Small Business Loans Made Easy

Small Business Loans Made Easy

While you may know that you need a small business loan for your company, that doesn’t mean you necessarily feel 100% confident about the process. Learning more about it and the factors to consider can help you to feel both more secure in your choices.

Types of Loans

When you need money for your business, you might think that you don’t have too many options. In other words, you may envision yourself walking into a bank, saying that you need a loan to get started with your small business and receiving either an approval or a rejection. Keep in mind, however, that some people take out business loans after their companies have been open. Others are in search of help to get started. Still others need to finance certain equipment or repairs for their businesses. Understanding that different options exist helps you to focus your efforts.

Amount of the Loan

Early on in this process, you should start to assess how much of a loan you need for your business. Being honest with yourself can help you to better procure what you want. Make a list of the expenses. Be sure to account for the fact that items, renovations and so forth often cost more than you originally think. Then, you can look into a lender that matches with your needs. For example, some providers may offer loans for only a few thousand dollars, and if you are looking to start a business, that amount probably isn’t enough.

Term of the Loan

When it comes to easy business loans, you also want to consider how much time you’ll spend paying them back. Therefore, you should research the terms that are available for different lenders. Some think that to get easy business loans, you should select the ones with the shortest terms. While that plan does help you to feel motivated to pay off the loan more quickly, short-term loans are often available for lower amounts of money than long-term ones. As a result, you must analyze more than just one factor when deciding which loans are right for you.

Available Assistance

Trying to wade through all of this material about loans might seem overwhelming. Fortunately, you can generally speak to representatives from different lending entities to learn about their easy business loans. On top of that, you can also schedule an appointment with your account or certified financial planner in order to gain some perspective.

Applying for a business loan doesn’t need to be daunting. Arm yourself with information about them to make the right choice- these loans can help bring your envisioned improvements to your business a reality.

Why Character is King when it comes to Getting a Business Loan

Why Character is King when it comes to Getting a Business Loan

Lenders talk about the 5 C’s regarding business borrowers:Cash Flow, Collateral, Capacity, Conditions, and Character.

Cash Flow has to do with the amount of cash the business generates.  It looks at the business’ revenue and its expenses.  Cash flow analysis identifies the earnings a company produces; the lender knows those earnings will be used to pay down the loan interest payments and principal so it is look for sufficient earnings.  Collateral has to do with the business’ assets such as equipment and inventory.  If need be, the business can sell its collateral to make good on its commitment to pay down the loan.  Capacity has to do with personal assets the business owner has.  If cash flow and collateral is insufficient to pay back the loan, the owner can always rely on these personal assets.  That’s why if the owner has real estate or a large personal bank account, this will increase the likelihood a small business will be approved for a loan.

Conditions refer to the general economy; are we headed for a recession, or are we in the early stages of a growing bull market?  Lenders will lend more in the latter than the former.

But beyond these four elements is the fifth- Character.  Character can be defined 100 different ways by 100 different lenders.  But ultimately it has to do with the honesty and integrity of the borrower.  Character impacts all the other C’s because if a borrower is dishonest, the lender may not believe the provided documents to attest to Cash Flow and Collateral, for example.  A dishonest borrower may forge or manipulate these documents.  So how will a lender ascertain your character?

For some lenders, they keep it simple.  They evaluate your personal credit score as a proxy of character- the sum of your past willingness to keep your commitments to lenders.  Others will also order a background check of you and other owners to determine if there is any criminal history or indicators of lack of commitment, such as defaulting on student loans.

According to “Money, Money Everywhere”:

Character. It’s a crucial step in the loan application process. You must convince your banker you have what it takes to succeed…..For them, for bankers today, determining character is the most important task. If they purchase an item, or take one in on loan or pawn, and that item is stolen or fake, they lose their entire investment. This is no different than any other borrower from the bank. If the intention of the borrower is not to pay back the loan, in actuality there is little the bank can do about it…..

Your reputation was defined in the past by your associations in the neighborhood, but today that reputation is more defined by how you show up on Internet search engines.

Did you do your assigned homework and Google your name? Bankers now understand more than ever that Google helps define your character. When the banker types in your name and an unflattering article pops up, that will be extremely negative to your case…..Other character tests are old school. In the past, it was important what organizations you belonged to, what country club you belonged to, and the lineage of your mother and father. Google has replaced that caste system.

If you there are negative accounts written about you on Google, there are ways to address it.  You can contact the website and request a take-down of the offensive material.  Another option is to work with a company that specializes in improving online reputation such as Reputation Defender.  Companies like Reputation Defender create original content and use search engine optimization to rank positive articles about you while pushing down in the search engine negative accounts.  This means that when people search your name, they will see the good representations and may not see the negative accounts unless they click to later pages on Google.

Knowing that Character is central to loan approval means that you can take proactive steps in preparing yourself prior to the loan application to give yourself the best shot of approval.

Restaurant Small Business Loans – Being Prepared for the Loan Interview

Restaurant Small Business Loans – Being Prepared for the Loan Interview

The kinds of questions that a lender will ask depends heavily on the nature of the business of the borrower.  Restaurants, just like any other business, have their own peculiarities.  A lender’s job is to get paid back with the least hassles and when deciding whether a restaurant should get a loan, his task is no different.  What is different is what data he looks for when discussing the loan with the borrower.

An excerpt from the book “Money Money Everywhere” explains some of the questions a lender may ask:

For a restaurant, one matrix could be the average size of the check for the lunch crowd, and is it growing or shrinking? For dinner, is your customer’s alcohol consumption up, or down? How many special events do you have planned for next month? What percentage of your sales comes from catering? What are your gross margins on the new buffet you introduced?

As you can see, the questions are industry-specific.  Lenders are impressed when borrowers have these figures on the top of their head; they can recite them instantly.  They know the average bill of their customer; they know if it’s trending up or down.  And even better- they know why.  If you’re in the restaurant business, you know there are a multitude of factors why this might be – new competition, trends in terms of demographics in the neighborhood, menu changes, etc.

The book also points out the difference between perception and reality as far as restaurant loans:

One of the great disconnects in the small business lending industry is the fact that we all see the failure rates for restaurants are staggering yet restaurants continue to be the number one receiver of small business loans.

Lending still has an emotional and qualitative dimension.  Sure with online lenders, much of the restaurant loan application has become numerical or mathematical.  But even with such lenders, they will often follow-up an online application with a phone call to inquire further, often wanting to know information about the business specific to it and specific to the industry it operates in.  In this qualitative dimension, some lenders may operate on the bias or mistaken assumption that restaurants fail at a disproportionate rate so it’s important to be able to explain the financial strength of your business with real data.  Generally, citing data from a one-year old balance statement won’t cut it.  Most lenders want to see that the borrower is on top of their current financials.  When going through the loan application phase, it’s not a bad idea to keep a cheat sheet of your key financial indicators to refer to when talking with lenders.

To summarize from “Money, Money Everywhere”:

Bankers aren’t stupid and they know the risks that come with restaurants, but they still do it. If you want to be one of those restaurant small-business borrowers, you need to first convince yourself that the business is viable and then convince the Old Man sitting behind the desk.

Being prepared to discuss your restaurant’s financials will put you in the best position to be approved for the restaurant small business loan, whether you apply to an online lender or a traditional one.

Tip: Ignore The Banks, Try Alternative Lenders

Tip: Ignore The Banks, Try Alternative Lenders

Banks were once held in the highest esteem. We knew the names of them because we respected the work that they did. A hard-working person could go to a bank when he needed a loan for his business. Sometimes with as little as a handshake he could leave with a guarantee of the funding he required. Sadly, that is not the time we live in anymore. Banks are no longer respected and their lending standards have become impossibly strict for many would be entrepreneurs. Fortunately, alternative business loans are on the rise.

The New York Times has published a story about the success of businessman Ivan Rincon. He runs his swimsuit business in Miami where he also resides. When he was first getting started he turned to the banks to get the funding that his little shop was going to need. The banks flatly rejected his proposal because of a lack of collateral. Rincon could have given up at that point but he didn’t. Instead, he selected alternative business loans that worked for him.

In Rincon’s particular case he went with a merchant cash advance. These are alternative business loans in which the business owners borrows money and pays it back as a portion of their daily sales. It meant that Rincon was able to keep the lights on in his business while at the same time expanding it and paying off the loan. There is no way a traditional bank would have allowed for this setup.

More flexible loans are leading the way to the business future that is before us. Traditional banks may choose to remain stubbornly stuck in their old methods, but more business owners than ever are turning their nose up at that. They are insisting on greater control over every aspect of their business, including how they borrow.

Alternative business loans are great because they keep alive so many small business dreams just like Rincon’s. His little shop in Miami could have been just the latest causality in the ever growing list of business failures, but he decided to take a different path.

With the Internet available at everyone’s fingertips these days, there is no reason to settle for a loan that you don’t like. There are always other loans available which could be better suited to your particular business needs. The amounts that may be borrowed via the alternative loans are expanding as well.

Never constrain yourself to the old ways of thinking or the old methods of doing things. Modern consumers like it when a business is more flexible with them, and businesses in turn should demand more flexibility from their creditors. That is what Ivan Rincon did, and it has worked out splendidly for him and his customers.

Consider These Options When Funding Your Small Business

Consider These Options When Funding Your Small Business

Inventory? Check, Employees? Check, A base of customers? Check. You have all of these things ready to go and your small business dream is about to take off, but you are forgetting one thing… capital. A business needs money to run effectively, and the vast majority of us do not have huge amounts of cash just laying around. Therefore, it is appropriate to consider options for funding a small business before you get too far down the road.

A Bank Loan

This option is likely the one that pops into the minds of most people when they think about how they might fund their operation. Sure, you can walk into the bank and hope that they will offer you a loan. In order to get one you will need to have a very detailed business plan as well as some financial numbers (real or projected). The bank will then take this all into consideration and potentially make you a business loan if they feel it is their best interest.

Reach Into Your 401(k)

If you are fortunate enough to have a 401(k) that you have been contributing to, this can be one way of funding a small business. Those funds will not last forever, so you should tap into them and try to start generating some profits as quickly as possible. The length of time that this can keep your business running will depend on how much is in your 401(k) as well as how fast the business burns through money.

Ask For An Angel….Investor!

You might feel like you need to start praying in order to get to funding a small business, but you actually just might need what is known as an angel investor. This is someone who sees the potential in your idea and wants to provide funding to it. They do so of course in exchange for a certain percentage of ownership in the company.

This type of funding can be very beneficial. It can also be pretty hard to come by at times. There are thousands upon thousands of small business ideas out there and only a few of them are any good. Angel investors have to carefully allocate their resources in order to make a profit. If they get the sense that your idea is not going anywhere they will not invest.

Use Your Credit Cards

If nothing else seems to be working, you can always reach into your pockets and pull out the credit cards. You may well rack up a lot of debt doing things this way. There is no guarantee of success, so you ought to think about this long and hard before pulling the trigger on this plan.

How To Find The Right Unsecured Small Business Loan

How To Find The Right Unsecured Small Business Loan

An unsecured business loan has many advantages over a secured loan. You are not required to risk collateral, such as your home. If your business is struggling and you are unable to repay the loan, the lender will not take your assets. While you do not need collateral to qualify for an unsecured business loan, you may still be required to show that you have strong business revenues, multiple years of operating history, and solid personal credit. Unsecured business loans carry a higher annual percentage rate compared to secured business loans, however they also come with quicker funding. Here are the top lender choices available on the market as you look for an unsecured small business loan.

OnDeck

OnDeck is a preferred option for small business owners who need capital to help manage cash flow or deal with emergency expenses. OnDeck does not have as many requirements as other competitors. OnDeck does not require a lien on your assets, however you must sign a personal guarantee that makes you liable for repaying the debt if your business is unable to.

StreetShares

StreetShares should be considered an option if you have not established a business history yet, because the lender only requires a minimum of one year of experience in business. Be aware that the minimum line of credit that you can qualify for is around 20% of your actual revenue.

Lending Club

Lending Club offers both lines of credit and term loans. The APRs on these products fluctuates, which makes it more expensive than other types of Small Business Administration loans. However, they are one of the lowest among online unsecured funding options. Collateral is required on loans and high lines of credit. You also need at least two years of business experience.

Kabbage

Kabbage is an attractive option for borrowers who do not have good credit, but are in need of some cash to manage expenses in the short term. Kabbage does not have a minimum qualifying credit score, and you can receive funding quickly. Once you are approved, you can get access to your funds immediately. Try to avoid Kabbage if you need money for a large expense, due to its high APR and short repayment time frame.

Fundbox

Fundbox is a good choice for businesses that are in need of short term working capital, as the lender can provide a high line of credit. The borrowed amount must be repaid every week and you can receive funding on your next business day. To qualify for a loan, you must have at least six months of business experience.

Remember to do your research to find the right unsecured small business loan for your situation. Make sure that your small business loan matches up with the amount of revenue that you bring in.

 

BorrowStar

BorrowStar provides insight and information to small businesses looking to secure a loan for working capital, inventory, expansion, franchising or whatever the need may be.  We aim to provide objective, crisp walk-throughs and guides so you can make a better & more informed decision.

The good news is that there are today, thanks to the Internet, a large variety of choices that small businesses have when it comes to getting a business loan.  This wasn’t always true when mainstream banks dominated the landscape; the rejection rate was higher as banks demanded to see a certain amount of assets or a lengthy tenure before they would consider loans.  Today, a multitude of online lenders, including non-bank lenders, vie for your business.  Often, they offer loans to a high percentage of applicants, and without cumbersome paperwork.  However, there are always disreputable organizations that take advantage of the anonymity of the Internet and are unreliable.  BorrowStar aims to aid you in your evaluation of lending products and make the best choice for your business to grow and thrive!