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Computer and IT Industry Loans

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The Computer and IT Industry is here to stay, and has seen exponential growth over the past decade. From data entry and database management to companies offering services to handle large-scale storage and backup for financial, corporate, and government institutions, to the start-up businesses with revolutionary apps, the computer and IT industry is so firmly integrated into every aspect of our lives that it has become a mainstay of everyday business.

However, many people looking to open computer ans IT service operations often overlook the details of what is needed to fund such a business. Apart from office space and equipment, computer and IT business owners also need to have fluid cash for:

  1. Hiring & training staff
  2. Marketing
  3. Industry research
  4. Software licenses
  5. Insurance on all of the equipment.

That may seem like a look to keep track of when asking for a computer or IT industry loan, but there is a wide array of business financing for any computer and IT industry business. Both banking institutions and non-traditional lenders offer many options to finance computer and IT business operations of any scale. Before jumping in and asking for a computer and IT industry loan, you should familiarize yourself with the different types of financing available for your IT business.

Computer and IT Industry Loans: Which Loan Product Is Right For Me?

SBA loans

The Small Business Administration's (SBA) 504 and 7(a) loan programs are among the more popular alternatives to traditional loans. The SBA typically back 75% of the loan, which allows banks and other lending parties to assume less risk in the investment. The SBA has loan eligibility requirements such as the SBA Standard Operating Procedures for loan underwriting, and requires businesses to follow these procedures to the letter. For the popular SBA 7(a) product, loan pricing can be implemented using the Prime Lending Index plus a maximum spread of 2.75% (essentially the cap on the pricing rate). Some lenders offer flexibility in the interest rate by offering variable financing if the Prime rate goes up or down, so will the interest rate on the loan. SBA loans are typically structured around the assets being leveraged as collateral.

Conventional Loans

If your business is looking for flexible terms and pricing, conventional loans offer both, because the lenders can giver lower pricing for more robust requests. Conventional loans can be arranged through traditional banking institutions and even non-bank lenders. Keep in mind that such loans are not guaranteed by a third party, so the credit standards on conventional loans are typically higher, as the bank or lender assumes the full risk of the loan.

Unsecured Business Line of Credit

Computer and IT Industry start-ups may not initially have collateral to back a loan, so it may be necessary to arrange for an unsecured line of credit. Unsecured credit is based on the computer or IT company's needs, as well as the financial strength of the business, its owners, and the company's cash flow history. Most unsecured credit loans have very strong financial requirements, as the lending institution assumes all of the risk in the initial investment.

Asset Based Lines of Credit

Computer and IT Industry businesses find that asset-based lines of credit are very easy to arrange with lending institutions. The companies receive financing based on the equipment and hard assets owned and used by the company. The higher the value of the assets, the greater the line of credit available.

Seller Carry Finance

For those looking to buy out existing computer and IT industry businesses, it may be possible to negotiate the terms and prices of the financing with the owner. In lieu of getting the full price on purchase from the buyer, both parties agree on pricing, how long until the entire purchase price is paid off (usually within a three to five year term), as well as the interest rate. Many sellers are also willing to oversee the transition to the new buyer, in order to make certain that training goes smoothly and that the business is successful.

Merchant Cash Advance

A merchant cash advance is financing based on credit card receivables. The lender offers a merchant cash advance loan which is based on the number of credit card sales the computer or IT company has. In order to qualify for a merchant cash advance, the IT company needs to have a brick and mortar establishment, as well as an established history of a high volume of credit card sales. Merchant cash advances are considered short-term financing, and can be arranged quickly, with a higher pricing and interest.

Credit Parameters for Gym and Fitness Industry Loans

Credit parameters vary widely between banking and non-traditional lenders, depending on the market drive for computer and IT industry loans. Lending institutions like to reduce their investment risk and look at the available collateral used to back a loan to measure their Loan To Value (LTV) ratio.

Given the necessity and demand for computer and IT industry companies, combined with a steady history of success, some lenders are willing to arrange loan amounts as low as 55% on up to a maximum of 90% of the available backing collateral.

Debt Service Coverage Rate (DSCR) is a measure of the available cash flow from a computer or IT business used to cover loan payments. Most lending institutions require a minimum ratio of 1.25X to 1.35X of the available incoming cash going toward annual loan payments. Most lenders like to see a much higher ratio because it offers a buffer zone in case of rough patch in running the business or a downturn in profits.

Keep in mind that banks and lenders will also weigh the personal credit and financial history of the primary borrower, which will be detailed in a comprehensive credit report.

Computer and IT Industry: Economic Impact

The Computer and IT Industry is not only a mainstay, but it is still growing exponentially. As of 2010, the IT Industry reported revenues in the trillions within the United States alone. From Physical goods, to start-up apps, cloud storage solutions and SaaS companies, the IT industry is booming as private and commercial clients rely on what the computer industry offers. As technology advances and society's dependency on computer and IT services increases, starting a business in the computer and IT industry is an appealing opportunity for investors.

Apply for Computer and IT Industry Loans

Computer and IT Industry loans are many and varied, and it is easy to find one that fits the scale of your operation. When applying for Computer and IT Industry financing, keep in mind that most banks and lenders require a comprehensive tax records, a business plan, a history of sales, and projected earnings. If you are looking to get a start-up off the ground, the banks and lenders will require a detailed history of the borrower. Most lending institutions will offer a list of supporting documents required when going over the loan application.

Applying for computer and IT industry loans has never been easier with one of the 5,000 lenders on BoeFly. A single loan request though BoeFly is the most efficient way to get the computer and IT industry loan that best fits your business model. BoeFly also has one of the fastest turnaround rates because, while many banks can start the lending process, BoeFly helps computer and IT business owners by by creating competition among lenders, thereby giving you a wide array of financing options, terms, and pricing.

Ready to start? Contact BoeFly at 1-800-277-3158 for a free consultation.