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First resort lenders include friends who lend at prime rates or less, and commercial lenders, with whom you have established some credibility, who lend funds to small businesses at prime plus one or two percent.
For some projects and circumstances the funds from these first resort lenders are insufficient. You may find it necessary to turn to a lender of last resort, who lend at five percent or greater over the prime rate.
Last resort lenders include government agencies established to encourage some business enterprises or private lenders willing to accept a high risk in return for a higher rate of return. The private lenders are simply exploiting a profitable niche by having a system for recovery of funds in the form of mortgages or other such liens.
Government agencies try to secure their loans by imposing certain conditions such as training, extensive ongoing reporting and counseling. They employ more staff to monitor and assist the performance of the borrowers than do other lenders. These conditions can be quite beneficial for the entrepreneur lacking some business expertise. A part of their selection of a candidate is often a request for evidence the borrower had been refused funds by a commercial lender.
Prime rate, based on the fluctuating rate commercial lenders receive from government, is the rate extended to its most preferred customers. Small businesses are not included in that classification.
Stories from members will add great value to these maxims.
Please post your story by emailing it to max@unclemaxsays.com.
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