Personal Finance Tips

If you answer yes to any of the following questions, you may want to consider looking into getting a business loan.

1. Is the amount of your current assets minus the amount of your current liabilities a negative number?

Subtracting your current liabilities from your current assets will show you how much working capital your business currently has. Working capital is generally the money that can be used to put back into your business in order to advance your business. Businesses not only need working capital to expand, but sometimes, working capital may be necessary to stay afloat. If your working capital is not a positive number, you may be able to benefit from a business loan. You can use a business loan as an immediate injection of working capital for your business that does not need to be paid off immediately.

2. Have your original funds for business financing come up short?

It usually takes multiple sources of financing to start and run a business. Most business owners do the math, calculate all of the projected expenses and find financing from various sources; friends, family, personal savings, investors, grants, etc. But once all of the money is put to use, it may turn out that, still, more funds are needed. It may now be time to consider getting a business loan.

Contrary to popular belief, a bank is not the only place to get a business loan. A business cash advance can supply you with the funds that a bank gives without the requirements of great credit, and collateral.

3. You want to expand your business

Using a bank loan to expand a business is a great idea. The money that you receive in your loan can finance the purchase of additional equipment, extra advertising, inventory, and anything else that you may need on your road to business expansion.

As stated above, a business cash advance is a type of business loan that can be very beneficial to many business owners. Business cash advance lenders purchase a business’ future credit card sales. Therefore, a lump sum is given to a business owner to be used for business financing, and soon after, a small percentage of the business’ daily credit card sales goes towards repayment of the business cash advance.

A business cash advance is a preferred method of business financing for many reasons: Business cash advance lenders have few requirements for eligibility, offer an easy repayment process, and allow borrowers to renew business cash advances.

Getting a small business loan is a big deal to a small business. It can mean the difference between being able to continue operations or have to shut down, or it can provide the necessary funding for a successful small business to grow or expand to the next level. A small business loan can also help a business overcome temporary market conditions and help it weather the storm until calmer conditions come back again.

A few important things that every small business owner should know about a small business loan. First of all it is not normally possible to get a small business loan from a bank or credit union in the first two years of operation. That’s because the failure rate for small businesses is greatest during this period and unless a business can provide security guarantees in the form of cash or property a small business loan may not be the best place to seek financing for the blossoming enterprise.

Secondly the bank or lending institution is much more vigilant about granting a small business loan than it is with other forms of credit like car loans or mortgages. That’s because they have little to seize if there is a default on a small business loan since almost all of its capital resources have already been allocated to make the business survive. They have a double set of criteria that a small business must meet in order to get a small loan, the ability to pay or repay and the creditworthiness of the business itself.

Thirdly, the bank wants to not only know that the business is or can be successful before they hand over a small business loan. They also examine the personal financial situation of the principals or owners of the enterprise to ensure that their credit record is both established and free from any unfortunate circumstances like previous bankruptcies or defaults on previous loans, personal or professional.

Once theses hurdles have been overcome, the banks, credit unions and other financial institutions are more than happy to offer assistance to their small business neighbors in the form of a small business loan or business line of credit. They also realize that successful businesses generate revenues and they want to ensure that the small business continue to take advantage of their services as their businesses grow and prosper.

Applying for a small business loan can be a nerve racking experience for even the best small business owner, but if you do your homework and make a solid business case then there’s nothing really to be afraid of. You simply do your best and follow the process and then like a hundred of other aspects of small business life you wait and hope for a positive solution to just another small business problem.

You wish to finance in your small enterprise. But, your present financial situation does not permit you for that. You can arrange cash by availing small business loans. Again you have a problem for that…your bad credit score. Do you know that arranging small business loans is also possible for those borrowers who have a bad credit score? Bad credit small business loans are available in loan market.

A wide range of usages made bad credit small business loans popular among those businessmen whose credit score is bad. You can use these loans for gearing up a new venture, escalating present business, purchasing equipments, repaying business debts, setting up new office or as business capital.

Two types of bad credit small business loans are available in loan market; secured and unsecured. Secured option is available against a security. Any valuable object can be used as security. It could be your personal property or commercial property. On the other hand, unsecured option does not claim anything against the lending amount. However, with secured option, you can borrow the amount, ranging from

Getting a small business loan is relatively straightforward. Like any other loan- car, home, etc., it comes down ability to repay, ability to collateralize, and creditworthiness. Unfortunately, for business owners showing ability to repay it is not easy as showing current check stubs. Nor is collateralizing as easy as a car or home loan which self-collateralizes. But just as there is mechanisms in place to make car and homes loans, there is a system for business loans.

The first order of business is to make sure the home front is in place. That is the personal credit of the principal owners of the business is good. Then the credit of the business needs to be in good standing also. Many times credit applications for businesses want up to ten credit references. The next thing is to make sure the financials are looking good. The balance sheet, the profit and loss statement, and the cash flow statement should all be in order.

The financials lead to the next step and that is developing a business plan. A business plan lays out for lenders how a business intends to use the funds it receives and how it plans to increase sales to repay the money. Though there is a narrative section, what is most important is the projected financials. That means that a business should present two forms of financials. A lender will receive from a business past performance financials and projected financials based upon the capital it receives.

These steps will show ability to pay and creditworthiness, but it will not present how the business will intend to collateralize the loan. The business will have to present that option. Businesses could use real estate, vehicles, inventory, equipment, accounts receivable, or even personal assets of the owners should the business decide. Except for real estate most other options are considered lesser but it does make the lender feel more comfortable that the business has something to lose.

Should a business not be able to show an ability to pay, have creditworthiness, or have collateral getting financing could be difficult. That is one reason it is always good to secure financing or a line of credit when times are good for a business. Seemingly, when a business needs it most it may not be there. The old adage is true, banks only want to lend money to people who do not need it.

There are options for businesses that may have difficulty getting financing but the price is often high. Sometimes an investor can help but will want part ownership. Factoring is another option, which is some who prepays on accounts receivable. Downside to factoring is the rates are very high, one could receive only 70-80% of the value of their accounts receivable. Finally, there is community based lending but this is often done as microloans. Microloans can be defined as loans under $35,000 dollars. This may not be enough for many existing businesses to truly expand. Still, it nice to know that there may be other forms of capital a business can acquire.

Ever heard the saying, “It takes Money to make Money”? The principle of borrowing money from banks and other credit agencies to make money has been a relatively basic assumption since early trade days. Existing business owners may want to expand their business, buy more inventory, or even hire more employees. New business owners need start-up capital to get all the balls rolling. Many times businesses take out loans, just because they can. It helps build good credit standing. When discussing the purposes of a business loan, one must look at the various types of loans available. Many times, the reasons your business may need a loan don’t fall under reasons the bank feels you need a loan. Here are a few examples of types of loans available and the functions these loans are used for:

o Short-term loans are usually used for short-term working capital for a business temporarily in need of cash. These loans may be based upon seasonal fluctuations, and other short-term problems that a business may encounter. Usually, these loans are paid within 1 year.

o Intermediate loans are often used for businesses that are starting up. These loans may be used to build inventory, buy equipment, or increase working capital. Working capital is money needed for business purposes such as paying employees, maintaining good over-head, and other business needs.

o Long-term loans can be given to business owners that are well established and wish to increase their fixed assets, for related business acquisitions, and for expansion. Long-term loans may be given to start-up businesses, as well. Usually for purchases of land or buildings, construction efforts, and long-term working capital, these loans have terms that run 3-5 years.

o Government small business loans are available through financial institutions, as well. The government guarantees these loans if certain criteria are met regarding the business and the business owner. These types of loans can be used for various reasons: the purchase of land or buildings, new construction or expansion, to acquire equipment, machinery, furniture, fixtures, supplies and materials, and to refinance existing business debts that have higher rates and unreasonable terms. These loans can be used for both short term and long term working capital as well.

Most commercial banks, credit unions, and even investors expect business owners to have a well-thought out plan regarding their business. These business plans should incorporate the usage of loans in a very decisive manner.