Many of you have heard of FICO Scores, but might not necessarily understand how they work, and more importantly how lenders view them.

In this article I'm going to give you some basic information on credit and then conclude with SBA's evaluation of Credit Scores. Credit scores can make or break a potential loan. You must pay close attention to your ongoing credit situation at all times, not just when you are trying to get a loan.

At that point it may already be too late.

Fair Isaac or FICO scores are the key to the lock that must be opened before any bank will entertain any loan for you . Before deciding on what terms they will offer a loan (which they base on their "risk"), lenders want to know two things before they underwrite a loan; < about the ability to pay back the loan,
and the willingness to pay back the loan.

For the first, item they look at your income-to-debt obligation ratio. For the willingness to pay back the loan, they consult the credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. (and they're named after their inventor!).

Your FICO score is between 350 (high risk) and 850 (low risk).

Credit scores only consider the information contained in the credit profile. They do not consider income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status.

Credit scoring was developed as a way to consider only what was relevant to somebody's willingness to repay the loan. Different portions of the credit history are given different weights.

Thirty-five percent of FICO score is based on specific payment history.
Thirty percent is current level of indebtedness.
Fifteen percent each is the time open credit has been in use (ten years old accounts are good, six month old ones aren't as good) and types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards).
Finally, five percent is pursuit of new credit -- credit scores requested.

SBA will generally not entertain a loan if either spouse or partner's credit score is below 650 without extenuating circumstances. It behooves you to share all relevant information about your credit score with the financial broker or banker you are working with.

Banks do not like surprises. If you are aware that your credit history is not up to the score the bank needs tell them upfront why your score is lower, don't let them ask you.

For example we're currently working with one client whose score is below the 650 because he has a high ratio of debt. By us refinancing his debt with an SBA loan his credit score will be raised within a short period of time. The bank has factored this into their credit decision.

This is just one example of where working with a broker has paid off for our client.

Contact us to show you how you can get the money that your project or business acquisition requires.

Key Commercial Loan Indexes

Fed Prime Rate 7.750%

10-Year CMT 4.560%

30-Year CMT 4.790%

USD 6 MOS LIBOR 5.178%

As of October 5, 2007

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How do I choose traditional commercial loan or an SBA loan I'm confused?

Ariel, Lake Elsinore

The answer is very simple. You can only use an SBA loan if you are buying a property for your own personal business usage. You are not allowed to buy any investment property with an SBA loan.

However you may be able to lease up to 49% of your business property to tenants, so in essence you can get SBA financing for a portion of the property that is income producing that is not related to your direct business usage of the property. For practical purposes I would not lease out more than 40% of the gross square footage.

Please email your questions to "Ask Your Financial Broker" at Askthebroker@loanforbiz.com.

Shell Gas Station - SBA 504 Loan for 1.5M
Subway Franchise - SBA 7A Loan for 250K
Wall Manufacturing Company - SBA 7A Loan for 110K
Self Storage Construction Loan for 6.6M
Self Storage Mini-Perm Loan for 5.3M
Self Storage Bridge Loan for 4.8M
Shell Gas Station - SBA 7A Loan for 520K
Residential Care Facility - Commercial Loan $650K

If you are interested in joining our GROWING company please contact Harlan. We are expanding this year and would like to have you join us. For those financially astute individuals we offer a proven system to build your commercial finance business along with comprehensive training.

email: harlan@loanforbiz.com

phone: 858-592-0659

web: http://www.loanforbiz.com