Personal Finance Tips

Congratulate yourself. You started your business from nothing. You kept it afloat through that rough first year, and you have positive cash flow in your second year. Now it’s time for growth and expansion, and you need a bank loan for that. Getting that first loan can be tough, and though you know that going to be tough, you know you can do it.

Here are some tips to get you started.

Identify the right bank. Do you want a bank that can offer a business loan backed by the Small Business Administration? Do you care about the geographic location, or are you comfortable dealing online? Ask a friend or another business owner for suggestions on where to get a business loan. If you contact a bank that isn’t right for you, ask for a recommendation of another, more appropriate bank. Once you find the right bank, get the name of the person who will review your loan application and set an appointment. Ask for a list of all the documents required for the business loan you need. Generally, you’ll be asked to provide a cover letter, loan application, business and personal tax returns and financial statements, an updated business plan and projections. Bring brochures, newspaper articles or press releases-anything that speaks favorably of you and your business. Prepare to answer in detail questions about what collateral you have; when you’ll have the loan paid off; and exactly how you’ll spend the money. The idea is to present the company-and yourself-as rock solid and low risk, but don’t stretch the truth; the risk of getting caught is too great. Let the lender know you’ve identified potential business “challenges” and have B-plans prepared.

The first business loan is the hardest to obtain, and requires a lot of forethought. Make sure your personal and business credit reports are spotless before you apply. Dress like a banker. Be confident. If you can start a business, you can obtain the money you need to succeed.

Are you looking for a small business loan despite your past damaged credit history? There are many lenders in the loan market place in these days who are offering bad credit small business loan to such business people. Bad credit small business loan is specifically designed for business people who have late payments, payment defaults, arrears or county court judgments mentioned against their names in their credit reports. Such borrowers are approved the loan with ease as lenders know well how to cut risk in the loan deal.

The best of negating bad credit factor is to offer some valuable property to the lender as security of the loan. As the loan amount is fully secured now, the lender usually has no problems in approving bad credit small business loan. What is more, lender offers you greater amount depending on value of the property placed as collateral. You also are given the option of repaying the loan in larger duration that ranges up to 30 years. So one can say that secured bad credit small business loan is approved without any trouble with advantages for the small business person.

In case you require only smaller loan than you can take unsecured bad credit small business loan without providing any security to the lender. However interest rate will be very high as you are risky borrower. The loan is to be returned back in shorter duration of 10 years.

One advantage of secured or unsecured bad credit small business loans is that as you clear the loan installments regularly your credit score moves up and loan availing in future becomes easier.

Ensure that you take a convincing business plan to the lender showing the areas of business you would be investing the loan on. The lender must be convinced that you have adequate repaying capacity and have sufficient amount in your bank for timely repaying the loan installments. Compare different lenders for availing bad credit small business loan at better rate and terms-conditions.

It’s almost impossible to start a business of any sort without raising finance for your start-up costs. The most common way of raising capital is via a business loan – but the problem is, a business loan requires security of some sort. So it is essential for you to understand how to secure a business loan, whatever your business may be.

Some years ago, if you were starting in business, the obvious place for you to go was your own bank. The banker would grill you with all sorts of questions and you would have to wait to find out whether they would give you the loan or not.

Now it’s very different. Even in a time of credit crunch, there are hundreds of lenders out there looking for your business. You can negotiate many key issues, such as due date, interest rates, fees, etc. But there is one thing they will all insist on and that is security in one form or another. After all, they don’t know you or your business ability, so they need to have some assurance of getting their money back.

So here are some suggestions as to how to secure a business loan.

If you are looking for a loan to purchase the actual business premises, obviously the loan can be secured on the real estate itself. This is obviously the preferred type of collateral and may well ensure you get the best rates and loan-to-value. If the loan can’t be secured on the business premises, it might be possible to use the equity value in other real estate, such as your own home. Obviously you have to be very careful and ensure you have a well-thought-out business plan, or you could risk finding yourself homeless. If real estate is not an option, lenders will look at other possibilities for securing the loan, such as equipment, inventory or receivables. If equipment is used as security, the lender has to be satisfied that the useful life of the equipment will equal or exceed the term of the loan. The value of equipment as security depends on how old it is, but different lenders take different views. Some will allow up to 75 percent loan-to-value on new equipment, and a lower loan-to-value if the equipment is older. However, other lenders reverse this, on the basis that depreciation on new equipment, as with new cars, is much faster, whereas older equipment holds its value better. With inventory, the level of loan-to-value you will obtain depends on how the lender judges its “merchantability” – i.e. how quickly and for how much it could be sold. For ready-to-go retail inventory you could get 60-80 percent loan-to-value. For manufacturer’s inventory that consists of component parts and other unfinished materials, it could be as low as 30 percent. Receivables, or “accounts receivable,” refers to money which is owed to you by customers for goods or services you have already delivered. They are seen as a business asset so can be used as security. However, their value to the lender depends on how old they are. If they have been outstanding for more than 60 days, they will be regarded as having little value. Stocks and bonds can also be used as collateral. You can borrow up to 75 percent of their market value, but you can’t use the money to buy additional stock.

These are some ideas as to how to secure a business loan. In addition to collateral, some lenders may require you to secure your loan further by providing a co-signatory or guarantor for the loan. In this case you will need to set up a formal agreement with the guarantor as to how he/she will be repaid if your business fails.

Whatever you use as collateral, make sure that you obtain an assurance from the lender that once the loan is repaid, the full interest in the collateral will be released to you. And make sure you take advice from a competent and impartial financial advisor. If you can negotiate a loan successfully first time round, the next time will be a whole lot easier.

When you need money to purchase a business property, whether to open a new business or expand your current one, commercial mortgage loans can help you get the cash needed to move forward. You can apply for a commercial mortgage loan through a traditional lender such as a bank or through a private lender. To get approved for this type of loan, you should already have a property in mind that you’d like to buy, a good credit history, and either a well put together business plan or proof of a stable financial history for your business.

No matter which lender or type of commercial mortgage loan you choose, there are many benefits supplied by this type of loan. Let’s look at some of these benefits and see if they apply to your situation.

Buy or Expand while Maintaining Cash Flow

Even if you already have plenty of cash on hand, you might not want to spend it all on a new commercial property purchase. Obtaining a commercial real estate loan will allow you to keep a steady cash flow while paying back your loan over time. A steady cash flow will give you freedom to purchase supplies and inventory, pay employees or contractors, and promote your business. And best of all… the interest on your loan is tax-deductible!

Numerous Business Opportunities

A commercial mortgage loan will open a world of opportunities for you to start or expand your business. These loans can be used for office buildings, restaurants, repair shops, health care facilities, retirement homes, apartment complexes, condos, hotels, strip malls, schools, car washes, or even churches. The loan will enable you to purchase an existing building, construct a new building, or buy multi-unit properties for rental purposes.

Better than Renting

Buying is better than renting… even in the business realm. If you must rent due to location or circumstances, then by all means, don’t allow a rental situation to keep you from pursuing your business dreams. But in most cases, it will benefit you now and in the future to buy your own business property. When you own a property, you can make improvements or remodel whenever needed. You can also build equity as you make monthly payments. In some cases, renting will be the same or even more than a mortgage payment. So, why waste money on rent payments month after month if you don’t have to?

Renting will also place you and your business at the mercy of the building’s owner. If the owner decides to sell or retire, you could be left without a building to operate your business. If the owner sells the property to another investor, your rent agreement could change significantly and your rental payment may increase as well.

Going Out of Business

If for any reason you have to close your business, you’ll be able to sell the property along with the business – not just your business’ name and inventory. Most commercial mortgage loans are assumable, so a qualified buyer could take over your loan terms and payments without having to start a new loan of their own. You should check with your lender or broker to be sure this can take place if ever the need arises.

Customized for Your Loan Needs

Another benefit of commercial mortgage loans is you can usually pick and choose which lender, broker, or type of mortgage you’d prefer. There are private lenders that can work with you if you have special loan needs or if a major lender has turned your loan down due to credit reasons. You can also choose from a number of mortgage plans, including fixed rate mortgages, variable loans, balloon mortgages, and interest-only mortgages. Though fixed rate mortgages are the safest, your situation may call for a lower initial payment or other special needs. You can speak with a broker to find out which option best fits your business plans.

Whether using a mainstream lender or a private lender, be sure to check out your online options as well. You can obtain a commercial mortgage loan through an online broker or private lender and potentially save lots of time and money!

Many small businesses are falling apart and are looking for ways to keep it running. Some have considered applying for grants but it is just not reachable for the present economic times. But some banks and other institutions are considering small businesses for loans. There are items a business owner must know before applying for the loan and how to apply.

Before Hand

The owner should like up a business plan and have all financial statements readily available. A normal business plan includes the exact purpose, what is to come revenue and expense wise, and how the business will prosper with the use of the loan. All personal financial records need to be gathered. Even though personal credit and finances are separated from the business the lender needs to be ensured that have people with a good financial status to make payments. The purpose of the loan needs to be clear. A financial institution is not going to give out a loan for nothing. They need to know exactly what the loan will be used for. For most small business loans collateral is a must. Assets such as equipment or land are often used for collateral. The financial institution needs to be sure that if a loan is not paid there will be back to pay it off. Lastly, before applying for a loan the owner should be well aware of the costs and payment plan. The payment needs to fit the budget of the business or it will fall apart.

Instructions

Numerous business owners do not have a clue on how to apply for a small business loan but want to make sure it is done properly. Having the paperwork, such as financial statements, the cover letter with the purpose of the loan, accurate and organized is the first step. Reviewing and prioritizing the stacks of paperwork will show that the business owner is well organized and the financial institution will spend less time shuffling papers. The owner should not meet with only one financial institution. Financial institutions all have different loan rates and upfront costs. Researching several institutions is highly recommended. Once all the paperwork is together and several financial institutions have been selected, filling out the loan application completely should be priority. They do not want to see incomplete work and will just toss aside the application not even considering the business for a loan. Alongside the application, a cover sheet should be attached with all the company’s vital information.