How to Establish a Secured Microloan (Optional)

Hello, and welcome to this module, How to Secure or Establish and Secure Microloan IEACD. Now, this is totally optional, but it’s definitely going to be a really, really great tactic that you can use to start making sure you get into the SBFE database and start building up business credit with your own cash. So here’s what I’m going to cover. So, number one, what is a secured CD loan? And then how to obtain a CD secure loan? Basically, a microloan using your own cash. So what is a CD loan? So essentially when you go and you open up a checking account, you’re going to, you’re going to be required to do a deposit. And essentially it’s just securing your deposit. So you’re putting your money in a CD. And then what they’re going to do is use your CD as collateral, and then give you the ability to take a loan out against that CD.

And then they’re going to report that activity to the credit bureau. So interest rates with these types of loans, when you’re doing this secured loan, because you’re using your own money are typically a lot more competitive and they’re lower. So essentially you’re just leveraging your cash as a way to start building a credit. So it’s almost like a big secure card, but it’s with a bank and it’s going to, it’s going to it’s with a bank that’s going to report this on your business credit. Now, when you open up your CD account, what you want to do is make sure you deposit the funds at the issuing bank and make sure that they agree to pay you interest over the, the agreed period of time. So again, you’re not going to really get that much interest. So you’re not really doing this for the interest.

You’re not doing this to really make money on the money you’re doing this so that way you can start building up credibility or business credit with the bank. Because if you were going to put that cash in the bank anyways, why not start getting some cash to build, why not get some credibility to build it up, and then you can do up to $250,000. That’s going to be FDIC insured. So that’s going to be a really, really solid line on your credit file. So when you’re looking at these CD loans, your bank is going to have a minimum deposit required. So it depends upon which bank you went with. They may or may not have CD loans or Secured loans IE and basically they’re used for a savings too. But again, the recommended reason why I’m saying this is because you want to do this to start building business credit, and then a small business or a micro loan user under $35,000 gives you a huge headstart in helping you fast track your business card, business credit profile.

But again, it’s optional. So when you’re looking at this ,the, the biggest reason why you’re doing this is because it’s going to help you qualify easier for lending later on down the road and allow you to start building that relationship. This is also really good if you don’t have really good personal credit, because this is going to basically be, be assuring, you know, and you’re going to basically be building your credit with cash right out the gate. And another thing is, if you do have good personal credit, what you could do is you can take a personal loan out and then put that personal loan in the business checking account in terms of in the form of a CD. So even if you, you know, and then the other thing is that they’re not gonna look at your DTI. They’re not going to look at your credit in some scenarios.

Um, what they’re going to do is the majority of business owners are going to be able to take the money that they’re going to put in cash. And then in some way, use that credit, use that cash to report to the credit bureau. So that way you can start building some credit. All right? So that’s really the biggest thing. And then they’re really, really simple to get. And then there’s a lot of different businesses or banks that offer them an output that sheet up. So the steps are really, really simple. First, you want to just make a deposit into your checking account and make sure that’s an SBA preferred lending bank or one, that’s a part of the list that I included. And then, you know, you want to do something where between, you know, it depends on the one, but you can do as little as $2,000.

Okay. Um, and then once you’ve made that deposit, the other thing you want to do is get that money inside of that account and then ask them, Hey, look, do you guys do secured loans or secured CDs? And they’re going to say, yes, um, how soon are they available? How soon can I get the funds available? And then they’ll tell you when the funds will be available. So you can, you know, if you don’t have the money, you can actually borrow the money from a friend or family member and just make it very, very clear that, Hey, look, I’m putting in this money to build up my business credit. I’m going to give it to you right back. And you can even put an agreement in place that documents that, but essentially once you get the money from them, let’s just say, example, you, you borrowed $10,000 from a friend, or you borrowed $10,000 from me or from your 401k or your IRA or whatever would typically be your 401k.

You borrowed that money from your 401k, just so you can build up your business credit. What you would do is you can put the $10,000 in your, take a loan out from your 401k or your friend deposit into that checking account, like your secure checking account, and then turn right back around and take the money out and pay it back, and then just pay yourself back over time in that particular CD loan over like, you know, a $1000 a month, which would be for 10 months, you just pay yourself a $1000. And what that’s going to do is build up your credit and show that this person can be trusted with the loan. And it’s also going to make it really easy for you to get more revolving terms. So you want to make sure when you’re doing this, that you understand like the late fees, the CD terms, the APR, you also want to make sure you have the money for deposit.

Another thing to consider is once you have the money, you want to give them that particular information, and then essentially put this in there. So the loan officer, you, you know, they’re going to walk you through the process, help you fill out the application. Some lenders are going to help you do this online, and then others will require you apply in person or by phone. It just really depends on that particular application. And then as you’re going through this process, you know, they’ll probably tell you right now, if you’re approved within a few hours or in that same single business day with that, that particular secure loan. Obviously you’ll want to sign the documents. And then once everything goes through and you’ll take the money out once it’s been funded, and then you can start to use that money as cash, but then you’re obviously still owed the money back, but you’ll, you’ll essentially be building up your business credit.

All right. And then the bank they’re going to report this to the SBFE and the other credit bureaus, which is going to be huge. So this is a really, really good way to jumpstart your relationship with your bank. And then also start building a business credit because the bank loan is going to appear on your business credit report, just like any other loan. And the only note in there, there won’t be a note saying that the security it’s just going to be like, Hey, look, this is a, this is a loan that this person has for $10,000. And this is a really, really powerful way. So this is something that many people just don’t do. So again, it’s a quick hack. I recommend you take advantage of it. If you have the ability, if you have a 401k and you have the ability to take loans out from your 401k or your retirement account, if you’re still employed, that’s a quick way to do it.

If you already have good personal credit, you can take a personal loan out and then put that money into the checking account. And then then the favorable terms, then, then turn right back around, loan yourself, the money from the personal loan, then pay the personal loan back off, and then immediate. So you let’s just say you take out a $10,000 and a personal loan while you do the personal loan. Okay? You deposit that personal loan fund inside of your business checking account, and then you make it a CD account. And then you take the loan. You take the money out to say out of the savings account for, or the CD account, because it will be it’s secure. And then you now use it. And then you take that money. You go pay off your personal loan in full. So that way you don’t have that many payments. And then you just make the payments back to the business loan over the course of 8 to 10 months. And that will be building up your payment history. So you build your personal credit at the same time, and then you build your business credit as well. So it’s a really, really powerful thing to consider. All right? So knock this out. Again. It’s totally optional. It’s not required, but just another way to help you think through and be a little bit more credit and financial savvy, and I’m hope this helps. I’ll see you the next module.