Besides the myriad of problems that a small business owner faces, the most severe issue is lack of capital and limited avenues to raise capital from external sources. Being a small business owner, it is never easy to get a business loan, as most lenders would consider them as borrowers with unstable income and poor credit. Justifiably, as most small business often do not have a steady flow of income in the initial period and runs on low profit, it actually becomes a challenge for the owners to pay off their business loans. Most financial institutions and banks are therefore not very enthusiastic about lending to these small business owners and are concerned about their ability to repay.
However, the good news is that there is a group of lenders who would not like to let go this increasing market segment of small business borrowers and they have devised a lending scheme that fits the requirements of the small business owners. They can use these small business loans for expansion of their business, purchasing new tools and technology or even to meet revenue expenses like paying wages or buying raw materials.
Apprehensive about the increased risk involved in lending to small business owners, these lenders would always take sufficient measures to cover against any probably loss. In most cases the small business owners would be required to keep an asset as the security for his borrowed amount. Also, the interest for small business loans is always charged at a higher rate than other loans. Unlike normal business loans there is often a cap to the amount that any financial company would lend to a small business owner. Depending on the stability of the business, the credit history and several other factors the maximum amount of loan offered is decided.
Small business loans [http://1rstfunds.com/Small-Business-Loans.php] can be either for short term (ranging from few months to an year) or long term, which can be repaid over a longer period that might stretch even to 20-25 years. The small business entrepreneurs needs to decide on this repayment period and other terms and conditions depending on their specific requirements.
The most important factors that most small business owners should consider while deciding on a loan is the flexibility of repayment. As most small business would experience irregular income for some period in its life cycle, a flexible repayment schedule can be immensely helpful. There are lenders that offer extremely flexibility in terms of amount paid towards repayment as well as any pre specified period of repayment. This helps the small business owners to make repayments for any particular period based on their income during that period. As there is no specific pre determined amount to be paid, there is no question of underpayment or further interests being applicable. However, it is very difficult to find such a lender who will be so sensitive to your financial condition and offer you the highest degree of flexibility.
Alternative to small business loans there are many other companies that are offering business cash advance to small business owners, where they are not liable to repay. Business cash advance is not a loan and the organization offering this cash advance gets their money from the credit card sales that the business does in a specific period, there by reducing the burden of paying back the loan and the terms and conditions to qualify for such cash advance are also relatively simple.
With this increasing number of sources available for small business funding it is high time that you unleash the entrepreneur in you and give shape to that dream project you have in your mind.
This article is written by Ray Smith, a marketing expert with years of experience in different industries and specialized knowledge on branding and Internet marketing.
Small Business Loans, Business Cash Advance [http://1rstfunds.com/Small-Business-Loans.php]
Business Loans FAQ:
Question: Can you get a loan in the name of your business so your personal credit wont get damaged?
My partner and I have read you can can keep business separate from personal and the loan officer we were talking too didn’t seem to grab that concept. So it made us wonder if this was true about keeping business separate from personal.
Answer: You can, but your business has to be organized as a corporation or LLC to be considered a separate entity that shields the individual from liability. However, on a more practical matter, most lending institutions aren’t likely to loan a significant amount of funds for a start up business without getting a personal guarantee. The personal guarantee makes it allowable for the lender to go after your personal assets if your business defaults on loan payments.
Question: If I were to start a lawn mowing business and wanted a loan how much could I get?
I am interested in starting a lawn mowing business, I want to know what are the requirements to successfully be able to get a loan from the bank, (what do they want to see and hear). Say I am able to achieve this, how much would I be able to receive from them?
Answer: My take is don’t bother with a business loan initially for a lawn care business. Start it very simply and learn the basics of the business first. You may find you like the business or you may find you may not. After you experiment with it for a bit you may want to scale up with a loan. But more often than not, those who take out loans early on, fall into deep trouble.
Question: How to get business cash advance loan?
Answer: The business cash advance loan application is only two pages long and it will take about three to four minutes to complete. Once you have submitted your application along with your last four months of merchant statements, a copy of your business lease, a voided business check and a copy of your driver’s license. Your provider can approve the application in 48 hours. After approval, most business cash advance loan providers can fund merchant accounts in as little as five business days.
Question: How many years do banks fiance a business loan for like 2.5 million?
Answer: Anywhere from six months to 120 months. With some specifications, as much as 360 months.
Question: What are good resources for applying for small business loans and grants?
Answer: You stand a greater chance of getting a government-guaranteed loan through the Small Business Administration than a government grant. Read the SBA Financing page to learn about criteria needed for borrowing. It is hard to find grants to start a business. Unlike the myths that some perpetuate, federal government and even private foundations hardly give grant money for starting a for-profit business.
Question: Who do I go to get a loan for a new business?
Do you know of an organisation that helps people with funding to get an online store as well as a from home business? I am new to all of this but would like to open a jewellery store bracelets etc.
Answer: Your bank, the Small Business Administration, relatives and friends.
Question: What is the success rate of obtaining a small business loan (Less than $5000) from a bank?
Our company may require an initial bank loan of less than $5000 to utilize as startup costs. We are a company based on a new concept with a hybrid business model that hasn’t been quite done before in our particular industry. However, a main advantage of our model is that we require very little for startup costs, and our overhead is low (We are a services company, not a physical product producing or selling company). How difficult is it to convince a bank (either for-profit or credit union) to allow us to take out a small business loan if we presented them a well-established business plan?
Answer: This is going to be your first hurdle “hybrid business model that hasn’t been quite done before in our particular industry.” Bankers use industry benchmarks as part of their basis for reviewing loan applications, even small loans.
Second it appears you are still a ‘young’ company though you are an S-Corp. What is your D&B rating? It matters and if you don’t have one or any substantial business credit established, that’s going to trip you up also.
Finally, how are you going to repay the loan if this doesn’t work as you plan? The SBA doesn’t issue loans, they only guarantee the lender will be repaid if the borrower qualifies with the SBA first and defaults. You have to show this in your business plan or have money somewhere…just in case.
Before you ask for a loan, check with your banker. Will they give you a line of credit? It may not be the full amount you need at the moment, however over time as you use and repay the loan they will reconsider increasing your limit. Check this option first, the rates for the credit line may be lower than getting a straight loan.
Question: How do you make a business plan projection for next year after such a bad year compared to 20 good years?
I am trying to make sales projections for a business loan to expand and can not figure how to base my numbers…on a good year, average year or this years actually sales?
Answer: The most rational way to do this, Kathleen, is to create a 3-tiered business plan that projects several different scenarios: slow, medium and great. As you craft these plans, you will end up with a strong idea of places where your business can be flexible depending on how the year actually goes.
Your bankers for the expansion loan will almost surely require you to use this year’s actual sales, but I suggest adding another sheet with three or five years of data. Most bankers require multiple years of financial information anyway.