Weighing the Impact of Mobile Payment Technology on Small Businesses


Technology has been fueling the innovation of the financial industry for quite some time now. First alternative lenders like OnDeck, CAN Capital and Kabbage entered the scene with new underwriting systems that made it easier than ever for small businesses owners to receive access to working capital. Now Apple and Wal-Mart have stepped into the playing field with mobile payment processors, how will these impact consumers?

In October, Apple launched Apple Pay. Marketed as an easier way to pay in stores, or as “your wallet, without the wallet” Apple Pay aims to make your phone your primary method of payment in stores, and online. Essentially, they have created a contactless payment technology so that you can use any of your apple devices to pay for goods, securely. What’s more, is that Apple made partnerships with the big banks to keep Apple Pay transactions at a low price for merchants, even lower than it costs them to process credit cards. In essence, Apple hopes to take over the whole payment processor world by giving people a more secure way to pay for their products or services, limiting the potential for data breaches from hackers.

For smaller, community banks, this could be a big problem. The more people stray away from traditional forms of payment and go towards newer technology, the more small businesses and banks will be left in the dust, as made evident by the fact that the only companies to jump on the mobile payment bandwagon are big business! Smaller businesses do not have the time or resources to test the success of mobile pay like the big guys (Wal-Mart, Target, etc.) do. This gives small business a competitive disadvantage against big business, once again.

What do you think; will mobile payments prove to be just another catalyst for consumer spending or will it have a drastic impact on the state of small business?

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Navigating Credit and FICO Scores

creditWe live in a world where your financial history is very important. If you want to buy a car, rent or own a home, get a credit card, or start a business your credit score will play a huge part in determining if any of this is possible. Credit and FICO scores can be really confusing and hard to understand. We are here to help you better understand what a FICO score is, what a credit score is, what determines if you have good or bad credit and the difference between a free credit score and your FICO score. Often time’s people don’t realize how the FICO credit scoring process works and how it changed during the recession; having a broader understanding of these basic credit tools can help you improve your finances!

What is a FICO Score?
First off, FICO is a company that specializes in predictive analysis, meaning they take your financial history information and analyze it to predict your financial future. More specifically they take your credit information and uses it to create a score that help lenders predict your financial behavior (whether or not you are a perceived risk). The credit score is calculated using information from one of three major credit reporting agencies, Experian, Equifax, or TransUnion, as the company of FICO is not a credit-reporting agency.

It is called a FICO score because the company that develops the score is called Fair Isaac Co., and it is official name was shortened to FICO a few years back.

The FICO score range is from 300 to 850, with higher scores being associated with less risk to the lender or insurer. The higher your FICO score the better your rate will be when you borrow or seek out insurance. Five main factors contribute to your FICO score; these are your payment history (35 percent), current debt/amount owed (30 percent), age of credit history (15 percent), new credit inquiries (10 percent), and types of credit (10 percent). These factors also play a large part in other credit scoring methods, so usually if you have a strong FICO score you can assume your other credit model scores will also be strong.

Credit Score V. FICO Score
What is the difference between your credit score that you receive from Experian, TransUnion or Equifax and your FICO score?  The three credit agencies use different scoring models and all scores are dependent upon the credit report that each company receives. Basically Experian may receive different information that TransUnion or Equifax, and that may result in the discrepancies between their scores.

When you get your FICO score, you will actually receive three different credit scores, one for each credit bureaus based on their files on you. Your FICO score takes into account your current payment history like the credit bureaus do, but also the other four factors that change it a little bit, and give it a larger range (between 300 and 850 compared to between 300 and 830).

You can purchase your FICO credit score from FICO and you can also get your other credit scores for free from websites like creditkarma.com

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Fluctuating Mortgage Rates Result in a Refinancing Craze

shutterstock_182304722Mortgage rates reached their lowest point in 2014 last week, dipping below 4 percent to 3.97 percent (on average for a 30-year fixed mortgage). The dip in rates was a direct result of the commotion that seized financial markets and caused stock prices and bond yields to drastically fall.

These fluctuating rates made the opportunity for refinancing seem too good to be true, and according to Josh Boak and Alex Veiga of the Associated Press, “Ultra-low rates do carry risks as well as opportunities. Charges and fees can shortchange refinancers who are focused only on the potential savings. And falling rates are often associated with the broader risk of an economic slowdown that could eventually reduce the income that some people have to pay their mortgages.”

Because the rates dipped so low, and due to the current mortgage market, many homeowners took this as a sign that it was time to refinance, before interest rates go up again.

The swift fall of interest rates came as a surprise as many assumed rates would begin to increase (to around 6 percent) due to the Federal Reserve raising its key short-term rate next year, which would result in overall higher mortgage rates. The rates dropped to their lowest point however because investors put their money in the U.S. Treasury, effectively raising prices on government bonds, causing their yields to fall.

Don’t expect to see these types of rates again soon, or ever as this week already mortgage rates have increased (minimally, but they are still on the rise).

For more information regarding Mortgage Loans and Rates call us today: at (888) 277-1697!

CELTIC BANK is committed to offering the best selection of mortgage loans geared to meet your specific financial circumstances. With a range of choices, we give you the freedom and flexibility to build your dream home, whether it’s upgrading your current residence or purchasing a new one.

Celtic Bank is also an awarded SBA Lender of the Year with a history of successful history of partnerships with small business owners. Through our SBA loansasset-based loansconstruction financeand equipment financing, we provide the financial framework your company needs to grow and succeed.

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A Complete Guide to Asset Based Lending

459375933What is it?

Asset-based lending implies a secured lending arrangement whereby the assets securing the loan are the primary source of repayment as opposed to cash flow or earnings from the business.   In conventional bank underwriting, earnings from operations are assessed to determine debt service capacity and a lender may or may not take collateral to secure the loan as a secondary source of repayment.  In an asset-based structure, the loan is self-liquidating and the conversion of the underlying assets to cash comprises the lender’s primary underwriting focus.  The most common example of this occurs from the collection of accounts receivable and sale of inventory whereby the proceeds are used to relieve or repay the loan.

At Celtic Bank we describe an asset based loan as: revolving working capital financing for businesses involved in the extension of credit and management of inventory. These types of loans can be used as working capital, to refinance revolving debt, and for purchase order financing (depending on location and loan amount).

Asset based lending usually becomes the most viable option for getting financing for companies that have exhausted all their other fund raising options, or for businesses in dire need of immediate capital. In most cases, these loans have lower interest rates because if the loan is to default the lender will seize and in most cases liquidate the assets tied to the loan.

What are the Advance Rates?

The advance rates for an asset based loan from Celtic Bank are up to 85 percent on Accounts Receivable and up to 50 percent on inventory, with some limitations based on acceptable A/R to inventory ratios.

When it comes to these types of loans we are fairly aggressive on inventory relative to the market, depending on the company and their reasoning behind the need for an inventory advance.

Usually we offer a one to two-year renewable contract term, but we area also open to longer-term deals depending on the business and their needs.

What are the Costs?

The interest rates are a floating rate over Prime with total rate determined based on loan size and credit profile of the borrower. The smaller the deal the higher the rate because it puts more risk on the lender. Larger deals will generally have smaller rates, as will lower risk deals.

There is a closing cost of between 1 and 2 percent, depending on the loan program – these are one-time fees and are not annually recurring.

All other costs associated with an asset-based loan will be included in the rate of interest. There is a monthly minimum fee (not additional) which requires about 30 percent utilization of the line – this means that if there is a one million dollar deal made, each month their monthly minimum fee would be based on the interest the lender earns on a $300,000 average loan balance.

What Assets Qualify as Collateral?

Celtic Bank only requires A/R and Inventory.

What Inventory is Eligible?

Any raw materials (goods used in production) as well as finished goods waiting to be shipped qualify as eligible inventory. No work-in-process will be considered eligible as an inventory asset.

What is the Maximum Loan Amount?

Generally we make loans up to 5 million dollars. We may be able to increase your loan line to six or seven million in California for the right transaction

What are the Closing Procedures?

In general closing a loan like this can take anywhere from three to four weeks. After pre-screening, underwriting is done. If the deal looks good, we will provide a term sheet. If the term sheet is accepted, we take a deposit for expenses or an audit deposit. Then we collect all personal information on the guarantors and we ask for you to submit an application package. From there it usually takes about two to three weeks for our underwriter to send the loan package to loan committee. After a loan has been approved by the committee it typically takes two to three weeks to close.

How is Celtic Bank Different?

What sets us apart from other banks is our underwriting approach. We are far more liberal on underwriting/credit quality and on deal structuring than conventional banks. This is because we use government guarantee programs to reduce our credit risk, meaning we have the ability to help more small businesses across the country. What makes us different from factors and commercial finance companies and non-bank asset-based lenders is our rates; they are typically 33 to 50 percent the cost of typical factors. Another aspect of our approach that sets us apart from other lenders is our aggressive inventory approach.


Let us know if you have any questions about asset based lending, and if you are interested in learning more about our flexible and affordable working capital solutions call Daniel Godfrey at (888)241-7157

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Student Loans Outlook Ahead Looks Better

studentloansAccording to a September 24, 2014 Bloomberg Businessweek Article, the outlook for student loans, which has previously been quite bleak in the United States, looks much better for the future. According to the article, fewer individuals are not able to pay their student loans back year after year, and the student loan default rate decreased from 14.7 percent to 13.7 percent from 2013 to 2014 alone. Although the forecast for student loans seems to be getting better, there are still a large amount of young adults defaulting on their loan payments, meaning there is a larger problem with the state of Student Lending in general that needs to be addressed.

Education debt has the potential to affect the whole country, not just the student who are defaulting on their loans, and not just the schools they attend. Those students to face harmful credit scores and those schools do face decreased federal funding the more students default (most of the schools facing losing funding are for profit schools with a high percentage of students defaulting on student loans).

Student loans are a rocky terrain, and there is a lot of information out there that the American Public doesn’t know or understand. Before seeking a loan, any type be sure you can adhere to the terms, and if default is imminent do everything in your power to fix your financial situation and make payments again. The lending economy affects our whole economy.

learn more about student loans here.

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