Category: Ask 4 Funding

Applying For The American Dream

When a small business owner has a great idea they don’t always have the capital funding to make their dream reality.  Often times they will look toward commercial lenders to help make things come to life.  Small business loans are also looked towards when companies are looking into expansion.  Growth does not always come with the cash to make it happen.  Loans come in handy to encourage and stimulate small business health.

In order to apply for a small business loan there are things to think about in regards to how the financing affects the business owner’s personal financial situation.  Many times small business loans will not show up on the owner’s personal credit.  This is helpful because they are still free to go about making personal purchase such as a home or car without any ill effect.

The benefits of business loans are great.  Usually a business owner can get anywhere from ten thousand to a million dollars for use having to only go through a processing time of about seventy two hours.  Not only are they usually a quick type of loan to procure but they also do not charge any upfront fees.  The terms and rates associated with small business loans are generally better than average and some are even offered through government regulated institutions which can improve the rate as well.  Most often small business loans have the benefit of personal customer service and very minimal documentation required.

A small business loan may require less documentation than other do but they are not without their form of required paperwork.  One thing that most commercial lenders will require is a business profile.  This document is all about the business and includes specifics about the number of people that are working for the owner, annual sales and the length the business has been running and open under the ownership of the applicant.

Another document that will be needed is a business plan.  This is particularly important for new businesses.  They don’t have a record of good history or financial management built up so a plan should convey to lender all the different aspects surrounding the business.

Another document that commercial lenders will need is a loan request.  This document lays out to the lender the amount you are looking to finance. How the loan is going to be used and what type, secure or unsecure, are you looking to acquire.

Many lenders will require knowledge business and personal debts owned by the procurer of the loan.  This is to verify a debt to income ratio for the applicants.  It is important that lenders are able to see what debt is outstanding, what types of payments are scheduled and what collateral is being held to back the debt if any.

Some commercial lenders will require and loss and profit balance sheet for established businesses.  This is not always the case and truly it is easier for a small business owner to determine with the choice institution what is needed before going through the work of gathering all of this documentation.  If it is not needed in the end time will have been wasted and that is the last thing a small business owner can have.

Loans For Small Business Owners

Entrepreneurs are some of the most ambitious, adventurous people in our society.  Without the people willing take a risk our society would not be where it is today.  With the economic climate as shaky as it is in our current state some small business owners are looking at loans for business expenses, equipment, advertising and other business related expenses.  Growth in these times is often difficult without the backing of some type of financial source.  Financing these days come from many sources traditional and non-traditional.

First let us look at a loan for small business owners specifically.  The SBA express loan was launched to offer small businesses a chance at a loan backed by the SBA with little hassle in regards to application.  Qualified applicants can obtain a loan for up to one hundred and fifty thousand dollars and are guaranteed to receive a decision within thirty-six hours. The SBA express loan alleviates small business owners from having to go through all of the paperwork that is originally identified with the standard SBA loan.

Next small business owners should look into their local community banks for financial backing.  Although the options in financing may not be as varied as a financial giant smaller community banks offer something large lending institutions cannot and that is their flexibility in dealing with entrepreneurs.  This is something very valuable when owners are looking into financial backing options.

An asset backed borrowing option can be the right choice for some.  This is a way to reduce the risk that entrepreneurs present to financial institutions.   Offering up assets as backing to loans can often help to decrease the credit-risk premium.  If this is the only way to go don’t be discouraged, asset backed loans don’t narrow the terms of the loan.  That is not the case at all.  Assets can be anywhere from a home-equity line of credit to a SBA loan backed by a child’s college savings account.  Pricier options entail loans linked to company’s receivable or contracts billed.

A cosigner is another option for small business owners needing financial backing but not able to obtain financing on their own.  A co-signer is needed when the history of the applicant, in this case the small business owners, has a lacking credit history.  This is a tricky situation for new business owners to get themselves in because the co-signer then becomes liable for the payments on the business loan if the owner defaults.   With new businesses the statistics for success are not weighted in their favor so this is a risky option for a close relationship.  It is best to look outside of this option until it is apparent that all other options have been exhausted.

Loans for equipment, startup and growth amongst other things are all incredibly important reasons for a small business owner to be looking for capital funding.  It is important that as a society we look at small businesses within our communities and support them financially with our business to help them succeed.  With their success comes growth for communities, local and state governments not to mention national growth.  With the economic stupor society is in today it is important that people willing to take risks involved with business ownership are rewarded with business.

Prepare To Be Approved

As a small business owner to be or one that is in existence, but in need of financial backing for growth, the SBA loan application can be complicated.  It is important that once an entrepreneur decides upon a loan guaranteed by the small business that they begin the loan process by obtaining the documents required and contact a local lender that deals with SBA loans since they are not a direct lender.   Once the documentation has been gathered the loan company with then submit the information to the SBA for approval or denial.

The first piece of documentation that should be completed is the SBA loan application.  The business owner should complete this seven page application.  Another two page loan application is required to be filled out by the lending company.  These applications detail everything about the business, business owner’s finances, information on people of interest in the company and details about investments, debts and other financial documentation.

Another part of the SBA loan application is the personal history and background statement.  This goes through the applicant’s personal history.  This involves fingerprinting with a criminal history check as well as a credit check being done in regards to the applicant past business ventures and transactions.

It is also required when applying for a SBA loan that the businesses financial statements are included.  This is basically a detailing of a signed balance sheet of the company’s profits and losses as well as current statements on the business.  Current in this situation is anything within the past ninety days that has relevance to the company’s profits and losses.  Supplementary schedules are required on all current statements of finance.

Another piece of documentation that is important is a projected statement of finances.  A written explanation of your income goal and a financial explanation with how the company hopes to achieve this goal are required to show that the business has a plan for the money being leant.  Another pertinent piece of information that is requires in your loan documentation is information on all interested parties in the business be it ownership and information on affiliates with the business.

Licenses and all business certificates are important and should be documented within the application.  Another important document that will need to be included is a loan application history.  If you can obtain loans through a bank or private lending institution this needs to be sought out before asking for financing form the SBA.  The laws set forth to obtain a SBA loan include equality in hiring and granting products and services.  This means that the company cannot participate in discrimination of any kind.  In order for a small business to be considered for qualifying for a SBA loan it must be a non dominant business in the field it represents and must be independently owned and operated.  Certain criterion also involves the number of employees and annual receipts.

Tax returns from the business shall also be considered in the application checklist as well as personal tax returns.  It is important to represent at least three years of history to the SBA.  Resumes are also an important piece in the puzzle of obtaining funding from the SBA.  Along with a detailed overview of why the funding is needed and how it will help the business prosper the business should also obtain a copy of current lease agreements in regards to the building and the equipment leases.

If the purchase of an existing business is in the works the SBA will need information from the existing business including balance sheets, tax returns, the terms of sale along with a list including the purchase price, inventory, value of machinery/equipment and a list of all furniture and fixtures belonging in the sale.

This information will give the SBA a detailed look into the business covering the entire picture on what the owner is basing his attempt for funds for.  When looking at the provided information there should be little doubt as to the success of the businesses in order to obtain a loan from the SBA.  After going through the documentation requires obtaining a loan the small business entrepreneur should also have zero doubt about the substance on which the small business will be running.

Determining The Best Loan For Your Needs

Whether you are looking into commercial lending or personal lending you are looking at divulging your financial history to lenders who will determine if you are a viable risk.  Lenders look into your credit history by reviewing your credit report and look into your debt to income ratio to help determine at what rate your risk is worth them taking on.

If you have a credit score that is high with a low debt to income ratio you are an ideal candidate for commercial lending and personal lending.  What about the client with an average credit history and an average debt to income ratio? That is more likely the case in the current economy and the American way of spending.  It is still possible to obtain lending it will however cost you more and will be harder to obtain.  Special requirements such as a down payment, co-signer or collateral might be needed to obtain lending in certain situations.

It is important to know all aspects of lending and where to obtain lending.  In cases of commercial lending you are looking for eager investors or a lending company that is specially designed to help small businesses such as the loans given out through the SBA, small business association.

Personal lending is a bit different and can be obtained in several different methods.  It is your responsibility as a borrower to establish which method is best and most cost effective for the situation at the time.  The first network for borrowing which I think is interesting is a peer to peer lending network. This type of social lending is new and has certain requirements that must be met in order to borrow funds.  You must have a high credit score, be a citizen of the United States and your debt to income ratio has to be less than twenty five percent not including your current mortgage.  These are extremely high requirements to place on a loan but the rates you will obtain will hands down beat rates through other sources.

Next you can obtain a personal loan through your credit card company.  This is the easiest form of getting a loan basically every time you use a credit card you are taking out a personal loan against the company.  Although getting funds this way is one of the easiest lending methods it is usually costly with high interest rates and can lead to a never ending debt cycle.  Be careful when taking personal loans out against credit cards.  Make sure you can attest where the funds are coming from to pay off the credit card before taking on frivolous personal loans.

Banks, credit unions and financial institutions are a very common place to obtain a personal loan.  However you will need to determine the fixed or variable rate at which a loan will be obtained, the fees to get the loan and the rate at which the loan will be paid off at.  It is also requires time and diligence on your end in regards to paperwork before a loan is even able to be obtained.

Friends and family members are an easy go to answer in personal lending.  Remember however that these loans can be risky to your relationships with the people you are borrowing form.  It is best to have a formal agreement to discuss repayment and terms of the agreement.  Although this is an easy way to obtain a personal loan make sure that it is one that can be repaid or you could jeopardize a relationship.

Payday loans are popular in the lending environment today.  However convenient they do present large financial gains to the lender which means you will be paying for it in the long run.  It is quick, easy cash without any need for a credit check but will require large fees and expensive term agreements.  This should be used as a last resort and then even considered risky and unnecessary.  Payday companies are known for preying on those in need and often use this tactic to lure people in which leads to larger personal debt and financial ruin for clients.

It is obvious that personal lending options are out there for people of all different financial and term requirements.  It is up to you as a consumer to explore your options and obtain a loan based on term agreements that are fair and just to both the lender and the loan recipient.  Ask questions and understand everything before you sign and accept a loan agreement.  This is true not only with personal lending but also commercial lending as well.

Pros And Cons Of Buying and Leasing Business Equipment

There is so much information out there on whether small business owners should buy or lease their businesses equipment.  The jury is out on this decision as each situation will vary greatly.  Every small business requires different equipment and each piece of equipment will need to be looked at for its own special circumstances to determine whether leasing or purchasing is the better deal for your company.

If you are purchasing your equipment outright you will have to make sure the cash you have on hand is able to be tied up in equipment or if an equipment loan is your next step.  An equipment loan will add another dimension to the decision because you will now need to account for the loan terms and the cost associated with that.  This will alter the decision to lease or buy in some situations.

As a small business owner it is important to weigh the advantages and disadvantages of both leasing equipment and purchasing equipment.  In general people look at leasing as a way to safeguard capital and provide more flexibility but may cost more over the long term.  The cost however may be minor in regards to loss if you weigh in the advances in technology the equipment will have in the future.  Computers and technical equipment fall into line with this thinking.  Businesses look at the purchase of equipment in regards to the tax benefits and the value of ownership.  However because purchasing equipment means taking out an equipment loan it is not for all businesses.

Advantages and Disadvantages of Leasing Equipment versus Buying Equipment

Let me start by stating that the assumption is that the equipment being purchased is being bought outright and an equipment loan is not in this equation.  Loans add an entirely new dimension to small business ventures and equipment purchases.

1)      Initial Expense:  Obviously with leasing you are able to get more assets for business startup with minimal outlay.  Leasing often only requires a small down payment which will leave capital available for other areas. However, down the road when you add up the initial deposit and monthly lease fee you may have been able to purchase the equipment twice over at the end of the lease agreement. Purchasing requires a large amount of capital out of pocket this can be a real disadvantage to owners with little money who are looking into business ownership.

2)      Taxes: With leasing you can deduct the expense off of your taxes however with purchasing you get incentives some purchases and only depreciate others. Check with your accountant to decide which situation is the best for your needs as far as your taxes go.

3)      Upgrading: It is obviously easier to upgrade new equipment every few years with a lease.  Purchasing new equipment every few years would require the outlay of a lot of capital.  You will need to determine if the purchase will be one that requires that your business keep up with trendy new technology. You will have to decide if the equipment is something that will become obsolete, such as computers or if it is something where age is not really an issue like a stove.

4)      Ownership: This obviously does not happen with leasing.  You never outright own the equipment.  It is truly never yours to do with as you wish.

5)      Obligation:  If you are leasing equipment and decide being a small business owner is not for you the obligation to pay for the equipment is still there.  However, if you purchased it you may resell it hoping to recoup some lost capital.

It is in the best interest of a small business owner to figure out the net cost associated with the purchase of equipment for your business. Once you determine the cost effectiveness of leasing or buying you will want to review the items that aren’t as easily laid out in black and white.  These gray areas will consist of the longevity of the equipment and its technology. Along with the whether the equipment is deemed to be necessary for the long haul of the business.

SBA – Helping Small Business Owners Obtain Lending

Business owners are regular people just like you and I.  They run into situations that require more capital then they have.  How does an entrepreneur come up with funds when their small business is in need? This may happen in opening a small business or may present itself during an expansion whenever the need arises it is important to be aware of what you will need in order to prove to a commercial lender that you are a secure investment.

The small business association or SBA provides a lot of information on lending as well as tips and solutions for things that come up with running a business.  One issue they cover in great detail is lending.  There are several issues that can arise when a small business owner is looking for a business loan.  Do you have the means to pay the loan back?  Can you prove it to a lender and how?  Clarifying a need for money and what they lent money will be used for is also needed.  It is important to remember that lenders want to lend money but need to know that they are making a wise investment lending it to you.  Your goal is to prove to them you are a worthwhile risk.  The question is how one goes about proving this.

The SBA recommends that business owners have key information ready and available at all times for investors and lenders.  People are rarely prepared to ask for money when the need arises so it is important as a business owner to be prepared at all times.   The first step involves gathering information in the form of financial documents and a business plan to show lenders business goals and that you are a risk worth taking.  The next thing they will need to know is that the business has the means to repay the loan.  With cash flow data you will be able to prove to lenders that you have substantial resources to back up the loan.

Small business owners are at a disadvantage in some ways because they personally can be held liable for business debts.  Often small business owners will need to not only prove the businesses financial means but also their personal means.  Commercial lenders might be interested in seeing past tax returns that the business has filed and will also be interested in the company’s credit ratings.   It is good for business owners to pull a credit reporting of their business every six months to check for discrepancies and to look for areas to improve on the credit rating.  Higher credit ratings will ease a company’s ability to receive a loan because your credit rating is evidence to commercial lenders of debts that have been paid in a timely fashion.  However a poor credit rating will do the opposite so you want to make sure that your businesses credit rating is in check before applying for a loan.

The SBA is an association that offers guidance to many small business owners throughout the United States.  With the economy in a rut as it is now many people are afraid to take a risk in opening a small business.  It is important to look into organizations such as the SBA for help with not only fiscal decisions but also with guidelines to help make your business a success right from the start.  Make sure you stay on the right path in your business venture and access organizations and groups that will help you achieve this goal for the ultimate reward…success!

Small Business Help In The Form Of An Unsecured Business Loan

How has the economy affected your small business?  Many business owners, large and small, are scaling back whether on employee benefits, laying employees off, reducing inventory or asking the government for help.  With companies making cut backs society is also left to make changes.  Banks are stricter with who they lend money too and credit is tougher to receive.  The expansion of small businesses in this economic environment becomes incredibly difficult and leads to many owners calling it quits.

There is one major thing between those businesses who will succeed and those that will fail…capital.  Many small business owners are getting by with unsecured business loans.  With this type increase in funds small businesses can make changes to increase profits and pull themselves into economic recovery.  Unsecured business loans can help by providing a flexible, instant boost of cash flow to help with advertising, expansion, equipment purchases, employee retention and many other situations that can arise along with business ownership.

As with any business decision that is made there are advantages and disadvantages.  The same is true when deciding to get an unsecured business loan. You will want to look into all aspects of the lending process along with institutions that offer these services.  Look at the reasons that you are seeking the loan and what value it will bring to the business verse the risks involved with borrowing funds that you don’t have on hand to pay back.

Advantages

1)      A business owner is not required to pull money out of their own pocket as a deposit. Although some loan companies will require an initial fee of an amount under a hundred dollars to go through the loan process.

2)      Unsecured business loans are great for businesses with high credit rankings but have limited cash.  This is why during recessions unsecured business loans are so ideal.

3)      Cash advances are allowed to be pulled from the loan when needed.

4)      Repayment of the loan helps build good credit and with flexible repayment options payment plans can be worked easily into a business’s accounts payable.

5)      The application process and approval time are quick and this can help small business owners turn their businesses around in little to know time.

Disadvantages

1)      Often time’s interest rates are a bit higher than conventional secured loans.

2)      The repayment plan is shorter than most loans and there are maintenance fees.

3)      An unsecured business loan is often handed out in smaller amounts than secured loans.

A small business that can weather rough financial times and preserver is ahead of the game.  As long as business owners remain realistic and flexible they should be met with long term success.  With the assistance of an unsecured business loan small business owners with ambition and drive can manage to stay competitive through rough market times and grow during the rebound. Part of growing any business is risk taking and knowing when to call the bluff or fold on the economy.  Playing the game of small business owner is not for the faint of heart that is for sure.

Obtaining Loan Company Worthiness

There are many reasons people need a loan.  However it is not something that is dealt with on a daily basis so people often don’t have the information needed to make informative decisions regarding a loan company.  Whether a loan is needed for the purchase of a home, home improvements, a car, school or getting a business started banks and credit unions are loan companies willing to lend to those who show credit worthiness.

Loan companies must determine if the risk is worth the reward in lending money.  Of course the risk is that a client may not be able to pay the loan back and the reward is the money they will earn on the interest paid.  How do loan companies determine a client’s risk?  It will help you in obtaining a loan to know what lenders are looking for.  Education is the key is making the loan process less difficult and you will be more likely to be approved and at a better rate.

The first bit of information that is crucial in getting a loan approved is your credit history which creditors determine with your credit rating.  It is imperative that you keep track of your credit by obtaining a copy of your history report a couple of times a year.  It is easier to change errors that have been submitted when they are recent.  It will also help keep you in track to improving your credit score if you are aware of what information is being reported.  Credit scores can be raised based on the timely fashion your payments are made.  Makes sure you are paying all bills before they are do and that you are not keeping overly high balances open on accounts. These are all ways to keep your credit score high and new loan interest rates low.

It is also important in obtaining a loan that you are aware of your current and future financial situation.  You will have to prove employment history and also your financial accounts.  Often time’s lenders will request information on investments, checking and savings information and outstanding debts.  This information will help lenders access your debt to income ratio.  This tells them a lot about your ability to pay a loan back.  For larger items such as homes and cars it is always wise to have a down payment to go along with the request for a loan.  This shows lenders that you are responsible a trustworthy.  Money in savings and a good credit score are two major factors in determining your interest rate, the amount of money it will cost you to borrow funds.

If you are new to the world of credit how do you work on obtaining a credit history?  This is often the tricky part of lending.  If you have not been allowed to establish credit history then how do you get credit?  The answer is simple, a co-signer.  This is a person, maybe a parent or relative that has an established credit history that backs your financial obligation by offering to pay the loan back if the loan is defaulted on.  Another way that you can work to establish history is by offering collateral.  Maybe you have equity established within a rental home that grandma and grandpa gave to you upon their passing.  You can use the equity as collateral to help improve your chances of gaining credit until you find yourself more established in the rat race of lending.

Equipment Loans: What Works For Your Business

You have decided to open a business.  Whether it is a computer repair shop, a restaurant or an auto plant you are most likely not going to have the capital to pull off opening without signing loan or lease paperwork multiple times.  It is important to understand when leasing or asking for the funding form a bank is a better option.  This comes in to play a lot with equipment loans.

Do you outright purchase the goods or do you lease them from someone else?  How does it affect your finances?  Are the terms of the lease better than or equivalent to the loan payment and interest?  Pros and cons of both options will way in other decisions you need to make regarding the company so look into the details carefully.  The general rule many business owners follow is this: If the item will increase in value over time pay cash or take a loan out to make the purchase but if it will decrease in value you should lease it whether or not you have the cash available to purchase it.

When leasing an item such as a car, which will depreciate as it ages you will find the lease has terms that need to be followed and met.  This mostly helps because the financial burden will be spread to a later date.  This is helpful in starting up a firm because you are not required to have the capital up front.  With a lease much of the financial burden comes at the end.

When you purchase an item often by pursuing a loan you are taking more control over the item. This comes in to play with large items such as buildings.  When you purchase a building you take a loan out often requiring a financial down payment and then acquire the property with the loan agreement.  It is essentially yours.  You accept any increase or decrease of value for that purchase.  Purchasing an item with a loan is helpful if you expect that the item will last for an extended period of time.  This was you are not paying for it many years down the road when your business is established.

Equipment also changes frequently that is why you will often lease items that change frequently needing your company to upgrade often.  Phones, computers, cars and trucks are all examples of items that depreciate and will need an upgrade frequently.  These pieces of equipment are all examples of items it is most often better to lease than to purchase.  They wear out and frequently need to be updated because of that or advance in technology.

You will find that when looking into equipment loans and/or equipment leases that it comes down to two basic arenas – 1) cash on hand and available to spend and 2) what you qualify for.  If you don’t have the cash or the twenty percent to put down which is often needed in an equipment loan than you are going to be leaning more towards leasing until the revenue in your company picks up. Additionally if you can’t qualify for a loan because you are just beginning this venture you will be looking into leasing equipment until you can prove to financial lenders that you are a solid business risk.

Anyhow you look at it there are advantages and disadvantages.  Tax professionals might lean you one way or another so before going forward with any business decision no matter how big or small you might think it is bring in your financial gurus for their opinion on the subject.

Commercial Lending: Making Sure Your Needs Are Met

Getting a mortgage is an adventure.  It does not matter if you are looking for a mortgage for a home or for a business venture the basic same rules apply.  It is tough to enter into a large financial agreement with a lender that is often a complete stranger to you and your needs.  The problem is that you have specific needs that your commercial lending company needs to meet in order for you to feel confident that it is the right deal for your company.

There are some basic tips you will want to follow and things to think about as you apply for commercial lending.  Not only are you looking for a quality lender, low interest rate and fair terms for your loan needs. Finding this miracle lender is the tricky part and it will take time.  Also, just because you have found someone do deal with your lending needs for this transaction don’t assume that with every aspect of business lending that they will be your go to lender.  You will need to stay up to date on your lending needs too and not rely on someone else completely.

First speak to a mortgage advisor.  It is important that a party that is not invested in you or a lender look at your situation impartially to advise you.  A mortgage advisor is an individual who is paid to help you find a great deal on a commercial loan.  Because they don’t have any connection to a lender they will look for the best deal within your business sector and can also navigate better because they are professionals in the industry.

Mortgage brokers can also be useful because they often specialize in a certain type of lending such as commercial lending.  They will be able to explain their specialty inside and out.  They can give detailed information about lenders and different mortgages available which is all information that will benefit your lending needs.

Remember to leave yourself plenty of leeway in finding a mortgage for a commercial venture.  Residential mortgages take a while and much paperwork is needed to complete them but it is nothing in comparison to a commercial loan.  If you go with a mortgage broker or advisor they may be able to help streamline the process helping the speed at which your loan goes through.

It is imperative that when working with a professional broker or advisor that they are independent of a lender.  This way you know they are really scoping out the industries best deal for you and not favoring a lender because of ties to that company.

It is possible to arrange for a commercial loan on your own.  Be prepared for leg work and ask friends and business contacts for referrals.  Often you’re the financial people in your life can assist you with contacts.  Your accountant, financial advisor and other business owners can be your best allies when looking into a commercial loan. Don’t forget about your banking institution also.  They can provide services to help you with finding a commercial loan or pointing you in the direction you should be looking.

You should use all online tools available to you.  Scope out forums and blogs that will help you understand key elements and terms that lenders are throwing at you.  It is important to be knowledgeable and well educated when you enter into an agreement such as one with the magnitude of a commercial loan.  It will affect you and your business for years to come so make sure it is a best fit for all parties involved.