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Loan Transparency
Confidential
Confidential
Our Story 2
“Small business
owners struggle.
We saw it in our
family…
we see it in our
community.”
3Responsible Small Business Lending
Confidential
Camino Financial is the best alternative to a bank
when seeking a busines...
Confidential
What’s Loan Transparency? 4
Loan: a sum of money that is expected to be paid back with interest.
Transparency...
Confidential
Why Should I Care About Loan Transparency? 5
Less Transparency = Higher Probability of Buying a Lemon
Less Tr...
Confidential
Why Should I Care About Loan Transparency? 6
Reality Check: the lender is more knowledgeable about
business c...
What Do I Need to Know? 7
• Loan amount
• Cost
• Annualized Interest Rate
• Fees
• Repayment
• Frequency
• Payment Amounts...
Confidential
Benchmarks
• Interest Rate:
– SBA 504: ~4.3% (variable)
– SBA 7(a) Loans: 5.75% to 6.25% (variable)
– Commerc...
Confidential
How to Evaluate a Loan Offer?
Business loans are different than consumer loans because you
only borrow money ...
Confidential
Tips for Comparing Loan Terms
• Make sure you’re comparing apples with apples
– E.g. a real estate loan is no...
Thank You
Responsible Small Business Lending
Kenny Salas
ksalas@caminofinancial.com
(800) 852-0655
caminofinancial.com
Appendix
12
Confidential
Measuring the Cost of Capital
Paid Interest
Monthly Interest Rate (Interest Rate / 12 Months)
X Ending Monthl...
Confidential
Measuring the Cost of Capital
Factor Rate
Total Debt Obligation / Total Loan Balance
• Easy to calculate paid...
Confidential
Annualized Percentage Rate (APR) 15
Describes the interest rate for a whole year rather than just a monthly f...
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Loan Transparency

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Every business started with a dream. A business loan can inject new life into that dream, especially when working with a responsible lender. At Camino Financial, we believe in transparency and integrity. Together we can realize your dream, and reach that unreachable star.

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Loan Transparency

  1. 1. Loan Transparency Confidential
  2. 2. Confidential Our Story 2 “Small business owners struggle. We saw it in our family… we see it in our community.”
  3. 3. 3Responsible Small Business Lending Confidential Camino Financial is the best alternative to a bank when seeking a business loan. Online marketplace matching your business with alternative lenders that meet your needs. simple• Quick • SAFE
  4. 4. Confidential What’s Loan Transparency? 4 Loan: a sum of money that is expected to be paid back with interest. Transparency: lack of hidden agendas or conditions, accompanied by the availability of full information required for collaboration, cooperation, and collective decision making. Loan + Transparency: Simple and clear communication of important terms and obligations related to a loan
  5. 5. Confidential Why Should I Care About Loan Transparency? 5 Less Transparency = Higher Probability of Buying a Lemon Less Transparency More Transparency
  6. 6. Confidential Why Should I Care About Loan Transparency? 6 Reality Check: the lender is more knowledgeable about business credit and structuring a loan than you. Importance: Ensure the lender properly discloses everything you need to know to make an informed financing decision.
  7. 7. What Do I Need to Know? 7 • Loan amount • Cost • Annualized Interest Rate • Fees • Repayment • Frequency • Payment Amounts • Maturity Date • Required collateral • Limitations • Pre-payment • Covenants
  8. 8. Confidential Benchmarks • Interest Rate: – SBA 504: ~4.3% (variable) – SBA 7(a) Loans: 5.75% to 6.25% (variable) – Commercial Vehicle Loans: 8.5% - 12% (fixed) – Unsecured Long-Term Loans: 10% - 25% (fixed) – Daily Payment Loans: 25% - 50% (fixed) – Merchant Cash Advance: 40%+ (fixed) • Fees – 3% - 5% – Note: the smaller the loan size, typically the larger the fee • Tenor – SBA Programs: • Real estate: 20-25 years • Equipment: 10 years • Working Capital: 7 years – Unsecured Term Loans: 1 – 5 years – Daily Payment and MCAs: 3 – 24 months 8
  9. 9. Confidential How to Evaluate a Loan Offer? Business loans are different than consumer loans because you only borrow money to make money Ability to Repay • How much cash does your business generate each payment period? • Can you cover at least 1.25x the required payment? • Are there payment periods in the year you can’t cover the payment? Return on Investment (ROI) • What’s the cash benefit you’ll get from the loan? • When will you start making cash on the investment? 9
  10. 10. Confidential Tips for Comparing Loan Terms • Make sure you’re comparing apples with apples – E.g. a real estate loan is not the same as an unsecured term loan for working capital • Measuring the cost – APR vs. Interest Rate vs. Factor Rate – Fees • Don’t only focus on interest rate!! – Are you willing to pay a higher rate for more money? – Are you willing to pay a higher rate for lower monthly payments? • Compare repayment schedules • Ask for advice if you need help 10
  11. 11. Thank You Responsible Small Business Lending Kenny Salas ksalas@caminofinancial.com (800) 852-0655 caminofinancial.com
  12. 12. Appendix 12
  13. 13. Confidential Measuring the Cost of Capital Paid Interest Monthly Interest Rate (Interest Rate / 12 Months) X Ending Monthly Debt Balance = Paid Monthly Interest You Should Know that … • Higher frequency = lower interest paid • Shorter term = lower interest paid BUT higher rate • Early repayment = lower interest paid 13
  14. 14. Confidential Measuring the Cost of Capital Factor Rate Total Debt Obligation / Total Loan Balance • Easy to calculate paid interest • Fixed debt obligation, early repayment doesn’t impact cost Transaction Fees Typically calculated based on a % of outstanding debt. • Paid at originally (and occasionally annually) 14
  15. 15. Confidential Annualized Percentage Rate (APR) 15 Describes the interest rate for a whole year rather than just a monthly fee/rate, as applied on a loan Pros • Standardized measure • Includes fees • Represents the actual annual rate Cons • Mislead from measuring the nominal cost of debt • Rate may seem inflated for short-term commercial loan o Long-term low interest: $100,000 SBA Loan at a 6% variable interest rate, and repay monthly over 10 years, you will end up paying ~$133,224 to the bank (1.33x the original amount) o Short-term high interest: $100,000 commercial loan at a 20% interest rate repaid weekly for 1.5 years, the total repayment is $115,939 (1.15x the original amount)

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