably meet with your patients from almost anywhere in the world. But there are requirements that must be met if you want your consultations to be effective, compliant, and positively experienced by your patients.

Your main objective should be finding an enclosed space that ensures privacy for conversations with patients. Headphones are recommended in order to make your patients’ voices inaudible to everyone but you.

In addition to finding a private room, your chosen space should also be distraction-free. Clear your desk or table of all clutter and make sure there are no background noises. Brighten the room with adequate lighting so patients can see your face and feel reassured by the professional-looking setting.

2. Make yourself camera-ready: Even if you’re holding your consultations from a beach house in Tahiti, it’s important to look as professional as you would in an exam room. Wear your typical wardrobe—and don’t forget to run a comb through your hair.

Given the physical distance between you and your patients, it’s important to maintain eye contact and reassure them that you are listening. If you are looking elsewhere in order to write a note or check in on a record, explain what you’re doing so they won’t feel ignored.

Your attention to detail is critical during a telehealth consultation. Notice your patients’ body language and vocal cues. It’s understandable if they’re nervous, as this could be an unfamiliar arrangement for them as well. Patients might feel uncomfortable speaking to a screen or worried about the security of the transmission.

The virtues of bedside manner shouldn’t be forgotten, though you’ll need to retrofit them to become “screenside manner.”

3. Practice to make perfect: There are plenty of factors to consider as you prepare for your first telehealth consultations. Decrease the pressure by conducting practice sessions with a family member or employees of your practice.

Explain to them that you’re trying to identify potential issues in your process, and then ask them for blunt feedback. You might be surprised by the quirks that arise.

This also grants you the chance to discover any technical kinks. Your goal is to familiarize yourself with the software so that it’s streamlined from the moment you boot up your computer to your final moments with a patient. Once the process becomes automatic, you’ll be able to devote your whole attention to the patient.

It’s time to put your preparation into practice and hold your first virtual consultation.

All that’s left to do is sit down at your desk or table, position your computer, and meet the needs of your patient just as thoroughly as you would with an in-office visit—which you’re already very primed to do.

While some debt is considered good debt for small business owners—debt that ultimately helps the borrower net more in savings or income—other debt is deemed “bad debt.”

The latter includes debt that can directly and negatively impact a business owner’s credit score, or that costs money or potentially limits their ability to secure financing in the future. Past-due debt, sometimes referred to as “delinquent debt,” falls into this category.

What is past due debt?

Past-due debt is the money owed on a missed debt payment.

For example, let’s say you receive a credit card bill of $1,000 with a minimum monthly payment of $50. If you don’t make that $50 payment on time (usually within a month), it will become past due.

This debt payment will often accrue late fees and additional interest if not paid—and continue to accrue fees for as long as it remains unpaid.

You don’t necessarily need to pay the full $1,000 at once—but you missed the required minimum payment, which caused a debt payment to become past due.

Past-due debt can arise from anything that requires regular payments—utilities, rent, credit cards, business loans, and invoices. Any required payment that goes unpaid becomes past due.

What is the difference between past due debt and delinquent debt?

The difference between past due debt and delinquent debt is simply semantics. Debt that is past-due is also considered delinquent.

However, while any unpaid payment is past due, there are differing levels of delinquency. Each level has its own penalties and risks to your financial reputation. Here are a few examples:

• Within 10 days: Many lenders have a grace period of a couple of weeks during which you can pay off the debt. During this time, there aren’t late fees or penalties as long as you pay off your debt. (This grace window varies by the lender—some will charge a fee if you miss the payment date by even a day.) 
• After 10 days: You may receive a late fee for your delayed payment, but the lender won’t take any action against your account. 
• After 30 days: If you skip a full billing cycle, your creditors will likely report this missed payment to the national credit bureaus. This report can impact your credit score and add delinquency to your credit history.   
• After 90 days: If you continue to miss payments, you’ll likely accrue more penalty fees and interest. Your interest rates may increase, and your credit will keep dropping. Eventually, your creditor will send your account to collections and freeze any services you receive.

The impact of past due debt on your business

If you’re contending with multiple sources of debt, start with your past-due accounts. Late payments and delinquent debt can linger on your credit report and negatively impact your credit score.

With a poor credit score, loans (of any kind) will become harder to get—you’ll have to battle less favorable terms and higher interest rates, assuming you can get a loan at all. Paying off your overdue debts first could prevent your account from going into collections and affecting your credit score. 

If possible, make the minimum payments on all of your accounts—even if you can’t pay off the full balance. Hitting these minimum payments proves to creditors that you’re still willing to pay what you owe and aren’t going to fall into delinquency.

If you are ever in a situation where you’re unable to make the minimum payment, contact your creditor ASAP. Some credit card companies offer hardship programs where you can pause payments for a few months. Your other lenders may be willing to accept partial payments in the short run.

How long do late payments stay on your credit report? 

Payment history is one of the biggest factors of your credit score. Your history lets lenders know how likely you are to miss a payment or become delinquent on the account.

Because of its high value, a missed payment will stay on your credit report for 7 years, whether the missed payment is 30- or 90-days late. 

However, a missed payment might not affect your credit score for the full 7 years. If you only miss a few payments, then your credit score might rebound in a couple of years. Multiple factors contribute to your credit score, and maintaining a good payment history is one of the best ways to keep it strong.

How to solve your past due debt

If you have an upcoming loan payment that you can’t afford, don’t panic. Below, we’ll show you a few tactics to keep your lenders satisfied and your cash flow flowing when paying off your debts isn't a readily available option.

Find short-term financing

It’s always scary to fight debt with debt, but sometimes it’s necessary. If you’re struggling to make your loan payments, consider one of these short-term financing options:

• Business Lines of Credit: Use a line of credit to cover practically any business expense: payroll, rent, debt payments, supplies—you name it! You can get funds in as little as 1 to 2 weeks, and then you’ll get immediate access to any funds you use as soon as you repay the amount used.
• Business Credit Cards: If you don't qualify for a line of credit, a business credit card is another great short-term financing option. You can make your necessary loan payments on your credit card and earn cashback and travel rewards while you're at it. Plus, you can score a card with a 0% interest period (sometimes as long as 18 months), meaning you can make lower monthly payments with fewer consequences.

Negotiate with your lenders

Your lenders don’t want you to default.

If you’re struggling to make payments, they may be willing to temporarily restructure your loan. This act could mean lower interest rates, payment deferments, and extended terms.

For example, Bank of America allows businesses to request deferments on loan payments without negative credit reporting.

Funding Circle provides forbearance, repayment flexibility, and even late fee forgiveness. 

Talk to your lender and see what help they’re willing to provide. It doesn’t hurt to ask, and you might be surprised with their leniency.

Set reminders for your minimum payments

While your lenders will likely remind you about upcoming bills, you can also set payment reminders to ensure that you at least make your minimum payments.

These reminders will help you avoid past-due debt, even if you still need time to pay off your full balance. Making these small payments will help to protect your credit and your future financial opportunities.

If you’re too busy to remember to make payments, you can also set up autopay options to draft from your account. Just make sure you have enough money to avoid overdraft fees.

Boost your cash flow

Improving your cash flow is probably one of the harder options, but it’s still possible. To boost your cash flow, you’ll need to increase sales or decrease expenses (or both). 

Consider areas where you can cut spending. Every dollar counts. And then look for where you can grow your sales. With the digital world as your oyster, there are endless possibilities for making revenue online.

Don't give up

If you can’t make your loan payments, don’t give up. There’s a way out—you’ll make it through this. Hold your head up high and fight for your business’s survival.

A variety of reasons support buying a commercial property for your business. One is that it can give you the flexibility to adapt the building to your needs or expand your operations. Another compelling argument in favor of purchasing a commercial property is that doing so can help you build equity, which is an obvious disadvantage to renting.

Considering whether to buy or rent a commercial space can be difficult, and it is worth noting that those who rent will always, in a sense (and cents), be at the mercy of their landlord. If you have an opportunity to buy commercial real estate with a fixed-rate loan, however, you can make your expenses easier to manage and avoid the risk of either having to pay more in rent or move your business elsewhere.

Purchasing a commercial property for your business could also offer you an array of potential tax benefits and deductions. This includes depreciation and the chance to deduct the interest portion of the mortgage payment. In addition, when you locate your business in the commercial real estate investment, you could potentially deduct the maintenance expenses from the business income. Also, there is a chance you could pay rent to yourself as the property owner, and the rent would be a deduction.

What is commercial real estate?

Commercial real estate refers to properties that are used for business purposes. This type of real estate includes spaces where businesses operate, whether they're retail stores, offices, warehouses, or other types of buildings that generate profit.

Types of commercial real estate.

• Multifamily - As the name implies, this refers to residential investment properties housing multiple families, such as apartment complexes, duplexes, triplexes, and even assisted living communities.
• Office - This refers to large, small, or medium-sized buildings capable of supporting a variety of businesses with a need for space, such as medical providers, attorneys, or accountants.
• Retail - This type of commercial real estate refers to a space that a consumer-facing business may be interested in, such as a coffee house, department store, or a suite in a strip mall.
• Industrial - This term refers to warehouses, production facilities, and distribution centers—basically any type of building a manufacturer may need.
• Hospitality - This area generally covers buildings that are either the current or former home of businesses in the service industry, such as restaurants, hotels, bars, or resorts.
• Special Purpose: Properties specifically designed for a particular business, like hotels, schools, or self-storage facilities.

Within the confines of commercial office real estate, there are three different types.

• Class A refers to commercial real estate of the highest possible quality. These are usually newer buildings in a prime location and in good condition.

• Class B refers to middle-range commercial properties that may be older and lower in price compared to Class A, making them a good target for renovation or restoration.

• Class C commercial real estate refers to older properties in a less-than-optimal location with extensive wear and tear.

How to buy commercial real estate for your business.

Consider the following elements when beginning the purchase process.

1. Identify property requirements.

Understanding your personal goals as a commercial real estate investor is essential, as your goals will influence the property requirements. Are you looking to build a brand or a retail establishment? How much foot traffic are you hoping to attract?

When looking into commercial real estate, consider the following:

• Budget: Know what you can afford before you start looking.
• Zoning Laws: Ensure the property is zoned for your type of business.
• Accessibility: Make sure the location is easily accessible for your customers and employees.
• Future Growth: Think about your future needs and whether the property can accommodate them.

2. Secure financing.

There are a variety of commercial real estate loans available with different terms and commercial mortgage rates. Bear in mind that, unlike a personal mortgage that may be able to cover up to 100% of the cost of the property, a commercial mortgage will typically cover only up to 75% to 80% of the cost of the property. 

Commercial mortgage

This refers to any sort of financing where the loan is secured by the value of the underlying commercial asset, which could include a warehouse, apartment complex, office building, shopping center, etc.

SBA 504 loan 

The SBA 504 loan is a loan program administered by the Small Business Administration (SBA), in which small business owners partner with Certified Development Companies (CDCs) to secure financing. Usually, a 504 loan will include a first mortgage for around 50% of the cost, from a third-party lender. The SBA will back a second mortgage, up to 40%. This would only leave the remaining 10% to the small business owner, allowing that individual to free up capital. The loan can be used to expand, buy real estate, or purchase equipment.  

Hard money loan 

This type of financing originates from private individuals or businesses, instead of traditional financial institutions. Generally, a hard money loan refers to a nonconforming loan that can be used to purchase a commercial or investment property, often with a much shorter duration and a higher interest rate compared to other options. A physical asset or property is usually required to serve as collateral for this type of loan. 

3. Enlist an experienced team.

Buying commercial real estate can be a complex process, so it's essential to have a team of experienced professionals to guide you. Here are the key people you should consider involving:

• Real Estate Agent/Broker: Specializes in commercial properties and helps you find suitable options. They can negotiate on your behalf and provide market insights.
• Attorney: A lawyer with expertise in commercial real estate can help you with contracts, zoning issues, and legal due diligence.
• Commercial Lender/Mortgage Broker: They can assist in exploring financing options and securing a commercial real estate loan that fits your needs.
• Accountant: Provides financial advice, helps with tax considerations, and aids in determining the property's financial viability.
• Property Inspector: Conducts a thorough inspection of the property to identify any structural or maintenance issues that need to be addressed.
• Appraiser: Offers an independent assessment of the property's value to ensure you're making a sound investment.
• Contractor: If the property requires renovations or modifications, a reputable contractor can estimate costs and manage the construction process.

4. Evaluate the value of the property.

Determining the value of a commercial property is a critical step in the purchasing process. Here's how you can approach it:

1. Comparable sales (Comps): Look at recent sales of similar properties in the same area. These comps provide a benchmark for the current market value.
2. Income approach: Evaluate the potential rental income the property could generate. This method involves calculating the net operating income (NOI) and dividing it by the capitalization rate to estimate value.
3. Cost approach: Consider the cost of replacing the building with a similar one, including the value of the land and the depreciation of the current property.
4. Professional appraisal: Hire a certified appraiser who specializes in commercial real estate. An appraisal will give you a detailed report on the property's value based on various factors, including location, condition, and market trends.
5. Future potential: Assess the property's potential for appreciation. Investigate local economic growth, infrastructure projects, and zoning changes that might affect the property's value over time.
6. Physical condition: Conduct a thorough inspection to identify maintenance or structural issues. Properties in better condition typically command higher prices.
7. Market conditions: Stay informed about the current real estate market trends and cycles. The value of commercial properties can fluctuate based on supply and demand dynamics.

5. Make an offer.

Once you've researched the property you'd like to purchase, you can begin the offer process.

1. Determine your offer price: Based on your evaluation of the property's value and your budget, decide on an initial offer price. Keep in mind that this price should be competitive but also leave room for negotiation.
2. Prepare a letter of intent (LOI): Draft a Letter of Intent outlining your proposed terms and conditions. The LOI should include the offer price, payment terms, due diligence period, and any contingencies such as financing or inspection results.
3. Submit the LOI: Present the Letter of Intent to the seller through your real estate agent or broker. This document serves as a formal expression of your interest and opens the door for negotiations.
4. Negotiate terms: Be prepared to negotiate with the seller. This may involve several rounds of counteroffers until both parties agree on the final terms. Your real estate agent or broker can be invaluable in guiding you through this process.
5. Draft the purchase agreement: Once both parties agree to the terms, have your attorney draft a formal purchase agreement. This legal document will outline all the specific details of the transaction, including contingencies, closing date, and any special conditions.
6. Due diligence period: After the offer is accepted, you'll enter the due diligence period. During this time, conduct thorough inspections, review financial records, verify zoning laws, and ensure there are no hidden issues with the property. This period allows you to confirm that the property meets your expectations before finalizing the purchase.
7. Secure financing: Work with your commercial lender or mortgage broker to finalize your financing arrangements. Ensure all necessary documents and approvals are in place to secure the loan.
8. Close the deal: If everything checks out during the due diligence period and your financing is secured, proceed to the closing. This stage involves signing all required documents, transferring funds, and obtaining the keys to the property.

Ready to start looking into financing for a commercial property? Learn more about commercial mortgages.

As a small business owner, you’re probably familiar with at least a few of the many loan products available. Many lenders require you to offer an asset to secure a debt. As time goes by, you might find yourself securing multiple loans with the same asset—a process called cross-collateralization.

Cross-collateralization is fairly common—“second mortgages” are a popular form of cross-collateralization, for example. There can be many benefits to taking advantage of cross-collateralization, but this process also increases the risk of losing assets, so it’s important to understand how cross-collateralization works before making any formal arrangement.

What to know about collateral.

There are two main types of loans: secured loans and unsecured loans. These loans differ in regard to collateral requirements. Collateral is an asset that a borrower offers up as a way to guarantee the amount of a loan. Common forms of collateral include cash deposits, real estate, or vehicles.

Secured loans require collateral, while unsecured loans do not. If you default on secured loans, the lender can seize the collateral as repayment for the loan amount. Lenders of unsecured loans, like credit cards, have no such recourse, but this usually causes the repayment terms of unsecured loans to be less favorable for the borrower.     

In many cases, a lender uses an asset to secure the loan for that very asset. This is common with home mortgages, car loans, and equipment financing. If you have a mortgage, your house is the collateral—so if you default on your mortgage, the lender can then collect the collateral and repossess your house.

What is cross-collateralization?

Cross collateralization refers to a situation where multiple loans are secured with the same asset.

In a second mortgage situation, your home serves as collateral for a mortgage. As you pay down your mortgage, you own more of your home. You can then use your home as collateral for a second loan, i.e., a second mortgage.

Cross collateralization also occurs if different types of financing are secured with the same asset. If you’re paying off a car loan, the car becomes collateral for this loan. If you use the car as collateral for another type of financing, like a credit card, this is cross-collateralization.

“Cross-collateral refers to a method that lenders use to utilize the collateral of a loan such as a car to secure a second loan that an individual may have with the lender,” explains Jason Gordon at The Business Professor. “When an asset is cross-collateralized, it brings up issues as to which secured party has priority to the asset in the event of default.”

Less commonly, cross-collateralization also refers to a situation when a lender requires multiple forms of collateral for a single loan.

How cross-collateralization works.

Understanding the workings of cross-collateralization is crucial for any business owner considering this route. Essentially, this process ties the value and security of one or more loans to the same collateral. This is advantageous in situations where you may not have enough separate assets to secure multiple loans. For example, if you have equity in your property, you can leverage it to secure not just a primary mortgage but also a business loan or line of credit.

When you enter into a cross-collateralization agreement, it's like you're giving the lender a broader safety net. In the event of a default on any of the loans secured by the same asset, the lender has the right to seize and sell that asset to cover your debt. This means the stakes are higher for you because failing to repay one loan could jeopardize the asset tied to all the loans.

One critical aspect to monitor with cross-collateralized loans is the loan-to-value (LTV) ratio. This ratio measures the loan amount against the value of the collateral securing it. A higher LTV ratio indicates more borrowing against the asset, which can be risky if the market value of the collateral decreases.

For businesses, cross-collateralization can open doors to additional funding that might not be available otherwise. However, it compounds the risk to your assets. Therefore, it's wise to carefully assess your financial stability and the implications of tying multiple debts to vital assets before proceeding with such arrangements.

Benefits and risks of cross-collateralization.

Cross-collateralization can be a double-edged sword for savvy business owners, meshing intriguing benefits with profound risks. It's like stepping into a strategic game where your assets are on the line, offering a chance to secure more funding while posing a significant risk if the tides turn. In this section, we'll unravel the perks and perils of cross-collateralization, aiming to provide a balanced view that helps you weigh its worthiness against your business strategy.

Benefits

• Increased loan access: Cross-collateralization can significantly enhance your borrowing power. By leveraging the same asset for multiple loans, businesses can access higher loan amounts or more favorable terms than might be available with unsecured financing.
• Flexibility in financing: This strategy offers flexibility, allowing businesses to tap into the equity of their assets, such as real estate or vehicles, for various financial needs, from expanding operations to covering unexpected expenses.
• Potential for better rates: Often, loans that are secured by collateral have lower interest rates compared to unsecured loans. Cross-collateralization might help negotiate lower rates due to the added security it provides lenders.

Risks

• Increased loss risk: The primary risk of cross-collateralization is the potential loss of valuable assets. If a business cannot meet its loan obligations, the asset securing multiple loans could be seized, having a more significant impact than defaulting on a single secured loan.
• Complexity in managing loans: Juggling multiple loans tied to the same collateral can lead to intricate financial management challenges. Keeping track of various terms, interest rates, and repayment schedules requires diligent oversight.
• Difficulty in switching lenders: Once an asset is cross-collateralized, it may be more challenging to refinance or obtain new loans with different lenders. The existing cross-collateral agreements might limit flexibility and negotiation power with potential lenders.

What is a cross-collateral loan?

A cross-collateral loan essentially links the collateral of multiple loans together. This means if you've borrowed money to purchase a car and later decide to take out a personal loan, the same car can act as the collateral for both loans if both are through the same lender. This strategy can be particularly appealing for borrowers looking to maximize their borrowing capacity without having to find new assets to secure each loan. 

However, it's essential to understand that cross-collateralizing your loans binds them together in a way that can complicate future financial moves. For instance, if you wanted to sell the car that's serving as collateral for your loans, you'd need to pay off or substantially pay down the debts to remove the lender's claim on your asset. This intertwining of debts and assets makes managing your finances a bit more complex but can be a powerful tool in the right circumstances.

Is cross-collateralization legal?

Cross-collateralization is legal and fairly common, but a lender is required to inform you that cross-collateralization is occurring.

If you take out multiple secured loans from the same lender, like a bank, it might use the same collateral, making your assets cross-collateralized. You must legally consent to this, but do your due diligence in reading over any loan agreement. Be especially aware of “dragnet clauses” where a lender can pursue your asset if you used it for collateral for any loan with the lender.“

Lenders cannot use your business’s property as collateral without your consent,” writes Shawn Grimsley in the Houston Chronicle. “Lenders obtain your consent to cross-collateralization through a dragnet clause, which may allow the lender to use the collateral for any loans or other obligations your business may owe the lender.”

Is cross-collateralization bad?

If you can make your loan repayments on time, you’ll probably have no issues with cross-collateralization. Trouble arises if you default, however. If an asset is cross-collateralized and you default on one of your loans, you will default on all of your loans, because the asset can no longer secure any of them.

Can banks cross-collateralize?

Banks cross-collateralize often, but cross-collateralization is even more common with credit unions. Cross-collateralization is especially conventional when you seek multiple loans from a single lender. With every loan you take out, read over the agreement and make sure you consent to how a loan is secured.

How do I get out of cross-collateralization?

The best way to untangle yourself from a bad cross-collateralization situation is to contact the lender and attempt to renegotiate your loan. You might, for example, be able to secure the remaining debt with other collateral, although the repayment terms might be worse.

Bad cross-collateralization situations usually end with the loss of the asset, even if you declare bankruptcy. Unfortunately, besides repayment, the only way to get out of cross-collateralization is by letting your lenders repossess the collateral.

Alternatives to a cross-collateral loan.

Exploring alternatives to a cross-collateral loan is important for any business owner seeking flexibility and minimal risk in financing options. One such alternative is seeking out unsecured loans. Although typically bearing higher interest rates due to the increased risk for the lender, unsecured loans do not tie down your assets, providing peace of mind and simpler asset management.

Another option could be asset-based lending, which focuses on the value of specific assets rather than intertwining them across loans. This method allows for targeted borrowing against inventory, receivables, or other business assets without cross-collateralization complications.

Crowdfunding or peer-to-peer lending platforms also present innovative financing avenues. These methods can offer more favorable terms and the opportunity to avoid traditional banking systems and their associated risks and constraints. Each alternative has its unique set of benefits and considerations, gearing towards providing a tailored solution that aligns with your business's financial strategy and growth objectives.

Navigating the complexities of cross-collateralization requires a delicate balance between leveraging your assets for financial gain and protecting them from undue risk. Whether you're a seasoned business owner or new to the entrepreneurial scene, understanding the intricacies of secured loans, including cross-collateral loans, is crucial.

By weighing the benefits against the potential drawbacks and considering viable alternatives, you can make informed decisions that align with your financial goals and risk tolerance. Remember, the key to successful financial management lies not only in securing the necessary funds but also in maintaining control over your assets and their future.