8 posts tagged “business financing”
The lack of financial funding or start up capital is what prevents many aspiring entrepreneurs from executing their brilliant business ideas. Are you one those aspiring business owners who are hindered by finances? Would you like to learn more about the different business financing options that are available for you? Read on and find out.
The Importance of Sufficient Capital
True enough, one must not quickly jump in to a business without considering the consequences. Having sufficient funding or a reliable financial resource is crucial especially on the initial stages of the business. As your business tries to establish footing in the market, you will be confronted with different costs and expenses. Thus, without financial aid, you may find yourself soon stuck in debt or forced to give up the business you’ve started.
Business Financing Sources – Equity and Debt Financing
What are business financing sources? There are two basic types of business financing sources- the first one is equity financing and the second is debt financing. Examples of equity financing include angel investors and venture capitalists that are willing to provide funding assistance for new and established businesses.
Angel investors invest their money to smaller businesses with great potential and they become shareholders of the company’s profits. Similarly, venture capitalists invest money to help new entrepreneurs with promising business ideas. The difference with venture capitalists is that they can provide much higher investments and they are willing to take bigger risks.
Debt financing, as its name implies is a debt or loan borrowed by the owner of the business. Bank loans are the perfect example of this type of financing. When you obtain a bank business loan, you are expected to pay back the money you borrowed according to the bank’s terms. The repayment period may last from one year or more depending on the amount of money you borrowed.
Alternative Financing Options
Small business credit cards can also be considered as debt financing tools. With a business credit card, you can make purchases in advance even without cash. Business credit cards work pretty much the same as personal credit cards in a way that you can pay off your balances in installments. Nevertheless, business credit cards usually offer a higher credit limit.
Each time you carry over your balance for one month to the next, you automatically incur the additional interest on your debts. Thus, business owners must learn how to use their business credit cards wisely. To avoid getting stuck in debt, submitting credit card payments on time and staying within the given credit limit are two important actions that must never be neglected.
These are the business financing options that you can get if you plan on venturing into business. In most cases, debt financing is chosen because they are easier to obtain. Nevertheless, finding angel investors or venture capitalists is worth the try. Even if it may take a while to find potential investors and complete the process, equity financing frees you from the responsibility of making repayments.
Read more On Obtaining Small Business Financing
Resources for small business financing, startup business loans, Small business credit cards
The lack of financial funding or start up capital is what prevents many aspiring entrepreneurs from executing their brilliant business ideas. Are you one those aspiring business owners who are hindered by finances? Would you like to learn more about the different business financing options that are available for you? Read on and find out.
The Importance of Sufficient Capital
True enough, one must not quickly jump in to a business without considering the consequences. Having sufficient funding or a reliable financial resource is crucial especially on the initial stages of the business. As your business tries to establish footing in the market, you will be confronted with different costs and expenses. Thus, without financial aid, you may find yourself soon stuck in debt or forced to give up the business you’ve started.
Business Financing Sources – Equity and Debt Financing
What are business financing sources? There are two basic types of business financing sources- the first one is equity financing and the second is debt financing. Examples of equity financing include angel investors and venture capitalists that are willing to provide funding assistance for new and established businesses.
Angel investors invest their money to smaller businesses with great potential and they become shareholders of the company’s profits. Similarly, venture capitalists invest money to help new entrepreneurs with promising business ideas. The difference with venture capitalists is that they can provide much higher investments and they are willing to take bigger risks.
Debt financing, as its name implies is a debt or loan borrowed by the owner of the business. Bank loans are the perfect example of this type of financing. When you obtain a bank business loan, you are expected to pay back the money you borrowed according to the bank’s terms. The repayment period may last from one year or more depending on the amount of money you borrowed.
Alternative Financing Options
Small business credit cards can also be considered as debt financing tools. With a business credit card, you can make purchases in advance even without cash. Business credit cards work pretty much the same as personal credit cards in a way that you can pay off your balances in installments. Nevertheless, business credit cards usually offer a higher credit limit.
Each time you carry over your balance for one month to the next, you automatically incur the additional interest on your debts. Thus, business owners must learn how to use their business credit cards wisely. To avoid getting stuck in debt, submitting credit card payments on time and staying within the given credit limit are two important actions that must never be neglected.
These are the business financing options that you can get if you plan on venturing into business. In most cases, debt financing is chosen because they are easier to obtain. Nevertheless, finding angel investors or venture capitalists is worth the try. Even if it may take a while to find potential investors and complete the process, equity financing frees you from the responsibility of making repayments.
Read more On Obtaining Small Business Financing
Resources for small business financing, startup business loans, Small business credit cards
If you’re an entrepreneur and you plan on getting funding assistance for your business, one option you may consider is a term loan. In this article, we’ll discuss the basic points about term loans for small businesses.
Business startup financing
What is a term loan? Term loans have a fixed length of repayment period, lasting from a year to 20 years or more, depending on the type of loan you obtained. The amortization or the amount of repayment that the borrower would need to submit includes both the principal and interest of the loan.
Short Term Business Loans
Short term loans mature within a year or less and are ideal for growing businesses that need additional funding in the middle of operations. There are a number of short term business loans offered by lenders. Examples are working capital loans, accounts receivable loans, equity, lines of credit, etc. For instance, if a business needs funds to launch new marketing campaigns, buy more stocks, or hire additional workers, short term business loans provide an easy solution.
Long Term Business Loans
What about long term business loans? Obviously, this type of term loan takes a longer time to mature and complete. Long term business loans can have a 10-year, 20-year, to 30-year repayment period depending on the amount of money borrowed. Long term loans can start from $25,000 to as much as $50,000 or more.
If you are in need of large money to start your business, obtaining a long term loan is the more practical choice. Usually, term loans require collateral as a guarantee for the loan. Nevertheless, because long term business loans involve big cash, lenders are more strict and cautious when giving their approval.
Applicants for long term loans should be prepared to submit all the necessary documentations that the lender requires. Aside from the collateral, a professional business plan, along with business licensing certificates and accounts spreadsheets are often required to be submitted.
Your Business Credit History
Whether you’re applying for a short term or long term business loan, the status of your credit plays an important role in getting approved for the loan. Thus, it is advised to check on your business credit report before submitting your loan application. Although, there are lenders who grant loans despite bad credit, these loans usually have higher interest rates and fees. On the opposite, an excellent business credit gives you the advantage of getting lower interest rates and faster approval from lenders.
But what if you haven’t yet established your business credit history? In this case, your personal credit history would be used by your lender. Obtain a copy of your credit report to check on your credit score. Of course, a higher credit score makes you a more qualified candidate for a business loan while a low credit score puts you at a bad light. If you have a very low credit rating, it is best to work on your credit first before trying to apply for a business loan.
Read more Term Loans for Small Businesses
Resources for Small Business Loans, Start up Business Financing and Startup Business Loans
Managing a business is certainly not easy, particularly during times when the economy is in a slump. Some small businesses have been forced to shut down operations due to the lack of funds. Aside from day to day expenses, the company may have other obligations to creditors such as loans, leases, etc. Sometimes, mismanagement can be a cause of turmoil for a company. But instead of giving up the business, do you still have other options?
In this article, let’s talk about a business financing option known as CVA or Company Voluntary Arrangement. What is it and how can it help business owners solve their financial problem?
The Basics of CVA
A Company Voluntary Arrangement is an agreement between administrators of a company and creditors. Under the CVA, creditors agree to get paid at a later time, giving the business a chance to recover. Payments to creditors will be taken from the future profits that the business will gain. In the meantime, the business can use its existing funds for more important costs to save the company from closing down.
In order for a CVA arrangement to be successful, an entrepreneur must be sure that he/she can still keep the business profitable when financial help has become available. Otherwise, repayment can become a problem. If you see that all you need is additional funding to keep the business from going bust, then get in touch with a professional CVA personnel.
When applying for a CVA arrangement, a team of business professionals will evaluate the status of your business, paying special attention to its finances. Once approved, the application process can be started.
First, a proposal must be submitted to the State Court to prevent any creditor or lessor from taking action against the company or its property for up to 28 days. Afterwards, the proposal be sent to the appropriate creditors. You need to get at least 75% affirmative votes from the group of creditors.
Once the Company Voluntary Arrangement votes have been casted, the business’s liability to its creditors is temporarily cleared. Next, the repayment terms will be set. As The business or company who applied for CVA is expected to pay the creditors at a designated date within the agreed time period.
Company Voluntary Arrangement and Your Business
Banks, creditors and the government is inclined to give financial support for businesses that need to be rescued from the risk of failure. If you want to avoid insolvency or liquidation, it is an option that can save you time and money. It is also a confidential arrangement so there is no need to worry about damaging the reputation of your business or getting negative publicity.
Bear in mind that in order to work, the administrators or directors of the company must be willing to work hard for the recovery of the business. The management of the business has to be evaluated to know if a restructuring or changes in strategy must be done. To fully understand the terms of a Company Voluntary Arrangement, it is best to seek assistance from an attorney specializing in business.
Read more Company Voluntary Arrangement - The Answer To Business Financing?
Resources for New Business Financing and Start up Business Financing
Time and again, we all experience the need for financial assistance either from a relative, a friend or a lender. You may need the money to send your kids to college, renovate your home, or to help you start a business. Regardless of what your purpose is, there is a loan that suits your exact needs.
In this article, we’ll be discussing about a particular type of loan that is especially suited for business owners and new entrepreneurs- the finance loan. What is loan financing and how does it work? Why should you be interested to know about it? If you’re planning on starting your own business, how can a finance loan help you?
Secured Finance Small Business Loans
Finance loans are actually secured loans that are ideal for small businesses. Why? With this type of loan, the collateral used is actually the item that you’ve purchased using the same loan. For example, if you’ve bought a new equipment with your loan, this equipment will be used as a guarantee for your loan at the same time. This means, you failed to keep up with your payments, your lender has the right to take the equipment, resell it and use the money as payment for your debts. This way, your lender is protected against defaults of payment. After you’ve completed your payments throughout your loan’s term, then you’ll get the full ownership of the equipment.
Do you need to submit other collateral aside from the item you’ve purchased? The answer is no. The item you’ve purchased with the loan itself is used as the guarantee for your debts. This means, you don’t have to put your home property on the line or use your own existing property just to get a finance loan.
Comparing Loan Rates and Fees
Generally, small business finance loans are used to cover for large or expensive purchases such as special business equipment, machineries, or vehicles. Take note that within your loan’s term, you would also pay the interest of the amount you’ve borrowed. Thus, it is wise to compare different finance loan companies first before submitting your application. Make sure that you clearly understand the rates, costs and terms of the lender.
Another important advice is not to focus on the interest rates alone, when comparing possible lenders. Some lending companies may offer attractively low rates, but what about the rest of fees and charges? Would you have to pay for unreasonable processing fees and miscellaneous costs on your loan? To compare lenders efficiently, you need to weigh all the factors that are involved in your loan.
After doing your research, you may be ready to apply for a finance loan. Application is typically done online so it’s really convenient. You can often expect a response from the lending company within the same day of submitting your application. It is wise therefore to take your time in studying what each finance loan lender has to offer. Also, make sure that a finance loan is really the best option for your current financial need.
Read more Applying for The Right Small Business Loan
Resources for startup business loans and start up business financing
It is a fact that a business isn’t always guaranteed to succeed. In some cases, despite all your best efforts to save the business, you are left with no other choice but to sell. But selling a business doesn’t always mean that it was a failure. Some business owners are faced with the need to sell because they don’t have the time or the energy to run it or sometimes because they just don’t want to continue with it. Whatever your reason is for selling your business, there are different ways on how you can get through with your selling. One way to do so is by seller financing.
What is seller financing?
Simply put, it is where the business seller offers to finance the business so that the buyer will not need to apply for a financing loan of his own. This helps a seller find more prospective buyers, especially those who do not have the requirements needed to secure a loan from a lender.
As part of the deal, the buyer of the business will only pay the agreed upfront payment, and continue with his payments in installments within the time period that is agreed upon between both of them (the buyer and the seller). The seller will take a lien against the business until the buyer completely pays all his balance in time. As the seller, it will give you the benefit of continuously profiting from your sale with a higher interest.
Naturally, the price of the business will be much higher since higher interest rates will be incurred. However, most buyers prefer this way of selling, because it gives them ample time to make repayments and it also gives them more confidence on the profitability and potential the business. Since the business seller is willing to finance it, then surely it still has a strong potential in the market.
Should You Offer Seller Financing?
Given that seller financing has its benefits, it also has its risks. First of all, if the business will not be a success, then you won’t be able to claim the full repayment that you originally planned. Yes, there is a lien on the business but it doesn’t guarantee that it will be enough to give you the complete price you spent on the business. For this reason, some business sellers ask for additional security or collateral from their buyer just in case the business fails.
If you intend to sell your business, seller financing is an option you can consider but remember that this option may not be the best option for all business owners. It does give you an opportunity to get more from your investment, but it is also accompanied by risks. Furthermore, if you’re selling the business because you need the cash, then definitely this isn’t the way to go. Thus, study your situation carefully before deciding to choose this method of selling.
If however, you do choose to go on with seller financing, remember to carefully check on the buyer’s background and reputation. Also, consider asking for an additional collateral to give yourself more security and protection.
Read More Who Will Finance The Purchase of Your Business?
Resources for Equipment Lease for Startup Business, start up business loan and start up business financing
If you plan on getting a start up financing or an equipment lease financing, you should know some of the essentials in getting an approval quickly and easily. Here are the new rules of small business financing that every aspiring business entrepreneur should consider:
The importance of your credit history.
As before, this rule still exists even today. Lenders still base their approval upon an individual’s personal credit history especially for those who are just starting up a business. So before even submitting a business loan application, don’t forget to check on your credit report first. You can order a copy of your credit history from any of the 3 major Credit Bureaus (Equifax, Experian and TransUnion) for $12.95 or for free.
Once you’ve received your copy, check for any errors or incorrect details and inform the credit bureau who issued your report about this. If you have any derogatory record that has happened beyond seven years, see to it that this is not included in your current credit report. If you have a good credit status, you can be assured that lending companies and leasing companies will be willing to grant you an approval when they make on your credit report.
The New Automated Credit Scoring System
Today, lenders use the new automated credit scoring system for granting loan approvals for businesses. With this new system, a person’s credit worthiness will be based upon the new scoring system. The automated credit score is applied for businesses who wish to loan an amount less than $100,000. This new system makes way for speedier and easier processing of loan applications.
Business owners who are in need of immediate funding to start their business can take advantage of this opportunity by seeking a lender that uses this system. In addition, lenders who make use of automated credit scoring do not require a business plan to be submitted. Thus, there’s no need to hire a business plan creator or do the business plan on your own which can be both costly and time-consuming.
How to Avail of the New System
How can you benefit from these new rules of small business financing? If you want to apply with a lender that uses automated scoring system, better seek a larger bank than small financing firm.
To ensure speedy approval and processing of your loan, make sure you’ve checked your credit report for any errors or inaccuracy. On filling up the application, take the time to understand the questions and make sure that all the information you’ll give are true and accurate. Double-check the application before submitting it.
Another important thing to remember is to give accurate description of what you’re business does, in what industry you belong, and what type of business you’re running. An inaccurate description can cause the lending company or the bank to give your business an incorrect code. Lastly, in case you’ve been refused by a lender, request for an explanation and ask that a representative personally review your application.
Read more What are the New Rules of Small Business Financing?
Resources for start up financing, startup business loan and equipment lease startup business
If you’re a business owner planning to apply for a start up loan or additional funds, you should learn as much as you can about how loans work before searching for a possible lender. In this article, let’s discuss some basic facts that you need to know about business financing.
Different Types of Business Loans
One of the first things you’ll probably check on is the rate of interest. Lenders offer two kinds of interest- fixed and variable. Fixed-rate business loans are ideal because you can calculate exactly the amount of payment you need to submit each month. A fixed rate interest does not change from the moment you signed up for the loan until your loan term is completed.
On the opposite, business loans with variable or adjustable interest can change at any time within your loan’s term. Typically, the interest is based on the Prime Rate which means it can either drop or increase, depending on the market. Most variable rate loans start up low which is why entrepreneurs prefer them over fixed-rate loans. Nevertheless, a fixed interest rate protects you from the possibility of inflation.
Business loans can also be categorized as secured or unsecured. Secured loans are obtained by submitting to your lender a personal property or a business asset as collateral for your loan. Because the loan is guaranteed by collateral, lenders can afford to offer lower interest and longer repayment terms.
With regards to unsecured loans, they pose a higher risk to the lender and there comes with high interest rates and fees. Some business owners do not have a property to submit or don’t want to risk their property at all so they opt for unsecured financing. The disadvantage is that this type of loan can be very expensive and is offered only for limited amounts.
Business Loans and Your Credit Score
If you haven’t yet established a separate credit for your business, your personal credit history will be used instead. When you apply for a business loan, prospective lenders would check on your credit report to determine whether or not you qualify for the loan the offer. Having a good or excellent credit is a definite advantage because it gives you a stronger negotiating power to ask for lower interest and better terms.
Meanwhile, a low credit score instantly makes you a high risk borrower in the eyes of creditors. Lenders often impose higher rates and limited credit for business owners with poor credit history to make up for the risk. Thus, if you plan to apply for business financing, it is a good idea to check on your credit report first before submitting your loan application.
If you find that you’re credit isn’t impressive enough, work on building up your credit first even if it means delaying your plans for a few more months. Not only does a high credit score guarantee quick approval, it also gives you the chance to enjoy the best deal offers from lenders.
Read More Business Financing Facts You Should Know
Resources for Start up Business Financing
