This document discusses 10 types of business financing options including factoring, merchant cash advances, lines of equity, equipment loans and leases, commercial mortgages, microloans, SBA loans, franchise financing, SBA 504 loans, and the loan application process. It provides brief descriptions of each financing type and notes some of their key terms and requirements. The overall document serves as a guide to help business owners identify suitable financing options to meet their needs and grow their business.
Alternative Structures- PO Financing, Factoring & MCA (Series: Business Borro...Financial Poise
Purchase-order financing (P/O financing) is a type of asset-based loan designed to extend credit to a company that needs cash quickly, to fill a customer order. A company may operate with such a small amount of working capital that it cannot afford to pay the cost of producing a customer’s order. P/O financing enables such a company to not turn away business, by borrowing from a lender using the purchase order itself as collateral to support a loan.
Factoring is one of the oldest forms of business financing. Note that the term is “financing” rather than “loan” because factoring is not actually a loan. In a typical factoring arrangement, the company needing financing makes a sale, delivers the product or service and generates an invoice. The factor (the funding source) then purchases the right to collect on that invoice by agreeing to pay the company in need of financing the amount of the invoice minus a discount.
MCA lending is, in summary, an advance on a company’s sales. Financing through a merchant cash advance (MCA) is used mostly by companies that accept credit and debit cards for most of their sales, typically retailers and restaurants. The concept is this: funder purchases a portion of the company’s future credit card receivables for a discounted lump sum. The MCA funder receives the purchased credit card receivables as they are generated either by taking a percentage of the company’s daily credit card proceeds or by debiting a certain amount of funds from the company’s bank account. Depending on the risk profile of the company, it can be a more expensive form of financing for a business compared to other types of financing.
What these three things have in common is that they are each a type of “alternative lending.” Alternative to what? To the type of loan a company can get from a “regulated” commercial bank. This webinar explains these types of financing arrangements, what to consider before entering into them, and provides some tips on how to negotiate them.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/alternative-structures-po-financing-factoring-mca-2020/
A guide on business term loans and business loan termsMerchant Advisors
Need a term loan? Here is everything you need to know about business term loans and the most common business loan repayment terms. For more information, visit at https://www.onlinecheck.com/blog/business-loans/business-term-loans/
Alternative Structures- PO Financing, Factoring & MCA (Series: Business Borro...Financial Poise
Purchase-order financing (P/O financing) is a type of asset-based loan designed to extend credit to a company that needs cash quickly, to fill a customer order. A company may operate with such a small amount of working capital that it cannot afford to pay the cost of producing a customer’s order. P/O financing enables such a company to not turn away business, by borrowing from a lender using the purchase order itself as collateral to support a loan.
Factoring is one of the oldest forms of business financing. Note that the term is “financing” rather than “loan” because factoring is not actually a loan. In a typical factoring arrangement, the company needing financing makes a sale, delivers the product or service and generates an invoice. The factor (the funding source) then purchases the right to collect on that invoice by agreeing to pay the company in need of financing the amount of the invoice minus a discount.
MCA lending is, in summary, an advance on a company’s sales. Financing through a merchant cash advance (MCA) is used mostly by companies that accept credit and debit cards for most of their sales, typically retailers and restaurants. The concept is this: funder purchases a portion of the company’s future credit card receivables for a discounted lump sum. The MCA funder receives the purchased credit card receivables as they are generated either by taking a percentage of the company’s daily credit card proceeds or by debiting a certain amount of funds from the company’s bank account. Depending on the risk profile of the company, it can be a more expensive form of financing for a business compared to other types of financing.
What these three things have in common is that they are each a type of “alternative lending.” Alternative to what? To the type of loan a company can get from a “regulated” commercial bank. This webinar explains these types of financing arrangements, what to consider before entering into them, and provides some tips on how to negotiate them.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/alternative-structures-po-financing-factoring-mca-2020/
A guide on business term loans and business loan termsMerchant Advisors
Need a term loan? Here is everything you need to know about business term loans and the most common business loan repayment terms. For more information, visit at https://www.onlinecheck.com/blog/business-loans/business-term-loans/
Small Business Administration (SBA) Financing OptionsGuy-Daniel Boni
SBA financing is designed to provide small businesses with access to credit structures and terms that may be more flexible than conventional lending options. Blitt Capital is here to help Entrepreneurs match their financing needs with the appropriate SBA lending program.
Take It To The Bank: Sam's Club Whitepaper Helps Small Business Navigate Loan...Sam's Club News
In the "setting yourself up for success" section: Sam's Club small business whitepaper titled "The Big Picture: Small-Business Loans in Today's Economy", aims to clarify and aid the often-times challenging process of obtaining a small-business loan.
Here are the top small business loan options for your law firm with tips to make your law firm financing application a success. For more information, visit at https://www.onlinecheck.com/blog/business-loans/small-business-loans-for-law-firm-in-2019/
How to get a startup business loan with no money? If you are facing this problem, then you are in the right place. and sometimes getting a startup business loan with no money that can be challenging, but it's not impossible. Start by developing a well-researched business plan that highlights your market potential and revenue projections. Explore government-backed loan programs, such as Small Business Administration (SBA) loans, which offer favorable terms for startups.
Throughout this article, today we will explore "how to get a business loan with no money" and how seek out alternative funding sources like angel investors, venture capitalists, or crowdfunding platforms. Building a strong personal and professional network can also help you connect with potential lenders. Be prepared to demonstrate your commitment and passion for the business, and consider leveraging personal assets or securing a co-signer if possible. Persistence and thorough preparation are key to securing funding for your startup.
Small Business Administration (SBA) Financing OptionsGuy-Daniel Boni
SBA financing is designed to provide small businesses with access to credit structures and terms that may be more flexible than conventional lending options. Blitt Capital is here to help Entrepreneurs match their financing needs with the appropriate SBA lending program.
Take It To The Bank: Sam's Club Whitepaper Helps Small Business Navigate Loan...Sam's Club News
In the "setting yourself up for success" section: Sam's Club small business whitepaper titled "The Big Picture: Small-Business Loans in Today's Economy", aims to clarify and aid the often-times challenging process of obtaining a small-business loan.
Here are the top small business loan options for your law firm with tips to make your law firm financing application a success. For more information, visit at https://www.onlinecheck.com/blog/business-loans/small-business-loans-for-law-firm-in-2019/
How to get a startup business loan with no money? If you are facing this problem, then you are in the right place. and sometimes getting a startup business loan with no money that can be challenging, but it's not impossible. Start by developing a well-researched business plan that highlights your market potential and revenue projections. Explore government-backed loan programs, such as Small Business Administration (SBA) loans, which offer favorable terms for startups.
Throughout this article, today we will explore "how to get a business loan with no money" and how seek out alternative funding sources like angel investors, venture capitalists, or crowdfunding platforms. Building a strong personal and professional network can also help you connect with potential lenders. Be prepared to demonstrate your commitment and passion for the business, and consider leveraging personal assets or securing a co-signer if possible. Persistence and thorough preparation are key to securing funding for your startup.
What all financing options are available for SMEs .pptxM1xchange
The financing options available to SMEs vary from industry to industry. Financing options will also change as the business owner's needs change over time. From start up through growth and expansion, SMEs have many different ways to secure funding for their businesses.
Be it a startup or existing units, small business loans can help you access the capital your business needs to thrive.
Small business loans allow business owners to borrow funds to cover companies related purchase and operational expenses.
Be it a startup or existing units, small business loans can help you access the capital your business needs to thrive.
Small business loans allow business owners to borrow funds to cover companies related purchase and operational expenses.
The five step guide to financing recruitment business growthOutsauce
Make the most informed decisions on your journey to business growth.
Find out:
How to prepare for success
The pros and cons of every funding option
The unique benefits of factoring and invoice discounting
The power of corporate finance
Tips to take it to the next level - including acquiring another business and selling your agency
Alternative Structures - PO Financing, Factoring & MCA (Series: Business Borr...Financial Poise
Purchase-order financing (P/O financing) is a type of asset-based loan designed to extend credit to a company that needs cash quickly, to fill a customer order. A company may operate with such a small amount of working capital that it cannot afford to pay the cost of producing a customer’s order. P/O financing enables such a company to not turn away business, by borrowing from a lender using the purchase order itself as collateral to support a loan.
Factoring is one of the oldest forms of business financing. Note that the term is “financing” rather than “loan” because factoring is not actually a loan. In a typical factoring arrangement, the company needing financing makes a sale, delivers the product or service and generates an invoice. The factor (the funding source) then purchases the right to collect on that invoice by agreeing to pay the company in need of financing the amount of the invoice minus a discount.
MCA lending is, in summary, an advance on a company’s sales. Financing through a merchant cash advance (MCA) is used mostly by companies that accept credit and debit cards for most of their sales, typically retailers and restaurants. The concept is this: funder purchases a portion of the company’s future credit card receivables for a discounted lump sum. The MCA funder receives the purchased credit card receivables as they are generated either by taking a percentage of the company’s daily credit card proceeds or by debiting a certain amount of funds from the company’s bank account. Depending on the risk profile of the company, it can be a more expensive form of financing for a business compared to other types of financing.
What these three things have in common is that they are each a type of “alternative lending.” Alternative to what? To the type of loan a company can get from a “regulated” commercial bank. This webinar explains these types of financing arrangements, what to consider before entering into them, and provides some tips on how to negotiate them.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/alternative-structures-po-financing-factoring-mca-2021/
Louisiana Small Business Loans – Get Approved For Small Business Financing dhamza
Are you looking for a loan for your commercial vehicle? If yes, then you should consider applying for commercial vehicle financing. The process of obtaining business loans for vehicles is quite simple. However, there are certain factors that you need to keep in mind while applying for a commercial vehicle loan.
If you are planning to buy a new commercial vehicle, then you should apply for commercial vehicle financing before buying the vehicle. It is because the finance company will give you a better rate of interest if you apply for a commercial vehicle loan before purchasing the vehicle.
Small business loans you can qualify for with bad credit scoreMerchant Advisors
Business loans can be challenging to secure if you have bad credit. Here are a few financing options to get small business loans with bad credit. For more information, visit at https://www.onlinecheck.com/blog/business-loans/business-loans-for-bad-credit/
Approaching Your BankerTips1. Keep in mind tha.docxrossskuddershamus
Approaching Your Banker
Tips
1. Keep in mind that to stay in business banks need to make loans.
Do not be afraid to ask for one. That is what the Commercial Account Manager wants you to do. To increase your chances of getting a loan, look for a bank that is familiar with your industry and who has done business with companies like yours. Seek out banks that are active in small business financing. Some banks lend on a conventional basis (lending money without government support), while some banks participate in government programs (in the form of government participations involving direct government funds or loan guarantees). However, be aware that banks often demand stiff collateral requirements for start-ups.
2. As an entrepreneur, make sure that you are thoroughly prepared when you go to your banker's office to request a loan.
You need to show your bankers that a loan to you is a low-risk proposition. Have on hand a completed Business PlanManagementMarketsMaterialsMoney Copies of cash flow (12Mth) Financial statement projections (3-4yrs)
3. Learn to anticipate every question that he or she has. Remember, the combination of information and preparation is the most powerful negotiating tool in the world. A confident and thoroughly prepared borrower is four times more likely to have his or her loan approved than a borrower who does not know the answer to some of the basic questions a banker asks. To show the extent of your preparedness, your business plan should also include answers to your banker's questions.
These questions normally are:
How much money do you need? Be as exact as possible; although adding a little extra for contingencies will not hurt. How long do you need it for? Be prepared to go into detail about what the money will do for you and why your business is a good risk. What are you going to use it for? Businesses use loans for three things: to buy new assets, pay off old debts, or pay for operating expenses. When and how you will repay for it? Your cash flow projections should provide a repayment time frame. Convince the banker of the long-term profitability of your business and your ability to repay the loan by using your financial projections and business plan. What will you do if you do not get the loan? Is your request Safe and Sound.
4. Do not take an apologetic and negative attitude. Keep your negativity in check. Present yourself as an entrepreneur who can and will repay the loan. Boost your image by providing your Commercial Account Manager with any promotional materials about your business, such as brochures, ads, articles, press releases, etc.
5. Dress in a professional manner for the interview. This is a business transaction, so treat it as such.
6. Do not stretch the truth in your loan application. Broad, unsubstantiated statements should be avoided. The lender can easily check many of the facts on your application. If you cannot support statements with solid data, then don't make them.
Need capital to start, grow and manage your business, we provide loans in the form of short term loans and long term loans, check your ability to get a loan by bank loan rating and credit score check. Get complete information about the Syndication & Funding right from Term Loans to Unsecured Loans and the Process.
Understand the resources required to execute on your business concept; understand the different opportunities to fund start-up and subsequent growth, and the opportunities and challenges associated with each.
For Business Funding go to http://frombootstobusiness.com/category/from-boots-to-business/business-finance/
Start Building Your Business's Credit NowLease Funders
Learn the steps to get your business' credit started and start taking advantage of the benefits of having good credit. Get helpful tips on how to build your business's credit now.
Guide to Understanding Small Business Loans.pdfBroc Finance
Easy guide to help you understand what are unsecured business loans in Australia, its types, benefits, interest rates and how to choose the right business loan.
18 proven ways to help your business loan application succeedMerchant Advisors
Filling out a business loan application can be intimidating for most businesses. Here are some proven ways to help you get your loan application succeed. For more information, visit at https://www.onlinecheck.com/blog/business-loans/business-loan-application/
Similar to Ten Types of Business Financing You May Not Have Tried (20)
Protecting Your Business with the Right InsuranceInsideUp
A good insurance company will guide you into a policy that is affordable and effective. Research and ensure that they cover small businesses and have your best interests at heart. InsideUp can help you find the right insurance provider for your business, with free competitive quotes from top providers. Visit http://www.insideup.com/compare/business_insurance
USING CRM SOLUTIONS TO INCREASE SALES AND RETAIN VALUABLE CUSTOMERSInsideUp
CRM is an important tool for creating business success. The better your customer relationships, the
easier it is to conduct business and generate revenue. Using available technology to improve
customer relations management simply makes good business sense.
If you need further information, or would like assistance in selecting a CRM provider, go to
http://www.insideup.com/compare/customer_relationship_management
Should You Use a Professional Employer Organization? Top Factors to ConsiderInsideUp
When executives were asked, “What do you think will be the biggest investment challenge facing organizations over the next ten years?” For 47% of respondents, the answer was, “Obtaining human capital and optimizing human capital
investments.” Learn how a PEO can help you build a stronger company, and how to choose a good fit for your business
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...PaulBryant58
This article provides a comprehensive guide on how to
effectively manage the convert Accpac to QuickBooks , with a particular focus on utilizing online accounting services to streamline the process.
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
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RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
Remote sensing and monitoring are changing the mining industry for the better. These are providing innovative solutions to long-standing challenges. Those related to exploration, extraction, and overall environmental management by mining technology companies Odisha. These technologies make use of satellite imaging, aerial photography and sensors to collect data that might be inaccessible or from hazardous locations. With the use of this technology, mining operations are becoming increasingly efficient. Let us gain more insight into the key aspects associated with remote sensing and monitoring when it comes to mining.
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
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The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
As a business owner in Delaware, staying on top of your tax obligations is paramount, especially with the annual deadline for Delaware Franchise Tax looming on March 1. One such obligation is the annual Delaware Franchise Tax, which serves as a crucial requirement for maintaining your company’s legal standing within the state. While the prospect of handling tax matters may seem daunting, rest assured that the process can be straightforward with the right guidance. In this comprehensive guide, we’ll walk you through the steps of filing your Delaware Franchise Tax and provide insights to help you navigate the process effectively.
India Orthopedic Devices Market: Unlocking Growth Secrets, Trends and Develop...Kumar Satyam
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Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
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Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
Memorandum Of Association Constitution of Company.ppt
Ten Types of Business Financing You May Not Have Tried
1. TEN TYPES OF BUSINESS FINANCING YOU MAY NOT HAVE TRIED
2. Financing Options to Help Your Business Grow
A business loan at the right time, and with the right lender, can pull your organization
through tough times, and give it the impetus to continue growing. Sources for business
loans are abundant and varied. Each lender will have their own set of qualification
criteria and approval processes for loan applicants, as well as different types of loans
and repayment schedules. Some may require that you have an excellent personal credit
history. Others offer loans to business owners with lower credit scores, but require additional collateral or documentation that demonstrates your ability to repay.
This guide is designed to help you through the process of finding a lender who can meet your needs. You will also find tips on how to get approved for the amount you need.
Types of Business Loans
Factoring
Factoring is a financing option based on your invoices that are awaiting payment. In the factoring transaction, your business sells, at a discounted rate, its accounts receivable,
or invoices, to a third party, called a factor. This sale allows you to receive immediate cash to finance continued business growth. Factors can make funds available when a bank loan is not feasible because the primary focus is on the credit worthiness of your
company's debtors. Factoring can be a good option for under-capitalized businesses that have the profit margins to absorb the factor's fee.
Merchant Cash Advance or Business Cash Advance
Merchant cash advances, also known as business cash advances are a fast and
relatively easy way to obtain needed cash to get your business through a slow period or to cover expenses. If your business qualifies, the process for obtaining a business cash
advance is quicker and easier than applying for a traditional business loan. Business cash advances involve selling a percentage of your company's projected credit card transactions based upon your business's credit card transaction history.
This is not a loan, but rather an agreement in which your merchant account provider purchases the right to receive a percentage of your future credit card sales based on
your company's credit card sales history. This is a short-term financing option, and can help your business maintain cash flow or pay for equipment or other needs to help your business grow.
3. Line of Equity
Some entrepreneurs have successfully financed their startups by obtaining a home equity loan or line of credit. Home equity loans leverage the equity you have in your
house. For example, if your home is appraised at $100K and you owe $60K, you have
$40K in equity that you can utilize. Most lenders, however, will only loan up to 80
percent of a home's value, giving you approximately $20K in equity that you could cash
out. Home equity loans do not look bad on your credit, and may actually improve your credit rating.
Loan for Equipment Purchase
Lending institutions often provide companies with loans specifically for the purchase of machinery, tools, office equipment and other types of equipment required to operate a business. Equipment can include items such as industrial washing machines, tractors
and backhoes, and office equipment like computers, software, telephones and fax machines.
Some banks and other lenders will finance up to 100 percent of the equipment purchase
price. Most, however, will lend on a minimum loan-to-value (LTV) basis, which is typically 80 to 90 percent of the purchase price or appraised price.
Equipment Lease
If your business does not qualify for an equipment loan you may be able to lease the
equipment you need. There are three basic types of equipment lease:
1. Finance Lease - This type of lease, also known as a capital lease, could be
compared with a rent-to-own agreement. It is a means of financing equipment
without actually taking ownership of it. Your business would have all the
associated benefits and risks, but you would not actually own the equipment until the end of the lease.
2. Operating Lease -The term of this type of lease is shorter than the actual useful
life of the equipment, meaning that your business can acquire and use the
equipment for a limited period, after which you would return the asset to the lessor. The residual value of the item goes to the lessor.
3. Sale Lease Back - If you own your business equipment but are in need of
working capital one option you might consider is selling your equipment to a leasing company and then lease it back at a fixed monthly payment, so you retain use of your equipment and have cash to grow your business.
4. Commercial Mortgage Loan
If you need to acquire land or commercial property for your business, refinance existing
business debt, or expand your existing facilities, you might consider applying for a
commercial mortgage loan. A commercial mortgage is similar to a residential mortgage,
except the collateral is a commercial building or other business real estate rather than
residential property. You can apply for a commercial mortgage whether your business is a partnership, a corporation, or an LLC. Most lenders will require a good personal credit
rating as well as proof that your business is creditworthy, but some will consider
applications with a less than perfect credit history. Expect that most lenders will apply a loan-to-value ratio. You should also be prepared to invest some of your company's own money toward the purchase.
Micro Loans
Provided by non-profit lending institutions, and backed by funds from the Small
Business Association (SBA), micro-loans are designed to help newer businesses and
start-ups. Micro loans are between $5,000 and $35,000, and are typically easier to
obtain than other types of business loans. These are community specific loans, so you should look for a lender in your area.
Each lender will have their own set of credit requirements, but all will require both
collateral and a personal guarantee. You will also need to fulfill business training and planning requirements before your loan is approved. The maximum term for a micro loan is six years. Once the micro loan is granted, the funds may be used for working
capital, procuring inventory and supplies, and obtaining necessary equipment, machinery and office furnishings.
SBA Loans
The SBA also helps businesses that may not qualify for a traditional loan by
guaranteeing bank loans to businesses. In most cases, the SBA requires that you have
already applied for and been denied a commercial bank loan before applying for an SBA guaranteed loan.
The SBA does not place a limit on the amount you can request, and allows up to 25 years to repay most loans. To qualify for an SBA loan, you must be willing to invest
some of your own money into your business as well. They will also take into
consideration your personal credit history, as well as your business plan, so you should have both in order before applying.
5. Franchise Financing
If you plan to buy a franchise, here are a few different funding options you can choose
from:
• SBA Financing-The SBA loan guarantee program includes financing for
franchises, the most popular of which is their 7(a) program.
• Specialty Franchise Financing-Non-SBA programs for franchise financing include
structured term loans and equipment leases.
• The Franchisor-Many of the franchise companies offer their own financing
programs, or will help you find a suitable lender from their own list of preferred
lenders.
• Personal Credit or Assets-Some lenders will require the borrower to pay
anywhere from 15 to 30 percent of the total franchise costs. A borrower may
choose to refinance a mortgage or cash in their 401k, but it is preferable not to risk personal assets if the funds can be obtained from another source, such as an established business credit account.
• ERSOP-This program lets you use your IRA or 401k as start-up investment
capital without taxes, penalties, or distributions.
SBA 504 Loan Program
SBA's 504 program is designed for the purchase of fixed assets such as buildings or
land, and is a fixed rate, long-term form of financing. The main purpose of this program
is to help further the economic development of a community. The SBA works with
Certified Development Companies (CDCs) and lenders from the private sector to help finance small businesses.
The CDC, backed by SBA's guarantee, will loan up to 40 percent of the cost of a
project, and the private sector lender will cover 50 percent, for a 90 percent loan to
value ratio. The loan cannot be used to pay off or consolidate existing debts, nor can it be used for working capital, purchasing inventory or refinancing. Funding from the 504
loan program can be used for:
• Buying land or refurbishing existing buildings
• Street Improvements or grading
• Utilities, parking lots, or landscaping
6. • Building new facilities
• Updating or renovating existing buildings
• Buying long-term equipment or machinery
The Loan Application and Approval Process
Obtaining a business loan involves several steps. If you have not already done so,
creating a detailed business plan will be your first step. Then you will need to choose a
lender to work with and fill out the required paperwork to submit to the lender. Complete
your application package thoroughly, giving careful attention to all the details. A well prepared application will have a greater chance of success.
Be sure your application covers the five Cs of business credit:
• Capital-Demonstrate that your capital structure will not cause the bank undue
risk.
• Character-Your personal reputation and business history, as well as your
relationship with your lender.
• Collateral-The bank will want your loan to be adequately secured with an
acceptable form of collateral.
• Capacity-Your cash flow, asset/liability structure, and liquidity, and the net worth
of both the borrowers and the guarantors.
• Conditions-You will need to demonstrate a thorough knowledge of the economy,
the industry, and any conditions that will affect your business success.
A loan committee will take into consideration these five elements when evaluating your application. Although lenders do not require every loan to be risk-free, they do need to identify possible areas of risks, and determine the level of risk involved.
What can you do to ensure your application receives a favorable review? First,
communicate your business plan clearly. Have a detailed and complete application, as
well as an in-depth plan to repay the loan. Be specific regarding how the funds will be
used, and demonstrate that you have a well documented source of repayment. Include an objective analysis of risk factors, and your strategy to deal with problems that could arise.
7. Know in advance what your credit score is, and check with each lender to find out what
their credit score requirements are before you apply. This will prevent you from having
to apply to more than three lenders, which would be viewed as a red flag to any subsequent lenders to which you apply.
Once your loan is approved, you can use the funds for purchases and investments that
will help grow your business, such as:
• Buying, leasing or renovating a building for your business
• Office furniture, fixtures, and equipment
• Inventory and working capital
Finding the Right Lender
If you are new to small business financing, it's worthwhile to talk to your local SBA
District Office. Local office staff can help you understand options from community and
national banks. They can also provide guidance about loan eligibility and application
requirements. If you are a veteran or a woman-owned business, you can get specialist
advice about programs that meet your needs at a local Veterans Business Outreach Center or Women's Business Center.
If you are doing your own research, seek out a bank or credit union that has been
through this process before or one that is a Preferred SBA Lender - in other words, a lender who has a proven track record in processing and servicing SBA loans.
Choosing the Right Type of Loan
The type of loan you select will affect how quickly you receive the money you need.
Accounts receivable loans, home equity loans, and secured personal loans are among the quickest ways to obtain cash.
For short-term cash needs a personal loan may be your best choice. Because you will be putting up collateral, the lender will be assuming much less risk, which means they
will be more likely to approve your application. If you fail to make your payments, the lender will have the recourse of selling your assets to offset their loss.
A home equity loan is an option you might consider if you own your home. You can
reduce the approval time even more by applying through the company that holds your
mortgage. It's important to keep in mind, however, that you could risk losing your home if your business were to fail.
8. An accounts receivable loan is relatively simple to obtain if you have a substantial
amount of receivables that can be used as collateral. Accounts receivable loans have higher rates than most other types of business loans, but they can be a helpful source of cash flow when you have no other form of collateral.
Loan amount
Determine exactly how much cash you will need before you apply, and ask for that amount. Smaller requests have a greater likelihood of approval, but you want to be
certain you have enough to pull your business through a tight spot or to create
significant growth. Loans for smaller amounts, from $15,000 to $50,000, are less risky for lenders, and therefore more apt to be approved quickly.
Planning ahead, researching your needs and your loan options, and being prepared
with proper documentation and an outstanding business plan are the surest steps you can take toward getting approved for the funds you need.
9 Mistakes to Avoid When Applying for a Business Loan
1. Not being prepared with a business plan. Even when not applying for a loan, it's
wise to have a business plan to help keep your business running smoothly. But a good business plan is a basic essential for the loan application process. Lenders
will want to know how you plan to operate your business, and that you are
capable of reaching the financial goals you have projected for the business. Include all financial data at your disposal to support your plan. Not shopping
around before choosing a lender. Investigate the loan programs offered through
credit unions and other sources in addition to your local bank. Small business
owners can find excellent resources through the Small Business Administration.
2. Not having the required financial documentation. Whether applying for a
business or personal loan, take the time to get your finances in order so you can present the proper documentation to the lender.
3. Not being aware of your credit rating. Obtain your credit history and scores from
the three main credit reporting agencies so you have an idea of the type of loan
you can qualify for. If your credit report has errors it may be worth the effort to clear them up before proceeding with your loan application.
4. Not indicating what the loan will be used for. Lenders will want details regarding
how the money will be used. They also want assurance that you know exactly what your business needs are and how the loan will help meet those needs.
9. 5. Signing the loan agreement without carefully studying the terms. Once you find
out you've been approved, it can be tempting to sign without reading the agreement. But take the time to go over the details carefully and ask for clarification of any points you don't understand completely.
6. Not locking in a good rate. When you do find a good rate, don't hesitate to lock it
in before it has a chance to go up. Waiting for interest rates to drop further could prove costly.
7. Making changes in your business. Lenders look for stability in business
operations, so significant changes in personnel, or in the way you run your business may be cause for concern.
8. Lack of equity in the project. Seeing that you have personally invested in your
business project will give lenders more confidence in taking on the risk; you will
be more likely to work hard for success when your personal assets are also involved.
9. No collateral to offer. Few lenders will approve a completely unsecured business
loan.
Glossary
Accounts Receivable: Amounts due to a company for goods or services sold on credit. These are short-term assets.
Aging:
A procedure by which accounts are classified to determine collection time or delinquency (for example, current, 30 days past due, 60 days past due, etc.)
Amortization:
(1) The gradual reduction of a debt by periodic payments large enough to meet current
interest payments and to repay the principal by maturity.
(2) A method of gradually decreasing an asset book value by spreading its depreciation
over time.
Annual Percentage Rate:
The total financing cost expressed on an annual basis as a percentage of the amount of
the loan outstanding at all times. The APR is computed by a standardized method required by the Federal Reserve Regulation Z.
10. Capital:
The funds invested in a company on a long-term basis. These funds are obtained by issuing preferred or common stock, retained earnings, and long-term borrowing.
Clean Up:
Used to describe a loan payout or out-of-debt period by the borrower.
Collateral:
Specific property, securities, or other assets pledged by a borrower to a lender as a backup source of loan repayment.
Compensating Balances:
A demand deposit collected balance, kept on deposit by a customer, designed to offset the expenses of the bank for activity or lines of credit.
Contingent Liability:
Any obligation for which a party is not directly or immediately responsible for payment, but that party can or will become responsible at some future time.
Corporate Borrowing Resolution:
A formal document expressing the intention of a corporation board of directors.
Covenant:
A promise by one party to another regarding the performance or nonperformance of certain acts, or a promise that certain conditions do or do not exist.
Depreciate:
(1) In accounting, the process of periodically reducing a fixed asset book value by
charging a portion of the asset cost as an expense to the period in which it provides a service.
(2) To decrease in service capacity or usefulness.
Fixed Assets:
Those items of a permanent nature required for the normal conduct of a business and
not converted into cash during a normal fiscal period. Fixed assets include furniture, buildings, and machinery.
Guaranty:
A pledge to make good a note or security in case of default by the borrower. Although
the original debtor is responsible for the debt, a guarantor becomes liable in the event of a default.
11. Interest:
(1) The amount paid by a borrower to a lender in exchange for the use of the lender
money for a certain period.
(2) A share, right, or title in property.
(3) A charge levied by the bank on cardholder account according to the terms of the
cardholder agreement.
Key Man Insurance:
Insurance for people considered crucial to the effective operation of a business.
Letter of Credit (L/C):
A financial instrument, issued to a company or person by a bank that substitutes the bank credit for the company credit. A letter of credit is frequently used by companies
ordering goods from foreign suppliers with whom they have no credit relationship. As a
short-term negotiable security, a letter of credit can then be sold by the foreign recipient.
Letter of Credit, Standby:
A letter of credit against which funds can be drawn only if an underlying business transaction is not performed.
Letters of Credit, Commercial:
Unconditionally guarantees to pay the beneficiary a specified amount within a certain period of time.
Loan Agreement:
Legal contract between the bank and the borrower governing actions affecting the relationships.
Mortgage Loan:
A loan used to finance construction of single-family houses, condominiums,
cooperatives, homes and business properties. A mortgage loan is collateralized by real property, such as farms, private residences, commercial land and buildings.
Pro Forma Statement:
A financial statement that assumes future events in order to project conditions of the
company as a result of these events. For example, a pro forma statement may assume future sales to project anticipated income.
Secured Loan:
A loan against which a tangible asset has been pledged in case of default on the loan.
12. Security Agreement:
An agreement between a seller and buyer stating that the seller will have a security interest in the goods traded.
Working Capital:
Calculated as the excess of current assets over current liabilities, but in effect it
represents the portion of the long-term investment in a company which is being used to support current assets.