Most personal loans begin with repayment of principal on the very first payment date, 30 days after closing. But as a corporate lender having structured many different kinds of loans for big companies, I know they can be tailor-made, based on the situation and the need. Ideally, I’m looking for a “reducing revolving credit” that starts with an open revolving loan for some period of time allowing the borrower to draw down, repay, and reborrow, but then either begins to reduce in total credit availability after some period, or converts to a term loan with principal installments thereafter, due all at once (a bullet payment) or over time according to a pre-established schedule.
This may be too sophisticated for the average consumer or retail bank, but I believe there are lenders out there who may provide a more creative structure. And I am not talking about a “sub prime loan” that would lend too much money based on ability to repay, or with escalation clauses that kick in and lead to outrageous and ruinous rates. This is a PERSONAL loan with the need upfront to put the capital into an earning asset and to use that asset to repay the loan, once it is fully operational and throwing off cash as planned.
Do you know of a source where such financing might be found at the consumer or retail level? And this would not qualify as a Small Business Administration loan so please don’t suggest that angle.
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December 1st, 2009 at 9:45 am
You are exactly right on stating that loans can be structured. The only people I know that can do this are Private bankers. And they have a different criteria on who can become their clients.You know exactly what you want. Hit them up. All headquarters of banks have them.
December 1st, 2009 at 9:45 am
Most mortgages in the UK can be structured in this way.
December 1st, 2009 at 9:45 am
For consumer loans, banks take a lot of comfort in seeing loans that are “performing” (usually meaning that they’re paying both principal and interest), especially on an unsecured loan For a fairly modest-sized loan, it can be inefficient for a bank to customize a loan like you want.
Here’s an approach that could work for you: borrow more money than you need to get started. If the bank wants to know what you plan to do with this, call it a “reserve”.
The extra money you borrow will actually go towards the payments you make in the first year or two. You’ll probably want to have at least a 5-year term (10 years would be better), and you’ll have to be able to qualify for the higher amount, but it will achieve the same thing as having the bank allow you to make lower payments during the first couple of years.