Looking for Financial Advice

[Flash68]

Originally Posted by Vegas69

I have no experience obtaining credit personally for my business. I get offered business credit at the bank but I'm sure it's not much. When I said business credit is a different discussion, I meant the guidelines between obtaining a loan with business credit and personal credit are different.

Ageed. At the end of the day, many small business loans often require signing a personal guaranty anyway, so you're on the hook regardless.

However you slice it, it's a terrible time to be needing financing.

[tones2SS]

Originally Posted by Flash68

However you slice it, it's a terrible time to be needing financing.

Actually,.....it's just a terrible time, period!!!

[GregWeld]

I think the financing angle is all just wrong.... and that what you're really experiencing is a just a "return to normal financing"... You actually have to show you can pay a loan back... there are percentage of income calcs that went out the window with all the phony come on teaser rates and no doc loans.

When I owned a business the bank would make us do a audit... and an audited inventory. They held our feet to the fire. We used to have to "clean up" our line of credit for 30 days (in other words pay it off) every year. We had lunch once a month or so with our banker and it usually included our accounting firm management. They watched us like a hawk. We had 750K in cash on deposit - and a one million dollar revolving line. This was in 1975 and our sales were 3.5 million a year - with a 63% gross margin. We were hugely profitable and had very positive cash flow. They didn't trust us one bit.

Now - for someone to say they "can't get credit" - that only means they don't QUALIFY under the CORRECTED real world credit we have returned to. People typically are "needing" credit to bail themselves out - not to "expand" - or to take advantage of an opportunity. They're needing credit to EXIST. They're already over-extended or have a lack of assets and a lack of capital (aka cash on hand). There used to be a saying - you can get credit if you don't need it. That actually was ALWAYS TRUE until this crazy credit came about.

When I "grew up" you couldn't buy a house unless you had AT LEAST a 20% down payment - and you QUALIFIED for a fixed rate 30 or 15 year mortgage. They did a REAL credit check - and if you were late paying the electric bill once - you had to document why. The fixed rate was designed so that you knew EXACTLY what your payment was going to be - and so that over time - the percentage of your income that made that payment was LESS not more.

You walk into a bank now - and your credit cards are about maxed or carrying large balances -- your house payment is 40% of your gross -- your business revenue is down -- you owe on 3 cars.... Guess what... NOBODY is going to loan you anything. And they shouldn't because you can't pay it back -- and CREDIT means that you can pay back - not just borrow more. Sorry.

[Flash68]

I don't disagree Greg, but like most bubbles, there is an overcorrection and the banks' overtightening is exactly just that. It should settle back to where it should be at some point.... rational sensible lending. Gee, what a novel idea huh?

[ProTouring442]

Originally Posted by GregWeld

I think the financing angle is all just wrong.... and that what you're really experiencing is a just a "return to normal financing"... You actually have to show you can pay a loan back... there are percentage of income calcs that went out the window with all the phony come on teaser rates and no doc loans...

...You walk into a bank now - and your credit cards are about maxed or carrying large balances -- your house payment is 40% of your gross -- your business revenue is down -- you owe on 3 cars.... Guess what... NOBODY is going to loan you anything. And they shouldn't because you can't pay it back -- and CREDIT means that you can pay back - not just borrow more. Sorry.

I couldn't have said it better if I tried. The entire idea behind credit was to make it so people or business could buy now what they normally couldn't buy until later. It was never intended to make it so that people could buy what they normally couldn't have purchased on their own at a later date.

Shiny Side Up!
Bill

[WILWAXU]

Originally Posted by jeff71

Check out DaveRamsey.com you can also download his podcast if you cannot hear his raido/TV show. Also can go to your local book store he has several books.

If your ready for that life change he can teach you the steps!

Another vote for Dave Ramsey

[Vegas69]

The definition is gunshy. You cut off the tip of your finger using a circular saw and your going to be careful until that becomes a distant memory. I can't say I blame them, most lenders have lost there ass and they can't afford another run of losses.

I can't honestly say I feel anybody that deserved a home loan has been denied in the last 3 years in my presence. You can still obtain a loan as a veteran with $1 down and an FHA with 3.5%. Not exactly much assurance for the lender. If it wasn't government insured, it would never happen today. Conventional loans require a minimum of 10% and that's if you are iron clad and it's a primary residence. Mortgage insurance won't be as inexpensive as it was 3 years ago. In many cases the lender will loan the money but there aren't any Mortage insurance companies that will write the policy. With that being said, almost every conventional deal I've done in the past 3 years has been 20% down. Over a 1/3 of my transaction in 2009 were Cash.

Then there is buying power. Sure the low down payment government loans are available, but they stand little to no chance against a conventional buyer. That's the way it should be. Those that are most financially able should have more buying power and obtain the best property. That's a variable that went by the wayside. Anybody with a fico score and a pulse could get a conventional loan 3 years ago.

[GregWeld]

BTW -- I'm not ragging on anyone -- nor pointing fingers -- nor trying to show anyone is better or smarter.

I'm merely stating what I "see", and feel, to be the facts.

We (wife and I) sit on several boards.... some have finance issues - most do not. I'm a "lender" and an angel investor on a personal basis. I can tell you that I'm hit every day with, "invest in my great game changing idea" - and, "I just need some help" - and, my personal favorite line, "I don't really need to but....."

Had I been really smart -- I would have shorted all the home builders to zero... because the people that I hang with all saw this coming. None of us (and admittedly we're on the older side) could understand why financial institutions were lending to the LEAST credit worthy folks (those with no downs) and giving them the "best" (lowest) rates. I knew then as I know now - that isn't going to work. In my life - the least credit worthy didn't qualify for loans - and the "on the edge ones" got little credit and PAID A PREMIUM rate.... only the most credit worthy got the Prime plus rates...

When you see credit issued to those that deserve and EARN it... things will return to normal. I also agree with Dave (Flash) when he says the pendulum tends to swing too far to one side on both sides. That is what we're seeing now, but if you have good (top tier) credit - you can get it without too much hassle. What's too much -- is open for debate... but expect to actually have to PROVE that you can pay it back.

[Flash68]

Very sound analysis Greg. Whether it's real estate prices, or IPOs, or conventional lending, most asset bubble pops overcorrect and here we are.

Regarding your homebuilder shorting, I essentially did that with an ETF back in 08-09 with SRS - a "double-short" real estate index fund. It worked out quite well.

[Bow Tie 67]

I'm not sure if it was mentioned, but " Credit Score " can and will effect job prospectus and insurance rates. I would venture to guess there are other things I dont know about.