Free Business and Financing Articles

Getting your business up and running is an important and necessary process if you intend to fulfill your goal of financial independence. However, once the initial steps have been taken, you need to expand your venture so that it continues to thrive in the marketplace. You can accomplish this by providing new goods and services or increasing your capacity for inventory.

While these methods can be effective ways of increasing your business profitability, eventually you will need to find other ideas to maintain growth. Many small business owners opt to expand operations and their customer-base with additional locations.

Financing business expansion

The classical way of getting the capital necessary to accomplish business expansion is by applying for a small business loan. These loans can be accessed through lending institutions such as banks and other private lending bodies. However, be aware that loans can have a detrimental and debilitating effect on your operations.

[Example] market research suggests that there is an untapped market in the west side of town. These customers have the ability to purchase your products, but they are not willing to cross town to enter your store. So you put together your financial records, prepare your profit and loss statements and obtain business references. You also take your business plan, profit projections and summary of costs to your local bank and apply for a business loan.

After some consideration and an almost unbearable week of waiting, you are informed that your business loan has been approved. You quickly take your capital and begin the process of opening your second outlet.

Three months after the grand opening, you are enjoying the fruits of your labor. Your research paid off and customers are purchasing your products at the expected levels. This prosperity goes on for another few months and then you learn to your dismay that a larger chain clothing-outlet has decided to open a store not far from your second location.

Being an experienced business owner, you know that customer loyalty only goes so far, and if the larger competitor begins to offer similar merchandise at competitive prices, you may see your profitability plunge.

Nevertheless, you are also aware the terms of bank loans and the loan repayments do not adjust to your rate of business. Your bank still expects the same payment every month, with interest, even though you have less and less capital with which to run your business.

This situation is going to set you up with potential cash flow problems, because not only do you have commitments to your bank, but you are also committed to your employees and suppliers.

How to survive when the cash-flow is tight?

Being the experienced business owner, you go through your expenses and determine what can be carved away in order to survive this financial bottleneck. Unfortunately, after searching your books and trimming the fat, you aren’t able to make ends meet without closing your second outlet.

The irony is that if you didn’t have the loan repayments to meet, you could “weather the storm” and continue without having a significant impact on your overall profitability and running expenses.

You consider equity investment as an option, but you spent too much time and energy on building your business and you have no interest of letting someone else delve into your profits.

So what can you do to extricate yourself from this situation? Business cash advances have been the choice of many small business owners who wish to get themselves out from under the thumb of a bank loan. Business cash advances do not require repayment, leaving you in control and without having to surrender the independence that got you into business in the first place. Now you can keep your second store open and build on your dream of financial independence.

There are many companies out there that will offer you a business loan even if you or you company has bad credit. Simply do a websearch for “bad credit” and “business loans” and dozens of companies will show up, each one promising to give you the best loan against your bad credit. Welcome to the subprime market.

Many of these lenders are honest corporations with reputable business practices. They follow a set of strict guidelines set out by the government in order to maintain their operating license. However, there is a growing tide of lenders who thrive on those who desperate and uninformed. How do you tell the difference?

What is the subprime market?

The subprime market is made to cater to those with poor credit history. It also is a place for those that have no credit history, like the young, elderly or immigrant demographic.

While a majority of these operations are legitimate, there is an undercurrent in the subprime market that is not only unethical, but downright illegal. These devious operators count on their customers to be desperate and lacking any knowledge of their rights in a lending situation.

So if you in need of a loan, but do not yet have the history that will allow you to access it from a formal lending institution, you need to be aware of a few things so that these sharks will not make you such easy prey.

The warning signs of predatory lending

There are several warning signs to look out for if you suspect that you are dealing with a predatory lender.

• First, in order to get a loan, you should not have to pay a lot. Normally there is a small administration fee when setting up a business loan application, but if the amount if exorbitant, you should find another lender.

• Another thing to examine is the interest rate offered. Regular loans in both the prime and subprime markets can vary, but if you are being asked to shell out over six percent, you should go elsewhere. Please note that some predatory lenders hide their true interest rate with compounding it, so make sure to do your math before you sign anything for your business loan.

• Some predatory lenders will try to sell you a larger loan than what you were initially asking for. Most of the time they will press you to use your home as collateral. You would be doing yourself a disservice to accept more debt than you actually need, never mind putting your home on the line.

• Every lender, both in the prime and subprime market has administration fees associated with their loans. Predatory lenders will have concealed fees that will escape you until you do the math. So, make sure to add up your final debt load and ask about anything that does not make sense. If your fees make up more than two points of your total loan, it is time to break upon the books and possibly walk out the door.

Getting a business loan is a risky business, especially if you are shopping on the subprime market. Many small business owners have avoided this risk altogether by accessing their capital through a business cash advance. This method has a successful, proven track record with businesses as it is based solely on the purchase of future credit card transactions and therefore bears no interest and has no obligation of repayment.

How should you prepare yourself when making a business loan proposal? The more prepared you are, the more likely your business loan proposal will be approved.

Preparation is everything when it comes to applying for a business loan. It will not only speed up the review process, but it will also increase your chances of receiving money.

Bring the Proper Documentation

Before you even visit the lending institution, you must make sure that all of your business documentation is in order.

Bring a well thought-out business plan. Each lending institution will focus on different factors in an application. Therefore, be sure to include precise information regarding your your products or services, your customer base, and marketing strategies, as well as the future goals and profit projections you hope to achieve should you receive the loan.

Make sure to also bring documents, such as a balance sheet and income statements, that clearly describe your past and current cash flow.

Finally, take the time to research what information is required by the specific lender when making a business loan proposal. You can do this by phone, by visiting the institution itself, or by researching lender’s website.

What You Should Know About the Interview

When all of your documentation is in order, you will then be ready for the interview. Here again preparation can make a big difference. Phone ahead and arrange an appointment with a loan officer to ensure that he or she will be able to give enough time and attention to your proposal.

In this initial conversation, you should avoid going into detail regarding your business loan proposal. Give a brief description of your intentions and the time necessary for the meeting. Usually, an hour provides ample opportunity to make a loan request and answer any questions the loan officer may have regarding the application.

Be aware that there are optimum times to schedule such a meeting. On the first and fifteenth of every month, the financial traffic at a bank increases. This increased traffic may cause your meeting to be interrupted or cut short. Also try to avoid Mondays and Fridays for the same reason. The best time for an appointment is in the middle of the week during the bank’s morning hours, and the earlier the better.

There are several things to consider and prepare for when making your business loan proposal. Many small business owners have avoided this process by accessing funds using a business cash advance. They have found this method to be most successful as it is based solely on the purchase of future credit card transactions and therefore does not have interest charges or obligations of repayment.

Related: Small Business Loans

When you walk into a bank or a lending institution and apply for a business loan there is no guarantee that you will receive it. Although these institutions are in the business of loaning money in return for interest, they need to be assured that their investment will be returned to them for a profit.

Banks and lending institutions have set up certain criteria that help them to understand the business they are lending to and the reason they are requesting the money. The business applicant must therefore be prepared to fully inform the loan officer of the business’ operations and his reasons for seeking a loan.

One of the best assets that you can bring to a lender is a business plan. A well thought-out business plan should contain information concerning your products, clientele, and marketing strategies as well as future goals and profit projections.

The business plan allows the lender to get to know your business. The more complex your venture is, the more comprehensive your business plan should be. Thus a company that designs statistical software to project population growth would require more documentation then a sidewalk lemonade stand.

Since you may be involved in an obscure venture that, although profitable, is little understood beyond your customer base, you should be prepared to fully explain it to your loan officer.

The following is a list of information to prepare when trying to secure a loan:

1. Be sure to include a precise breakdown of your products. Do you manufacture, resell, or liquidate your product line? If you are service provider, then explain clearly what service(s) you offer.

2. The lender should be aware of your niche market and what distinguishes you from your competitors.

3. You should also be prepared to give the lender a complete breakdown of your operations. For example, if you are running a lemonade stand then you need to explain how you get your lemons, how they are processed to make juice, how the juice is displayed and sold, and how the profits are dealt with after the juice is purchased.

4. You should also let your lender know about your marketing and advertising techniques as well as the costs involved. This will give them a picture of the demographic you are serving and the effectiveness of your marketing systems.

5. Finally, you should explain the purpose of the loan. That way the lender will see if you will use the money for a legitimate business purpose. You should also include a breakdown of the profits that you hope to achieve once you are able to secure the loan.

Securing a business loan requires a great deal of preparation on the part business applicant, and sometimes the task can be pretty daunting. Many small business owners have managed to avoid the bureaucratic nightmare of loan applications by taking advantage of business cash advances. Business cash advances are based solely on your future credit card transactions. Once the cash advance facility purchases these transactions, the money is yours with no interest, no obligation to repay, and no restrictions on use.

When you step into the office of a loan provider for that necessary business loan to make improvements to your company, you should know that they are examining more than your financial status and business plan. The amount of collateral that you are offering as a security is a big factor that weighs heavy in loan approval process.

Banks are in the business of lending money, but they need to minimize the risk of their loan offer in order to protect themselves in the event that you default on your payments. By offering collateral to back your application, the lender is protected from financial loss.

Definition of Collateral:

Collateral is a term used to refer to tangible items that can be liquidated and resold by the bank in order to recover the outstanding portions of your business loan.

In the case of a grocery store, for example, collateral would include business machines such as, the cash registers, weighing devices and food freezer. In general, perishable items, such as fruits and vegetables, cannot be considered collateral. However, some nonperishable inventory, may be considered.

The Use of Collateral When Applying for a Loan

Banks are in the business of lending money, but they need to minimize the risk of their loan offer in order to protect themselves in the event that you default on your payments. By offering collateral to back your application, the lender is protected from financial loss.

If you own the property where you do business, or have a home or a car, you may want to bring in the ownership papers. When you apply for a business loan, it is a good idea to bring a complete list of items that you may be able to utilize as collateral to support your loan application. This will increase your attractiveness as a loan customer. Make sure that any documentation, such as appraisals, you may have regarding your assets, are no more than six months old.

The loan officer will take these documents, and at their discretion, complete their own appraisals of your assets. When they are finished and satisfied with your application, they will return to you with an offer and a request for collateral.

It would be in your best interest to see how they have valued your assets. Banks will typically undervalue your assets in order to cover any costs that might be incurred by liquidation. This is meant as a safety measure for the bank, but some loan officers can be overzealous in their duties and give your assets an unrealistically low value.

When the value of your collateral is set too low then you could be required to offer more collateral than necessary. Alternatively, the lender may choose to raise the interest rates or decrease the principal amount offered to counteract the supposed shortfall. Therefore, do not be afraid to negotiate for a more favorable appraisal.

Getting a business loan from a bank is a labor-intensive experience. Even if you possess superb negotiating talents, it may result in a financial prison that could sabotage your ability to do business or in the worst cases, be the cause of your bankruptcy.

Many small business owners have avoided business loans all together and have taken advantage of business cash advances with great success. A business cash advance is a form of funding whereby a financial facility purchases future credit card transactions from you. Since the amount given to you is your own money, there are no interest charges and no obligation for repayment.

Whether you operate in a real world setting out of a storefront in California, or you have an online venture based on intellectual property, chances are you will need an extra infusion of capital to either expand or improve your business. One of the most common ways to acquire the additional capital that you need is by applying for a business loan.

Be Prepared with the Right Documentation

Getting a loan is no simple matter. You are required to come up with the necessary documentation in order to prove to the lending institution that your business is worthy of receiving the loan. This means putting together your profit and loss statements, your inventory breakdown and other such account reports.

You will also have to supply your business plan and a proposal for the intended use of the loan funds. This proposal will have to include a detailed breakdown of costs, profit projections and repayment estimations. Once you have these together, you need to know a few things as you negotiate your loan.

Consider the Lender’s Point of View

When you approach a lender for a loan, remember how they make their money. Financial institutions function on creating money from the money that customers pay or deposit. They may give off an air of indifference, but in the end, they really want your business.

Consider the loan officer to be a salesperson, just like someone who sells stoves at an appliance outlet, except that this person is trying to sell you a product made up of money. Without the sale, they fail to make commission, so know that you are in the driver’s seat.

Get to Know the Different Types of Loans

There are several different types of business loans available to you, so you do not need to take the first one you are offered.

One such option is called a simple interest loan. This type of business loan has monthly interest charges based on the amount of principal left to pay off. This means that as you pay off your loan, the interest also decreases, and you will reduce the total amount of interest that you will have to pay in the end. If you are seeking to pay off your business loan early, then this may be an option to consider.

Another type of business loan is an installment loan. This is known as a front-end loaded loan. This means that the amount of interest you are required to pay is based on the initial principal. Thus, the amount of interest that you need to pay remains the same regardless of how much of the principle you have already paid off. In this case, rushing your payments or making balloon payments to end your loan early will make no difference to the interest owed.

Of course, this route requires a great deal of effort and a lot of footwork. Many small business owners have successfully tried another option to secure capital called a business cash advance. In a business cash advance, you sell future credit card transactions to a business cash advance facility. Because this is technically your own money, there are no interest charges and there is no obligation for repayment, and you do not have to jump through a thousand hoops to get it.

What is a policy loan and what are the benefits in comparison to a business loan? How does a policy loan work?

If you are seeking some extra capital for your small business in order to expand or improve your operations, there are many funding options to choose from. While you may be familiar with a getting a standard business loan from a bank, a less common source of funding could come from your life insurance policy.

How a Policy Loan Works

Some life insurance companies will lend you money against your loan policy. If you carry a policy of $50,000, you can approach your insurance company for a business loan for some or all of your policy’s value. If you require money to redesign the front of your store or to launch a new marketing campaign for a new line of products, you can access this money from your policy.

A policy loan is a loan and is, therefore subject to interest. After all, the insurance company is using your money to build their own capital by investing it in various interests. By taking the loan, you will be reducing their investment base, thus decreasing their investment return. To counteract this, they will require you to pay interest on your loan even though you are technically using your money to make this business loan to yourself.

The Benefits of a Policy Loan

One of the benefits of taking out a policy loan is that there is no obligation on how you use the money. This means that if you suddenly change your mind about how you want to use the loan, no penalty will be applied.

Another positive aspect to the policy loan is the repayment process. Unlike a standard business loan, there is no set repayment plan. In fact, because the money is technically yours, you have no obligation to repay at all.

This advantageous in that it protects you in the event that your investment in the business does not pay off.

However, you should be aware that by borrowing this money, you effectively reduce the total payout of your policy by the amount of money you borrowed plus interest. Thus, if you borrow $10000 against a $50000 policy, you will only have a $40000 payout.

Many small business owners have considered this option of increasing their capital through a policy loan and have found it to be too risky for the potential returns. Therefore they have opted to try a different method called business cash advances. Business cash advances are similar to policy loans, in that they do not require repayment.

But business cash advances are superior to policy loans, as they do not compromise your family’s security in a time of hardship. These advances are based solely on the purchase of future credit card transactions.