Curious to know what business owners are experiencing with regard to their banking/lending partners during this credit crunch

Consumer finance companies make small, secured, personal loans that are often limited to several thousand dollars.

Commercial finance companies provide business loans rather than consumer loans. A small business's primary use of a commercial finance company is to borrow money for the purchase of inventory and equipment. These financiers can be a useful resource, particularly if your business has adequate collateral available to support a loan. Commercial finance companies usually do a great deal of accounts receivable and inventory financing. Small businesses involved in manufacturing or wholesaling may be most interested because they tend to need to be highly collateralized.

The finance charge is the total dollar amount you pay to use credit. It includes not only the interest costs, but also includes other costs, such as service charges, appraisal fees, points, late fees, minimum balance fees or credit-related insurance premiums. Be careful to ask about all fees — they add up very quickly and can substantially increase the cost of the loan. It is important to consider the finance charge in making any intelligent credit decision.

Reporting period:

If you're looking for additional information on state tax topics, we recommend that you contact the governmental agency that oversees the administration of the specific fee or tax. Below are the agencies that may provide help in researching an answer:

One important question that a buyer is likely to have is, are you willing to finance at least part of the deal? This is a very fair question — some advisors estimate that seller financing was present in as many as 90 percent of all business sales during the bank-credit crunch of the early 90s. While the crunch has eased somewhat, sellers still finance more than half of business sales.

There are a number of types of institutions that offer small business loans, although each type of lender may be better suited to different lending situations.

Some lenders charge lower interest but add high fees; others do the reverse. The Annual Percentage Rate (APR) allows you to compare loans on equal terms. It combines the fees with a year of interest charges to give you the true annual interest rate. All lenders are required under the Consumer Credit Protection Act to disclose the effective annual percentage rate as well as the total finance charge in dollars. The APR is the true measure of the effective cost of credit. It is the ratio of the total finance charge, not just the interest charge, to the average amount of credit in use during the life of the loan and is expressed as a percentage rate per year. The calculation of the APR depends on whether the loan is repaid in a single payment or in installments.

Reporting period: