Small Business Loans
Every business needs money at one time or another. The process of obtainingfinancing can be daunting as well as the odds of success limited if it is approached in a disorganized or haphazard way. Lenders are conservative critters; nevertheless it is important to know it is their job to givemoney, and they are happy to do so if their risk is reasonable. The possibilities of getting abusiness loan are greatly enhanced if you adhere to the subsequentprocedure.
Understand how you intend to use company lending, how much fundingyou need and the way you want to pay off the loan. Be able to communicate this clearly and confidentlywith prospective lenders.
UNDERSTAND YOUR CURRENT SCENARIO
In the event you are an existing company, are you reallyprosperous, and does your balancesheet have positive equity? What does your credit look like? Have a clear understanding ofany existing liens and lien priority. Understand your credit score and solutions toderogatory credit issues (liens, judgments, slow pays, collection actions) beforepresenting your program. If there have been credit, profitability or equity problems previously, present a credible argument as to why these issues have beensolved or how this loan will change this case.
UNDERSTAND YOUR OPTIONS
All financing is critiqued from a risk perspective. Specificlevels of danger will qualify for specific types oflending. The degree of danger is represented in thecost of the funding. The more secure a lender’s money is, the less it costs you.Get creative. Financing takes many forms, and is available from a wide range of sources.
Regular (standard) bank financing typicallyoffers the very best interest rates, however it’s the mostdifficult to qualify for. These loans appear as a long termliability in the business balance sheet. Conventional loans areavailable through banks as well as other lending institutions and could beguaranteed in part or whole by the SBA.
Revolving Lines of Credit are another kind of business financing. This kind of credit is secured by accounts receivable or inventory and is available from a bank or an Asset Based Lender. Credit cards are a form of revolving credit line. An Asset-Based Line of Credit (ABL) is considered alternate financingand is available to borrowers that are too highly leveraged for a bank.
Unsecured loans, in the other hand, require no security but nearly always have a higher interest rate than secured loans.
Bonded loan helps borrowers in making the perfectuse of the equity saved in his or her property that helps him in borrowing abigger amount of credit and that too for a longer loan term.
Real Property, Equipment Leases and Notes are another type of businessfunding. In these contracts the security for the loan is the property or equipment . Equipment leasing has become more and more popular with set up companies. Specific programs, flexible credit guidelines and its easy acceptance procedure only for set upbusinesses.
When there’s no outstanding balance owed on the asset, equipment or the property may be used in a Sale-Leaseback transaction. Here, the asset is sold to the lender for cash, as well as the property is leased by the borrower from the lender until the loan is paid.
Landlords could be a source of funding. It is common for a landlord to contribute dollars or rent concessions to the creation of a tenant’s space. As repayment, the landlord mayrequire a Percentage of Gross Sales Clause in the lease for this particular loan.Lengthy vendor conditions for purchase of product may provide short-term operating capital loans.
In case that additional credit strength is needed, loan guarantors or borrowing someone’s credit may assist the borrower qualify for funding that is less expensive. Be flexible. Your closing package may be comprised of severalgiving alternatives
PRESENT A CLEAR AND UNDERSTANDABLE PROPOSAL Lenders have toknow who you’re personally, professionally and financially.The lender needs to evaluate Income Tax returns (Corporate and Private), financial statements (income statement and balance sheet) and a cash flow projection. The balance sheet has to look a specific way. The Current Ratio ought to be at least 1:1,to Equity Ratio should be the Debt and at least 4:1.
Be specific as to how it’ll be paid back and the way in which the money will be used. Lenders need to know what exactly is ensuring their debt. Lenders desire to ensure that it isadequate to ensure the debt in case of default, andevaluate the quality of the collateral. A secondary source of repayment is required prior to giving normal lending. The personal guarantee of the debtor is often needed. In a few scenarios, alender may seek secondary security. Secondary collateral is simply some other asset in which you have equity or possession, i.e. gear, property,stock, notes. Business funding is easy in the event the debtor is creative and realistic.Know how much cash you need and how you are going touse it. Be prepared to defend your needs andexpect the lender’s questions. In case your request is granted by a lender cannot, perhaps it’s the way a loan is packaged. Locate a lender who is willing to make recommendations that will help you find funding. A greatlender will let you know immediately if they can help you or not. A timely response isjustified if an organized and intelligent package is presented.