You are here: Home / Archives for Business Loans

How to Get a Small Business Loan

November 23, 2011 By Leave a Comment

11310494821_funding-small-business-loan.jpgGetting a small business loan is one way to start a venture or to expand your own established company, as this can be used in your business’ start-up costs, daily operations and monthly expenses. However, applying for a small business loan with banks, your family and friends, personal investors or other credit and finance institutions is not easy nowadays, since you have to assure your lender that you can pay in full as well as on time.
The best way to increase the chance of your loan to be approved is to prove that you are worth the investment. Proving that you are qualified for the amount that you are about to borrow will need careful preparation, which will definitely include documents such as credit histories, a professional loan proposal and a well-detailed business plan. You must also justify to your lender why you need the money and your confidence that your business will be profitable.
Below are guides that will help you obtain a small business loan.
Step 1:
The most important requirement that you will use in applying for a small business loan is your personal credit history. Having a clean credit history will be a good start for your lender to see once they have reviewed your loan application, for this may imply that you are creditworthy and capable of repaying the loan. But before applying for a loan, be sure that you know what is on your credit report. Credit reports are provided for free by these following companies: TransUnion, Equifax and Experian. You must also know your credit score, since some lenders have different minimum credit scores required. This is also important because this will show the type of credit you have and the length of your credit history, as well as your payment history.
Step 2:
Write a solid and detailed business plan. This is required once you apply for a small business loan, so you better prepare it precisely since this is the basis of your business loan. It is also important to specify in full detail how your business will be profitable. Your business plan must also include statements such as your own professional biography, market analysis, and description of your business assets, business worth and business projections.
Step 3:
Make a professional loan proposal that is formal yet written in a persuasive manner. You can also ask your lender for their preferred loan proposal format, which will definitely include a cover letter or an executive summary. Your professional loan proposal may also include a business description, wherein it contains relevant information such as the history of your business, its location, target market, current activities, legalities, and the type of products or services that your business provides. Other important details that are essential to be included in your professional loan proposal include the following statements:

Financial statements
Cash flow statements with realistic estimated profits
A loan request which explains how much money the business needs to start operating
Collateral of assets that will secure the business loan
Repayment plans that emphasize the process of how and when the loan will be paid

It is also best that you know what type of loan will go well with your small business before writing your loan proposal, for there are several types of loan plans such as Micro-loans, SBA loans, Lines of Credit and Development Financing. It will be much easier for you to repay if you research the policies and requirements for each type of loan.
Step 4:
Choosing your lender will be the easiest part. This is the part were you will need to present everything you have prepared. First off, it is best to apply for a business loan with banks and credit institutions that you already have done business with or have an existing account with a good record. Then you can also apply with other banks and credit institutions so that you can choose who has the best offer.
Once your small business loan is approved, you should build a good relationship with your lender through constant communication. You can also show appreciation by providing results and monthly progress reports. And if in case your loan was not approved, you can always find other ways to finance your small business, like government grants or private investors. Your prepared materials will still be of use, and you may also improve them as well.

Filed Under: Business Loans Tagged With: , , , ,

Business Loans: An Introduction

November 21, 2011 By Leave a Comment

21310494819_personal-loans.jpgBusiness loan refers to the loans acquired for running or enhancing ones business. A business loan relates to the expansion and enhancement of a business. In other words we can say that the periodical redistribution of financial assets between the borrower and the lender. The process of acquiring business loans can be very tedious and it can also have some tricky conditions and limitations. To avoid this thing, people who wish to apply for a loan, must have a concrete business plan. As we all know running business is not a childs play. Small and big business loans both are available for everybodys needs.

There are common types of business loans available such as:

Secured loans- in secured loans, the borrower promised his assets as collateral against the loan and in return, the creditor grants the loan. The assets pledges by the person become a secured loan or secured debt.

Related Coverage

BUSINESS LOANS: AN INTRODUCTION

A business loan relates to the expansion and enhancement of a business. The process of acquiring business loans can be very tedious and it can also have some tricky conditions and limitations. HOME EQUTIY LOANS: AN INTRODUCTION

Home equity loans are secured loans and the debt is thus secured against the collateral in the event that the borrower defaults and the creditor takes possession of the asset used as collateral and may sell it to satisfy the debt by regaining the amount originally lent to the borrower. An Introduction to Business Plans

The main purpose of a business plan is to attract investors, as well as guide the actions and policies of a firm over a certain period. Here are some steps to great business plans. An Introduction to Commercial Mortgage Loans

Do you need a mortgage loan for a commercial property? This article can help you to learn what you need to know to secure a solid commercial mortgage loan.There are different types of secured loan are there such as

Mortgage loans- these loans are taken against the collateral which is the applicant’s property, for instance, a house.
Non recourse loan- Non recourse loan is secured loan where the only security or claim the creditor has against the borrower is the collateral. It is known as a non-recourse loan because, here, the creditor has no option or provision against the borrower other than the collateral, in case of a failure in payment by the borrower. However, this happens only after ‘foreclosure’ by the borrower.
Foreclosure: foreclosure is an entirely legal procedure and this is where the mortgaged property is sold by the defaulting borrower to repay his debt to the creditor.
Unsecured Loans -These loans are the exact opposite of secured ones.
It is a kind of a loan or debt, which is not supported by collateral. It is difficult to get an unsecured loan; however, it is inexpensive at the same time. Unsecured loans are basically an assessment of the repayment capabilities of the business.

Start-up Loans: Start up loans is very basic loans where the loan is applied for a new business venture. Before applying for a start-up loan, meticulous planning is advisable, before applying for a start-up loan. Here, the collateral and credit can have a deep impact.

Business Only Loans: These loans are availed only for business sans the usage of personal credit, till the time the specific business is capable of returning the amount payable.

Business Acquisition Loans: If a company wants to go through a takeover process, or wants a loan to acquire another business, there are loans available to complete that procedure. These are acquisitions which can be financed through debt. Such acquisitions are called ‘leveraged buyouts’. This is very common, in many instances; the company has enough finances to carry out the takeover or the acquisition. Apart from these, there are professional loans; these loans are applied by a professional from a specific field. For example, business acquisition loans availed by doctors or lawyers and so on. The whole process of obtaining loans can be a very cumbersome and lengthy process.

Filed Under: Business Loans Tagged With: , , , , , , , , , , , , , , , , , ,

The Downsides Of A Small Business Loan

November 20, 2011 By Leave a Comment

01310676272_image.jpgIn our economy, small business is often praised as the savior of a stagnant market; the result of hard-working, innovative, bold individuals seeking to share a good idea with the world and make some money in the process. The field of small business start-ups is a tricky one, fraught with risk and pitfalls, only adding to the esteem that is often given to those who pursue such endeavors.
One tool that many use to assist in getting their small-market idea off the ground is filing for a small business loan, whether at their trusted local bank or by petitioning federal entities dedicated to distributing such funds, such as the United States Small Business Administration, or simply SBA. While obtaining this sort of loan may make sense, to raise capital quickly in exchange for being able to pay back over time, it actually comes with a few drawbacks.
Learning Curve
Unless the applicant has taken a business course or done the proper research, applying for a business loan is no easy endeavor. Typically a founder must turn in a business plan to convince the loan officer that the idea is legitimate. The more data the better, but it can be difficult for a layman to conjure balance sheets, marketing mixes, exit strategies, or other factors of an exceptional documentation. Even with these elements involved, landing a loan is never a sure thing, and any business acumen is an asset, which most people lack. A wonderful idea does not necessarily translate into a wonderful organizational tactic.
Entrepreneurial Stigma
Depending on the field and target market, filing for a small business loan and bring on, perhaps unfairly, a stigma in the market. After all, with so much dialogue about wasted spending and people relying on handouts, a loan can be seen as a preemptive bailout. In addition, it can cause problems for local networking, which is usually essential: Imagine the disdain the family restaurant down the street feels when the new kid on the block shows up with an expensive new promotional sign he bought with loan money.
Fiscal Liability
Perhaps the most compelling disadvantage is simply that a loan is a liability! From the moment the funds are granted, there is now a debt on the business’s books. It is also important to note that the loan, as with all loans, builds interest over time. This debt, and the interest, are two elements that may not have necessarily factored had the applicant instead vied for private means of raising capital.
Even with these reasons in mind, this does not mean that small business loans are terrible things. In fact, for many, they are exactly what their plan calls for. The important lesson is to remember to not simply assume that everyone needs a loan; often, a viable alternative is available to get a great idea out of development and into the profit zone.

Filed Under: Business Loans Tagged With: , , , , , , , , ,