Things to Be Followed for Getting Small Business Start Up Loans



If you wish to expand your current business or if you wish to start a new business on your own, it is advisable that you should obtain small business start up loans as quickly as possible. If you want to buy an office premise or if you wish to purchase necessary equipment or machinery, it is vital that you should obtain this type of fund in the best possible way. This article will highlight on a few essential things that you should follow in order to get this kind of fund in the best possible way.

The first step that you should remember is that you should be prepared to answer all the relevant questions of your potential lender as quickly as possible. If you apply for this type of fund to a bank, there is a possibility that that particular bank will check out Debt to Equity ratio. It calculates the total amount of money that you have borrowed in place of the total amount of money that you have already invested in the company. If you invest a huge amount of money into your business, there is every possibility that you can obtain small business start up loans within a short span of time.

Your second step is to determine the exact amount of money that you wish to borrow as well the appropriate repayment terms that you need. It is vital that you should be able to determine the amount of money that you are able to pay on a monthly basis and that you should also be able to find out the exact time that you will need in order to repay this kind of fund in the best possible way.

You should also be able to obtain the copies of your credit report from one of the popular credit reporting agencies as quickly as possible. There is every possibility that your potential lender will try to know the details of your credit history whenever you wish to make a decision about loan application. All you have to do is to read the credit report in a careful manner and to find out if there is any sort of incorrect information that is being provided in this type of report.

Your next step is to identify different types of small business start up loans that can be available for you. For example, if you suffer due to bad credit records and if you face rejection from conventional lending organization, it is advisable that you should acquire the loans from other lending organizations.

The next step that you should consider in this matter is to complete the loan application process in the best possible way. You should be well prepared so that you should be able to explain the reasons why you want to apply for this kind of fund and the total amount of money you wish to apply for. The final step is to submit this type of application along with the relevant documents such as license, tax return statements of the last three years, one copy of your original trade plan and so on. Plus, you should be able to provide necessary information about the particular property that you want to use as collateral.

3 Types of Credit Your Lenders ARE Looking At



When you apply for business financing there is actually three types of credit that are reviewed for your approval.

No matter what you're told... personal credit ALWAYS matters... unless it isn't being looked at. For example, when applying for business credit you can use your EIN to get approved and leave your SSN off the application.

When you do this your personal credit isn't even looked at nor is it used for the lending decision but this is about the only exception in the business funding space.

All other funding types including advances look at and care about your personal credit. YES, you can get approved for cash flow financing and merchant advances with bad credit but your repayment terms won't be nearly as favorable then if you had good personal credit.

SBA loans, conventional loans, most other long term loans, and credit lines do require good personal credit for approval in most cases. Collateral and asset type based financing doesn't care about personal credit as much. This is if financing only looks at collateral for approval, not financing where collateral is required for approval.

There is no FCRA in the business world, so lenders will never disclose to you that they pull your business credit when you apply for business financing. But they DO pull your business credit!!!

Just think, you are applying for money for your business, and your business has its own credit profile and score. So of course they will want to see how the business pays its bills on top of how you do as the owner. There is A LOT of money available for business owners, more now than there has ever been in the past. You just need to know what type of financing to go after, once you know that you can more easily find what you need.

Not having establishes business credit makes you look like a rookie, a startup, a "non-established" business. This will lead to denial so insure you have at least 5-10 reported accounts and that you are paying them as agreed.

You actually have three types of credit: Personal Credit, Business Credit and Bank Credit. All three should be good to give you the best chance of approval.

Your bank rating is mostly based on the amount of money you keep in your bank account over the last 90 days. High 5, account balance of $70,000-99,999, Mid 5, account balance of $40,000-69,999, Low 5, balance of $10,000-39,000, High 4, 7,000-9,999, Mid 4, 4,000-6,999 and Low 4, 1,000-3,999.

How to Take Funding From Your Friends or Relatives?



To give a kick-start to your business, you need funding assistance. Getting a business loan is a tough task in today's competitive world. Besides, loan processing requires a good amount of time and you may have to undergo through a lengthy paperwork process too. For budding entrepreneurs, it is relatively easy to obtain business funding from their close friends or family members. However, you should not step forward with a casual approach while borrowing a business loan from your relatives or friends. You should go through the loan borrowing process in a professional manner.

Here are 4 tips that you can follow while procuring a loan from your friends or family members.

Draft a Foolproof Business Plan

A business plan helps your lender clearly understand your ambitions and whether your business is going to be a successful one or not. With banks and other lending institutions, you have to submit a business plan beforehand. It is a crucial part of the loan borrowing process. With relatives and friends also, you should consider submitting a business plan so that they have a fair idea of your business goals and strategies. It will also help them know how you are going to use the loan and how you are going to make profit. It gives them an assurance that they are going to invest in a right project.

Borrow Only the Required Amount of Money

You should not hesitate to ask for a huge amount of money from your parents or friends. Remember if you go for a lesser amount, it will not suffice your funding requirements. You may not even start your venture if the amount is less than the required amount. Do not forget that in any business you will require money not for just starting the business only, but also to run the business and for dealing with various expenses like electricity bill, room rent etc. On the other hand, you should also not take them for granted and borrow excessive money unnecessarily.

Determine Your Repayment Plan

At the time of borrowing money, you should also decide precisely as to how you are going to repay the money. Consider making a plan that is feasible for you as well as for your investors. You can plan to repay the borrowed amount on a quarterly or half-yearly basis. You should also have alternative options for repaying the loan in case your business does not perform well. For that matter, you can prefer to have a legal document too. Make sure that the interest rate, loan repayment tenor and other terms and conditions are clearly mentioned in the document.

Take Inputs from Your Family Investors

You should consider giving an active role to your friends and family members from whom you are going to secure financial assistance. They might provide some invaluable suggestions about how you should start your business or how you should carry out your day-to-day business operations. Sharing ownership with your family investors is not a bad idea. It can help you efficiently run your business.

Once your business is established, make it a point to reward your friends or family members for providing funding assistance when you required the most.

Great Information for Business Owners Directly From Entrepreneur

The following article comes directly from Entrepreneur and contains some very valuable information regarding business.

As an entrepreneur, did you know you have a unique opportunity to build, maintain and acquire credit both individually and as a business owner? That's good news if you're trying to build and grow a company because you won't have to rely solely on your personal to do that.

As a member of the business industry, it's been my experience that fewer than 10 percent of all entrepreneurs know about or truly understand how business credit is established and tracked-and how it affects their lives and businesses.

So let's first take a look at how personal credit differs from business credit. Then we'll discuss some steps you can take to build business.

At the point an individual with a social security number accepts their first job or applies for their first credit card, a credit profile is started with the personal reporting agencies. This profile, otherwise known as a credit report, is added to with every credit inquiry, credit application submitted, change of address and job change.

The information is typically reported to the credit bureaus by those who are issuing credit. Eventually, the Report becomes a statement of an individual's ability to pay back a debt.

In some cases, the same is true for businesses. When a business issues another it's referred to as trade credit. Trade, the single largest source of lending in the world.

Information about trade credit transactions is gathered by the bureaus to create your business credit report using your business name, address and federal tax identification number (FIN), also known as an employer identification number (EIN), which you get from the IRS.

The bureaus use this compiled data to generate a report about your company's business transactions. In many cases, those issuing credit to you will rely on your report to determine if they want to grant you and how much credit they'll give.

The major business credit bureaus that compile and provide copies of the reports are:

• Dun & Bradstreet
• Experian Business
• Equifax Business
• Business Credit USA

Unfortunately, because the information provided to the bureaus is sent in voluntarily--no business is required to send it in--the bureaus may never receive all or even any information about your transactions. In fact, you could go for years racking up without any of it being reported to the credit bureaus.

Establishing Business Credit

Let's start by talking about your business credit score. Scores range on a scale from 0 to 100 with 75 or more considered an excellent rating. Personal scores, on the other hand, range from 300 to 850 with a score of 680 or high considered excellent.

It's important to note that there are many factors that affect a credit score; it's based on more than just whether you pay your bills on time. Your score can be affected by the amount of available credit you have on bank lines of credit and credit cards, the length of time you've had a credit profile, the number of inquiries made on your credit profile and more.

The mistake many business owners make is using their personal information to apply for leases and loans. By doing so, they risk having a lower personal credit score.

Available Business Funding Sources



There are many sources who offer business funding today. Knowing the different sources will help you find the best funding options for your business.

Remember, most of these funding sources you can access right through your funding suite with us. So reach out to me to receive more information about the specific funding that will work for you and your business.

In the meantime take a look at some of the many sources of funding that are available today.

Business Charge and Credit Cards are a fast and easy way to access cash for business. You can use the money for any purpose, and you can be approved for business credit with no personal guaranty or credit check. Many merchants will approve you for individual credit cards of $10,000 or higher.

Angel investors have been responsible for funding over 30,000 small businesses each and every year. With over 250,000 active angels in the country you may want to consider an angel investor network to simplify your search. These investors are a great source of funding when banks won't approve you, and perfect for projects where you need a lot of money.

Asset Based Funding is perfect if your company has collateral such as accounts receivable, inventory, equipment, purchase orders, or real estate. These assets can be used to secure the financing you need, and you can secure asset based funding even if your credit isn't very good.

Bank Loans are still available, although they have become harder to get approved for. Many large banks tend to be much more conservative in lending so you may want to consider a community bank or credit union for a small business loan.
Equipment Leasing helps when you want to lease expensive equipment, and some equipment leasing and financing also works for you to borrower against existing equipment you already own.

Factoring is perfect if you have high amounts of account receivables. You can obtain funding up to 25 million and you can receive your advance within 24-48 hours in most cases. With factoring, you sell your company's accounts receivables to a company (known as a factor) at a discount, in order to free up your cash. The company that purchases the receivables then assumes the responsibility for collecting them. This is a great option as they absolutely don't care about your own personal credit.

Grants are a great way to get money for your business, especially government grants. Depending on your business types and intended use of funds, there are many options available for you to receive grant money that doesn't need to be paid back.

Lines of Credit are perfect sources of working capital. A line of credit works like a revolving credit card but with much lower interest rates and higher available credit limits. You can get credit lines over $150,000 and write checks from the account or use a debit card to withdrawal funds or use for purchases.

Merchant Cash Advances and Merchant Lines of Credit are perfect for businesses who process credit card payments. This type of financing will advance you money against future credit card transactions. You can even get a debit card to use the funds you secure.

Microfinance Loans are less difficult and time intensive to qualify for with loan amounts ranging from $500 to $35k. Many businesses use several micro loans to get money for their business versus applying for one larger loan due to the easier qualifying criteria.

SBA backed Loans are still one of the most popular financing options available today. SBA backs, or insures about 80% of the loan while the lender lending the money takes on about 20% or so of the risk. Due to the lower risk to the bank, many major banks are more apt to lend money using SBA backed loans than regular loans.

Venture capital is neither easy nor fast to be able to tap into but can be a viable source of funding. This is a great source when you need higher loan amounts, and don't mind giving up a potential stake in your company. Plus you don't have some of the headaches that come with conventional funding.

Want a Bank Loan? Learn What a Bank Wants to Know

First and foremost your Bank will want to know how you will be able to pay the loan back in the allotted amount of time. You will need to be able to clearly answer the question: "What's your plan to pay us back"? Your business plan might have most of the information to answer that properly. That's why I am hoping that everyone that reads this article had a plan in place before they began their business journey. It is such a good way to keep yourself on track of what needs to be done on a daily, monthly and even yearly basis. In my opinion it is the better way to track your goals. You begin with a great idea. The Plan helps guide you on that journey to take your idea from zero to one-hundred and then from one-hundred to one-thousand. It isn't that hard, and if you are having trouble there are professionals that will guide you through the process. Get it done!
  • Describe your company: your goals: your objectives:your strengths; your industry and it's future.
  • Products / Services. What gives you a competitive advantage? What are the margins and how will you price yourself to maintain them?
  • Marketing Plan: facts about the industry: size of the market; describe the products / services as your customer sees them: location: competition: who are your customers? Sales forecast: promotional budget: How will you track results?
  • Operational Plan: daily: people: processes: inventory: suppliers: manage accounts: payables.
  • Management and Organization: Do you have a board: attorney: accountant: insurance agent: consultants and mentors, corporation: partners?
  • Personal Financial Statement? Financial plan? 12 month profit and loss projections: cash flow projection determines if you have enough capital to grow? Collateral?
Let me give you an example of what I am talking about. Take the inventory category. What kind of inventory will you keep? What raw materials will be needed? What is the cost of each? What is your total inventory investment? What is your rate of inventory turnover and how does it compare to industry averages? Will there be seasonal buildups? (Very important to cash flow projections). Lead time for ordering? Credit and delivery policies of suppliers?

Your loan will most likely be approved because they feel comfortable about your ability to repay the loan and repay it on time. Congratulations will soon be in order.

Just follow this outline, start writing, start your research and you will be on your way to success!

How to Get Business Financing With Bad Personal Credit

Banks REQUIRE good credit to get approved as you know. Most people only go to their bank when they need money. But the most common business bank loan, SBA loans, only account for 1.1% of all business loans (Department of Revenue 2013). The reality is the big banks are NOT the suppliers of most business loans. And even though they require good credit to qualify, many sources don't.

SBA and other bank conventional loans are tough to qualify for because the lender and SBA will evaluate ALL aspects of the business and the business owner for approval. To get approved all aspects of the business and business owner's personal finances must be near PERFECT. There is no question that SBA loans are tough to qualify for. This is why according to the Small Business Lending Index, over 89% of business applications are denied by the big banks.

Private investors are a great source of business funding. They want average or better credit of 650 scores or higher in most cases. They will also want solid financials for at least two years. Think of private money as being for SBA and conventional bank loans that just miss the mark.

Does the business have existing cash flow proven by bank statements, NOT tax returns? Does the business have over $60k annually received in credit card sales? Does the business have over $120k annually going through their bank account? If the answer is yes then revenue financing or merchant advances might be the perfect funding product.

You must be in business six months for merchant advances and revenue lending. No startup businesses can qualify and you must have 10 monthly deposits or more. Most advertising you see for "bad credit business financing" are these products. These are short term "advances" of 6-18 months. Mostly short term at first, then when half is paid down lender will lend more money at a longer term. Loan amounts up to $500,000 and loan amounts equal to 8-12% of annual revenue per bank statements. For example, a company that has $300,000 in sales might get $30,000 advance initially.

With revenue and merchant financing 500 credit scores accepted and are COMMON with this type of lending. Bad credit is okay as long as you aren't actively in trouble such as in a bankruptcy or have serious tax liens or judgments.

Collateral based lending lends you money based on the strength of your collateral. Since your collateral offsets the lender's risk, you can be approved with bad credit and still get REALLY good terms. Common BUSINESS collateral might include account receivables, inventory and equipment.

With account receivable financing you can secure up to 80% of receivables within 24 hours of approval. You must be in business for at least one year and receivables must be from another business. Rates are commonly 1.25-5%.

You can also use your inventory as collateral for financing and secure inventory financing. The minimum inventory loan amount is $150,000 and the general loan to value (cost) is 50%; thus, inventory value would have to be $300,000 to qualify. Rates are normally 2% monthly on the outstanding loan balance. Example is a factory or retail store.

The Various Types of Loans Offered by The Small Business Administration



If you wish to run your small business in a successful way, it is vital that you should acquire small business start up loan as quickly as possible. If you want to buy new devices or if you wish to invest in inventory, it is vital that you should acquire a lot of money from a reliable lender as quickly as possible and that you should run your business successfully. This article will highlight on a few types of small business start up loans that are available for small businesses for their successful operation.

Loans offered by the SBA

The Small Business Administration or SBA has designed these funds with the noble objective to cater to the funding requirements of startup companies. It is vital to remember that it does not give money to them directly. In fact, this organization sets effective guidelines for these funds that are offered by its partners such as community development agencies, banks, micro lenders and so on. SBA 7 (A), SBA 504, Microloan and Disaster loan are the common types of these funds that are designed by this organization. For instance, in case of SBA 7 (A), the amount is five million dollars and it is normally used for up to twenty five years for permanent assets and it is also used for up to ten years for the working capital investment. It is mainly used for renovation of building, purchase of machinery and other purposes. In case of SBA 504, the amount is nearly five million dollars and the maturity of this type of fund varies from ten to twenty years. It is used for multiple purposes such as purchase of high quality machinery, renovation of buildings and so on. Microloan is used for the purchase of furniture, equipment as well as machinery, but it can neither be used to buy real estate property nor can it used to pay debt. This organization develops disaster loan of nearly two million dollars for them which can be used to repair equipment, machinery, real estate property and so on.

Funds offered by Banks

In order to start your business in the best possible, your next option is to secure conventional fund that is offered by a bank. If you are able to show an effective plan, there is possibility that you can get it easily within a stipulated period of time.

Funds offered by Alternative lenders

If you do not get qualified for conventional fund that is offered by a bank or any other funding organization, it is advisable that you should take the help of alternative lender. Those who do not have poor credit history can take the help of these lenders in order to get money to start them in the best possible way. Even if they qualify for the conventional funds, there is possibility that they have to wait for a prolonged period of time before these funds that they have applied for, are sanctioned by the concerned authorities. Due to this reason, currently they seek the help of this type of lenders in order to get money for their successful operation.

Questions to Ask a Freight Factoring Company



Thinking of partnering with a freight factoring company? A positive cash flow can have a huge impact on your business. Not only will you be able to take on more clients and larger deals, but you will also be able to ensure that driver payments, payroll, fuel and all your other expenses are always paid on time.

If you've already decided you are going to partner with one of the freight factoring companies in your area, then you need to start researching the various companies to determine who will provide the best service to you. Here are a few questions to ask to make sure you get a value for money service:

What happens if my clients don't pay?

This is an important question because it can put you in a difficult position if you have to pay for outstanding bills from clients. Find out if the factoring company handles debt disputes and what their normal procedures are when trying to claim back money from clients.

Do I get to choose which invoices I factor?

In some cases, you might have weekly loads which you bill and your clients pay each week. In this case, you might not necessarily need a factoring company to factor the invoices for you. You might only need factoring services for larger loads which only get paid after 30, 60 or 90 days. Find out if the factoring company will allow you to decide which invoices you want to factor or if you have to hand over your entire client book.

What kind of extra services do you offer (and what do I have to pay for?)

Factoring and bank loans are very different in a number of ways, but one of the most prominent differences is the fact that banks research businesses to determine whether they are creditworthy, while a factoring company will research your clients to determine whether they are creditworthy or not. Freight factoring companies will either do a credit check on your clients to ensure they are capable of paying the invoices, or they will give you a list of pre-approved clients which meet their credit requirements. Find out what process they use to determine whether clients are creditworthy and whether you will have to pay extra for this vetting process.

What percentage of the invoice will you advance?

Many times, a freight factoring company will advance a certain percentage of the invoice (such as 80%, 90% or even 100%) and the rest of the amount only gets paid once the client has paid the outstanding invoice in full and their service fee has been deducted. Make sure you know what percentage gets paid to you in advance.

Want to find out if our freight factoring company's service will work for you? Get an instant factoring quote now.

Interstate Capital's factoring programs include a long list of unique features including rates starting at just 0.49% per invoice, advance rates up to 100%, same-day funding, 24/7 automatic credit approvals, fuel advances (for motor carriers), professional collections, and much more.

Set-up is always fast and easy. There is no application fee and most companies will qualify for an instant online proposal in under 2 minutes just by completing the Instant Factoring form on this page. If you like what you see in your proposal, just click on the application link in your proposal and you're on your way to fast funding.
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