5 Tips to Keep in Mind When Obtaining a Small Business Loan

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More likely than not, if you are starting a small business, you will need to secure a small business loan. The U.S. Small Business Administration (SBA) offers help and advice on securing a small business loan.

Some of the points to consider before applying for a loan include the following:

1. Assessing your financial needs.

First, determine how much money you will require from the small business loan. For what purposes will that money be used? How will the money that is loaned out to you help your business plan? Incidentally, if you have no business plan, make sure to write one now. Most lending agencies will want to take a look at your business plan and where the capital will be allocated before any loans are considered.

2. Borrowing money.

When borrowing money for your small business, there are usually two types of financing: equity and debt. Equity financing (also known as equity capital) occurs when a company raises capital in exchange for ownership shares in the business. The money that is raised does not need to be repaid over a set period of time. Debt financing is when a company borrows money in the form of a business loan or a personal 1000 dollar loan, and must later repay it, usually with interest. The lenders do not own shares in the company when debt financing is secured.

Regardless of whether equity or debt financing is secured, lenders and venture capitalists will assess the company’s debt-to-equity ratio before making an investment. In most cases, investors prefer that a business’s total debt and/or liabilities not be more than four times the amount of the business’s equity. The ability to repay, the amount of business collateral, management experience, as well as personal and business credit history, are also examined.

3. Establishing business credit.

Many business owners assume that business credit and personal credit are separate entities. However, if you have not owned a business in the past, the only credit your lenders can examine is your personal credit. Therefore, prior to taking a loan, it is imperative that you get your personal finances in order. Obtain your credit report from agencies such as Equifax, Experian, or Trans Union and note any errors or omissions that may be present.

4. Estimating startup business costs.

It costs more money to start a business than to simply keep it going. Additionally, while some businesses can be started using almost no cash, others require extensive initial spending. To find out how much seed money you will need, estimate the costs of business operation for at least several months. Separate one-time from ongoing costs; for example, incorporating your business is a one-time cost, while utilities and insurance are ongoing costs.

Likewise, divide your expenses into the following two categories: fixed and variable. Fixed expenses are items such as rent and insurance. Variable expenses are items such as sales commissions, shipping charges, and inventory storage charges. An effective tool for making such calculations is the following Starting Costs Calculator.

5. Creating financial statements.

Once your small business loan is secured, you will need to track it and make sure that it is being spent wisely. Tracking your loan may even be a requirement if you have secured equity financing from private stockholders and venture capitalists. Most businesses track and report their financial activities via balance sheets and income statements.

The balance sheet explains a company’s financial health at a certain point in time. On the balance sheet, several items are listed, including company assets, liabilities, and net worth. The balance sheet is so-called because, at the document’s bottom line, the company’s assets must equal its liabilities plus net worth. Assets are all the items of value that are owned by or due to the business. Liabilities and net worth are typically the business’s source of funds.

The income statement (also known as the profit and loss statement) describes a company’s profitability over a set period of time. Income statements are useful because they show how much net profit a business is generating after all expenses are accounted for. In order to generate a balance sheet for your business or an income statement, you may go to the following SBA resource.


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Tips That A Woman Entrepreneur Has To Embrace To Get The Business Loan Sanctioned

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The business loans for women are only offered to the women entrepreneurs and the women who want to start their own business venture and need capital.

There are many banks and lending companies who are offering different types of business loans for women at low interest rates. Women who are interested in pursuing their dream of becoming an entrepreneur can avail this loan and start their dream business. This type of loan is quite easy for women to get. The processing time of the loan is short.

Undeniably, it is highly challenging to run a business, be it the business is a small one or a big one. All you need to have to run a business successfully is capital. When you invest, you can earn huge returns going forward. When you start a business, it generates employment and contributes to the GDP of the country.

The business loans for women are designed for women exclusively. These loans are only approved for them. These are highly beneficial for women who are seriously looking for funds. This loan can be applied only by women entrepreneurs. The loan term period of this loan would be 6 months, 12 months, 18 months and 24 months. However, the term period depends on the loan amount you are requesting the bank.

It has become a piece of cake for the women to get business loans by submitting the appropriate documents and meeting the eligibility criteria. There are loan agents available to take care of the whole loan application process.

In fact, a few lenders are allowing the borrowers to submit the loan application and other documents online for processing. This has totally reduced the paperwork.

Few of the tips that a woman entrepreneur has to embrace to get the business loan sanctioned in a short period of time include:

Choose the business loan specific to women:

The first thing you need to keep in mind is to do extensive research on the different types of business loans that are given for women.

You need to learn about each type of loan and list out the pros and cons of each and then choose the loan that suits your requirements. There are many loans that are specially designed for women entrepreneurs. The best part of these loans is that they come with flexible repayment options and lower interest rates.

Women who want to start a business can easily get the loan and make payments without feeling the financial burden. However, to get the loan, they should meet the basic eligibility criteria. You also need to read the terms and conditions of the loan without being on haste, since there would be few terms that would give you nasty surprises later. To avoid such surprises, you need to go through the terms and conditions clearly.

Develop a business venture:

The lender would be sanctioning the loan to the businesses that have a specific business product or service and when the business is running stable.

They will give loans to the people only after making sure that the business would earn huge profits and the women will be able to repay the loan on time. The best way to boost the confidence of the lender is to present the documents related to the business venture.

You can also take the help of a professional to explain your business venture and future plans clearly to the lender. When the professional is giving a presentation about the business, it is important to cover all the aspects pertaining to the business.

The business plans are only disclosed to the vendor who is credible and who is ready to approve the loan. These people also approve the loan even when you are applying for the unsecured loans.

Make sure that there is a continuous cash flow:

Once you submit the business loan application to the lender, the lender will first check the cash flow of your business prior to going ahead and approving the loan.

You need to bring the business to a stage where there is a steady flow of cash and the profits you are making would meet the expenses of the business.

More importantly, you would be ready to pay the monthly installments to the bank on a timely basis without any delay. If you are receiving a lot of money and the cash flow is not steady, then the loan application would be rejected by the lenders. You can apply for business loans after doing thorough research about the lenders available in the market.

Pick the loan that is collateral free:

There are many banks and lending companies that are ready to offer loans to women that are free from collateral.

For this type of loan, you do not need to pledge any asset as collateral. When you avail this type of loan, you do not need a guarantor.

 


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Various Benefits That A Woman Can Reap By Taking A Business Loan

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There are around 52% of the women who are working in various industries in varied roles. The barriers that are faced by women are more than the men who wanted to start their business ventures.

They face a lot of financial difficulties over men. The credit score of women would be around 40 which is very less compared to men. There are many lending companies and financial institutions that are showing interest in giving loans to women who want to pursue their dream of starting their own business.

The business loans that are availed by the women can help them to run the day to day operations of the business and generate revenue. In addition, it will boost the business models that are embraced by them.

Few of the benefits that a woman can reap by taking business loans include:

Cover all the operating expenses:

Many women would struggle a lot with operational expenses over men. Many women would show interest in opening retail stores compared to men.

Moreover, these stores would need high operational expenses over other businesses.

To meet the operational expenses and monthly payments, women should avail of the business loan. This loan helps them to continue their business and attain success. No woman needs to stop their business just because they do not have enough capital in the hands. The business loans will help women in all ways in taking their business ahead.

Help to grow the business and earn huge profits:

The businesses that are owned by women earn less compared to the businesses that are run by men. So, it is critical for a woman to focus on the growth of the business and its profit margin.

Without profits, a woman cannot run the business for a longer period of time. To give a fierce competition to the competitors and make a name oneself, women need financial aid. This aid is provided by the banks in the form of business loans.  The small business loans that are offered by the lenders will allow women to start off their business small and slowly expand it with the revenue earned.

This investment will help them to take their products to customers across the globe. By taking a loan, they can invest some amount in launching a powerful marketing strategy, invest in high-quality equipment or hire staff to flourish in the business world.

There should be enough working capital that is required for the business to meet the day to day needs of the business owner. The best option that is available for them is business loans. This loan allows them to earn profits. The best thing is that they do not need to ask friends or family members for money instead can apply for the loan and get it sanctioned immediately by submitting the appropriate documents.

Boost the credit score:

Generally, women have a lesser credit score than men. By taking the business loan, women can improve their credit score over a short period of time.

However, improving the credit score depends totally on how quickly the monthly payments are made by the borrowers. If the borrower pays on time, then the credit score would be improved.

When you make regular payments, you can gradually improve the credit score. In the future, it will become easy for women to take loans since they have a good credit score. There will be many banks and lending companies who would come forward to sanction you the loan quickly.

You should never default on the loans believing that you can easily meet the repayment terms. If you default the loan, there are high chances of you putting your credit score at stake.

Invest in the business future:

The small business loans are not just for the business who would like to fund their business, but this can be availed by the women who want to expand their business or buy new equipment for their business to boost the business operations.

When you take the business loan in the nascent stage of the business, it would be easy for you to meet the monthly payments.

More importantly, you can also pay the wages of the employees on time without delay and retain them. You can also have extra money to meet the emergency expenses that come up. The expenses can be in the form of delivering the goods to the customers and getting the payment later.

To deliver the goods, you need to have enough money in your hands to buy the raw material and do the production.

It is important for women to keep on expanding the business and try out new things to flourish in the business world. To meet the operational expenses, boost the business growth, increase profits and stay successful in the market, you would need continuous capital. This capital can be fetched by taking business loans.

 


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Different Types Of Business Loans That Are Given For Women

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Women are breaking the stereotypes and making a name in every field, be it sports or business.

They are trying to establish themselves without taking the help of men. There are many women who have scripted their success stories. Today, many women are trying to break into the business world with innovative business ideas.

There are many lenders and financial institutions who are giving a helping hand to the women by offering them with the business loans to run the business or expand their existing business.

There is no idea that can be expanded without capital. All you need is to have money to bring your idea into reality. You no more need to wait for the investors to invest in your business. There will be a few investors who would be gender-biased.

The best option that is available for women to prove their spirit is to take business loans.

There are a few loan schemes that are exclusively designed for women with lesser interest rates and flexible payment options. More importantly, the processing fee for the loan is also very less. They do not need to pledge any asset as security. The loan repayment will be long. The different types of business loans that are offered to be women include:

Working capital term loans:

This is a type of loan that is required for women to meet their immediate financial needs. However, this is not used to make investments or buy assets

This type of loan will make sure that you can meet the expenses such as rent of the company; wages for the employees, etc. until the client clears your due amount. This comes handy for you to carry out your day to day business operations without any hindrance.

Working capital demand loans:

This is also known as revolving working capital loans. This type of loan will be funded capital to the business to carry out its day to day operations. This type of loan is simple to avail of and is highly flexible. More importantly, this is alike to that of the business line of credit.

When you take this loan, you need to repay the loan amount in a timely manner. This is best for the business that has cash flow. This allows the business owner to withdraw the amount when in need and repay back the loan amount for the withdrawn cash on time.

Secured term loans:

This is the type of loan where the borrower has to put an asset as collateral with the lender or financial institution. When the borrowers fail to pay the amount, the lender possesses every right to sell the asset and recover the loan amount. The borrowing limit that is provided by this type of loan is pretty high.

The interest rates would be less compared to unsecured business loans. You also have an option for flexible repayment, since you have pledged an asset as collateral therefore the lender would not be at risk.

This type of loan is used to buy buildings, lands, get renovation work done and for construction.

Project and acquisition financing:

These types of loans are taken by women to expand the business. The business owner has to project the cash flow of the business and the balance sheets of the projects to the lenders. Even this type of loan is secured since the project assets would be used as collateral by the banks. This is widely availed by the women entrepreneurs when are planning to expand the business.

Medical equipment:

If the woman is a medical practitioner and would like to start her own clinic or a diagnostic center, then she can avail of this loan and get the money sanctioned to buy the equipment that is required to run a clinic or a diagnostic center. She can use the money to buy CT scanners, X-ray machines, MRI machines, sonography, and other medical equipment.

Machinery loan:

Every factor would need machinery to produce the products by utilizing very minimum resources such as power, manpower and installation expenses.

If you want to start a manufacturing business of a product or a machine, you would need the appropriate machines to make the products ready.

You can get the machinery loan to buy the machines required to run the business. When you buy the machine, then the machine would be put as collateral by the lending companies.

The above are a few types of loans that are given to the women entrepreneurs to start their own business and flourish.

Women entrepreneurs in the market are giving a fierce competition to their male counterparts in various industries.

Every business owner needs funds to run the business and it is important for the women entrepreneur to be aware of the different types of business loans that are given to them by the lending companies and financial institutions so that they can apply for the loan and get the amount sanctioned briskly.


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Get Personal Loan Tips For Self Employed Here

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When you are in employment, you will likely need the personal loan to carry out some extras that will make life more worthwhile. If you are employed, getting the loan will be pretty easy. But for those that are self-employed, you have to go the extra mile to get approval for such loans. The following tips will be of valuable help.

Your Credit score

Make sure you work on your credit score and make sure there are no errors in it. With a high credit score, the chances of getting the loan will be enhanced.

If you are applying for a personal loan, then your credit score should be on the high. If it is a business loan, your business credit score should be worked on. Make sure you make all the necessary amendments a few months to the timing of the loan.

Existing Deft Portfolio

One of the parameters that lenders will look at is your debt portfolio. If the records show that you are indebted, the chances of getting any consideration will be out of it completely.

Clear all personal debts if you are targeting a personal loan. If it is a business loan, then all business debts should be cleared before putting in your application.

When the lending company sees that you come in with a clean portfolio, the chances of getting the loan will be enhanced. It boils down to prepare ahead of your application. Whenever the need arises for a loan; create time to clear all your outstanding debts before you apply for the loan.

Your Length Of Time In Business

This is a factor that every lender will confirm before they grant any loan. The stats go to show that most businesses are consigned to the dustbin of history within two years of their entry into the business.

So if your business is not more than two years, do not waste your time applying for any business application. 405% of small businesses do not go beyond their first two years; therefore make sure your business falls within the required range.

However, this criterion might be overlooked if your business can show evidence of strong successes in the notch. It should not be a flash in the pan; something regular must be on the table before any business under two years can be given any form of consideration.

Your Cash Reserve

Having spoken on the fact lenders give considerations to businesses that have been in the mix for more than two years, it should be stated here that you can get results that matter even when your business is not up to two years.

So how do you achieve this? Simply work on building your cash reserves.

Build your cash reserves and the lenders will rate your firm high with the belief that even if when the business runs into the troubled waters, you will have something to fall back to and will be able to pay the loan even in a business recession.

A Large Down Payment

There will be several applications competing with your application. It is, therefore, a survival of the fittest in the race to secure the loan.

One strategy that you can adopt as a self-employed is to save up a large amount of the loan. Then place the offer of a large down payment in your application.

The lender will see you as a very serious client. Every lender wants to take fewer risks, with the large down payment you have succeeded in sending the signal to the lender that you are equal to the task of paying the loan back.

Your application will be considered as a potential risk that will make the lender beam with a smile at the end of the day.

Your Tax Write-Offs

Even where you have put all the measures listed above in place in preparation for the loan; you might still meet a brick wall because of the low income of the business.

This is due to tax write-offs which reduce taxable income shown on your tax returns.

It is good for your business; but if you are planning to get the business loan, then you must avoid tax write-offs because it is not good for loan application.

Limit the tax write-offs for your business if you want your firm to remain competitive in your bid for the loan.

Talk to your tax professional about it; make him amend your old tax form to limit a long time of wait for the loan.

Conclusion

All that you need to put in place to get the loan as a self-employed are what you have just read through above.

The last thing to be considered is to make sure that you choose a credible lender.

Go through their portfolio and ensure that they are credible before signing the dotted lines of the contract.

 


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The Risks Involved In Loan Against Property

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Loans Against Property has an appeal among business people that needed immediate capital to help in moving their business to the next level. The popularity of this type of loan as against personal loan arises from the fact that the interest on it is very low. There are risks involved and it is going to be our central focus.

Credit Ratings

The emergence of Big-Ticket loans combined with higher loan to value ratios has brought in some measure of pressure on LAP.

Many non-banking financial companies have come into the picture because of the gains involved in it and this has adversely affected the credit ratings in the sector. When the credit rating falls, the resultant ripple effects are better imagined than experienced.

Higher loans are increasingly been offered close to a third of the portfolios in this notch are loans with high LTV or big-ticket size. Close to 5% of the two loans are subject to very high risks falling credit rating.

Loans With Commercial Property

There is a movement towards loans that have commercial property as the collateral. The majority of the incremental loans close to a third are linked to commercial property.

There is a rush towards this area by lenders is based on the successes achieved by others as can be seen through the returns that come in with every loan agreement. The competition is intensifying in this direction at the detriment of other areas. A time will come when the notch will be saturated and when this happens, the bubble will burst in the sector.

The Use Of Intermediaries

When business owners need immediate cash and they do not have the collateral demanded by the lending houses, they result in getting wanted they wanted through the back door by going through intermediaries who pose to the lending houses as the real owners of the business. There is a growing increase in the number of balance transfers and it is not speaking well for the sector because the true ability of the borrow in repaying the loans cannot be measured. This has led to an increase in delinquent loans in the sector.

Business Failure

The saying that he who pays the piper dictates the tune is very true in this sector. There is a downturn in the global economy of the world. The business owner that fails to meet up with the projections on his income from the business will lose out entirely in the unfortunate event that he is not able to meet up with the loan repayment schedule.

The lender house becomes the ultimate gainer because they have the rights to the company in the event of failure to meet up with the demands of the loan as it is signed in the contract. It is estimated that the lenders will grow their business at an annual rate of 22% for the next couple of years to the detriment of the original business owners who are facing hard times.

The growth in the sector for the lenders has been impressive going by the records and the trend will likely go on in that direction for years ahead.

Discipline In Spending

Another risk in LAP is the area of discipline. Since this category of loan can be used for any purpose as it suits the borrower under the sun, there is the risk of misplaced priority upon the receipt of the funds from the lending houses. LAPs that are obtained and not used for business purposes will not end up in a sweet story. It has been observed that many that collected the loans used it for other purposes outside the expansion of their business concern.

Issues will naturally crop up when it is time to repay the loan. Lack of discipline on the part of lenders is one of the greatest problems facing the sector today. Even those that use the loan for business purposes are guilty of not directing it to areas in their line of business that will improve on their income. At the end of the day, the gains will not show and when this is the case, monthly payment of the loan will be a task that cannot be overcome.

For success to be achieved and sustained in LAP, there should be discipline and prudence in spending the loan amount. No company has arrived until the backlog of the loan is cleared. What is required is a sheer commitment, focus, and discipline to the cause of the business line of operation.

Conclusion

In every business venture, there are risks. If you do not take the risk in business, the gains will never come in. The above are the areas of banana peel that can cause business fall when you chose to take a LAP. Caution is the word; the advantages in LAP far outweigh the disadvantages.


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Startup Funding Options Business Loans & More

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Startup business loans are not as difficult to fund as you may think. A business startup is exciting and challenging. Discover all the different sources of financing available for your business when starting out.


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