Business Loans – Finding Financing Fast
Most business owners who are in need of a quick loan often make the grave mistake of approaching unscrupulous loan brokers and agents who will offer them quick loans at atrocious interest rates. The truth is that there are ways to get a loan quickly and affordably. You just have to think outside of the box.
Ask business owners what their impression is of commercial finance and you will get a host of answer. The one factor that is almost always mentioned is the time involved. Commercial banking is not a quick process. The idea of doing a loan in 30 days is laughable. If you need money quick as a business owner, you need to look to alternatives. Let’s take a look.
Personal loan with collateral – If you have a decent credit score and are willing up to put up collateral, banks will offer you reasonable amounts of cash as a loan that will be processed quickly. Unlike business loans with a long application process, secured personal loans will usually go through a quick approval process. The very big downside is you are now on the hook for the loan and essentially waive any protection from incorporating.
Accounts receivables loan – We’ve all been in the unique position of being receivables rich, but cash poor. Our dearly beloved customers owe us money, but haven’t paid or aren’t due to pay for net 30 or 60 and we need money NOW! The Accounts receivable loan is one way for dealing with this. Commercial banks and brokers offer them. The costs can be high, but the cash flow relief is usually worth it. The same is true for factoring receivables as well.
Even if one plans on applying for a loan using routine procedures, they can speed it along by providing the right documentation that will quicken the loan approval process. You must also be able to meet several conditions and present your case clearly so that the bank is quickly able to realize that you have good credit worthiness. Some of the documents and factors that will help establish your credit worthiness are
• Consistently good credit history and credit score, both for your business as well as personal accounts.
• Good financial statements on the business that will show the business as a profitable one.
• Collateral assets and necessary proof to show ownership of proposed collateral
One will usually see a quick approval process for smaller loans where the requested amount is typically lower than about $50,000. Some businessmen make the mistake of asking for more than what they need which will lead to a rejection or a very long approval time where the bank checks your requirements for the funds. Stay within your means, provide supporting docs and you should be in great shape.
The Advantages of a Business Loan
In today’s marketplace there are many ways for a person to get money for a business they might want to start. They can go to their friends and relatives for money or they can pull out a personal line of credit in order to fund their business. There are many other options available as well, one of which is known as the business loan.
A business loan is a loan that is given out to an incorporated business by a bank, credit union or other financial institution. Rather than you being liable for the loan as you would be with a bank line of credit, the corporation that you have just created is the one responsible for the repayment of the loan. There are many advantages inherent to the use of business loans for your company and some of these advantages are discussed below.
Liability
Perhaps the most obvious advantage of a business loan is that quite often you will not be held liable for paying the loan back. Because a business loan is made to a corporate entity, if the corporate entity goes belly up and is unable to pay the loan, then the corporation will be liquidated in order to help pay part of it back. The corporation is the one that goes bankrupt rather than you personally.
The lack of personal liability with business loans gives you a lot of freedom when it comes to managing your business. You have the freedom to take some chances and go out on a limb and in the case of many people in the past, that freedom has led to decisions that have proven extremely prosperous for the company. The mindset when no personal liability is present is completely different and that is definitely the most powerful advantage of a business loan.
Size
Another important advantage to business loans is that the size of the loan is often going to be larger. If you have good credit, chances are that you can get a line of credit from a bank worth around $10,000. While this is a large amount of money, there are some businesses that require loans far in excess of that amount. If you incorporate your business and go after a business loan however, you can get loans that are easily 10 to 25 times that amount. Business loans are serious and if you go after them you will get serious money in return.
Motivation
There are many people in the world today that love to talk about motivation. They love to point to the different things that motivate someone and how a positive mindset of good feelings can lead to hire energy levels and motivation. Well, something else that leads to motivation is the feeling of self-confidence that comes from knowing that other people believe in your ability to succeed.
Well, that belief is something that is part of the deal when you are given a business loan. With the loan is the implication that the other party believes you are going to succeed in your business and be able to pay the loan back. There are few things in the world that can provide as good a motivating factor as a successfully obtained business loan.
How To Qualify For A Business Loan
Qualifying for a business loan is not as easy as it was even one year ago. This is because most lending institutions have increased the requirements for businesses requesting a loan. The recent slowdown in our economy has forced banks to re-examine their lending practices as many businesses are experiencing lower profits. So when you are looking for a loan for your business it is important that you have everything in order so you will have the best chance to be approved.
One of the first things that you need to look at before going to a lending institution is whether or not you have a good business plan together. Having a business plan drawn up for your company is a great way to show the bank that you have carefully considered your request. This will show the bank where your business is currently and where you hope it will go once you have been approved for a loan. There are many professional writers that work as freelancers that have the expertise in this area that you can hire if you are uncertain about your ability to convey your thoughts on paper.
The next thing to do before you go to a lender is to look at your company’s financials. Clear as many debts as you possibly can. For example, if you use a credit card start paying it off monthly or if you have a vehicle loan with just a few payments left on it you might want to consider paying it off. This will help your income to debt ratio and make your business a more attractive prospect.
Once you have done that, you should look at all the officer’s credit reports. Every officer of the company will have a credit history run on them because they will be personally guaranteeing the loan. So make sure that the person income to debt ratio is good and clean up any bad marks against your credit.
When you have all of that together you are now ready to go to the lending institution. With the situation the way it is currently it would be wise to start with the bank you already have a relationship with. This is especially true if you have a community or local bank. They make their decisions based on the local area unlike the larger national banks. If your company is turned down don’t take it personally but consider your other options.
There are other places to gain access to a loan. You need to keep your eyes open, when the private market tightens the amount of money they are willing to lend oftentimes you can more easily qualify for an SBA loan. So if your bank says no don’t give up to easily especially if all of your financials are strong. So when you are looking for a business loan make sure that you have your company looking the best that it can financially and present the lenders with a solid business plan.