Obtaining Business Loans

In this discussion, we are going to focus on obtaining conventional business loans in order to develop or expand your business operations. First, as it should be noted that with changes in the lending industry – you will be required to put up a significant amount of collateral as it relates to the ongoing business loans that you are seeking for your company. However, if you do not have the appropriate collateral then you may qualify for any Small Business Administration loan which will provide you with a much greater advantage as it pertains to receiving financing from a bank or other financial institution. As we will discuss in several other articles pertaining to the small business administration, this organization was specifically developed by Congress in order to provide small business owners with the capital that businesses need in order to expand their operations, develop operations, acquire inventory, acquire real estate, and provide for some level of general working capital as it pertains to the ongoing cash needs of a specific business. In regards to business loans, it is first extraordinarily important that you develop a business plan that clearly showcases to the financial institutions the overall aspects of your business and how you intend to repay the loan will be standard 5 to 7 year time frame for which business loans are granted. This includes having a well developed profit and loss statement, cash flow analysis, as well as a balance sheet that showcases the assets that you are purchasing and the cash flow of the business as it pertains to the debt service that you'll be paying on an ongoing basis. As it relates to small businesses, and as we have discussed in some of our previous articles, the most important aspect as it relates to obtaining a small business loan is a really showcase to your profit and loss and cash flow analysis that the business will be able to support the principal payback as well as the ongoing interest expense as it relates to your business. Additionally, you should develop a secondary document that clearly showcases the collateral to secure the business loan or business line of credit that you are seeking. Additionally, you'll need to submit documentation to the bank or financial institution that you're working with in order to effectively obtain your business credit facility. This includes showcasing personal financial assets which include your home, retirement accounts, income producing real estate, and other assets that you own that are currently not under lean by any other financial situation. Additionally, these personal assets will also be used as part of your business loan package. You can anticipate, in today's lending environment that you should be fully required to put a personal guarantee on any type of conventional business loan that you are seeking. In some of our future discussions, we will discuss the difference between a business loan any business like credit and how potentially acquiring a business line of credit may be near better interest if you do not need all of the capital upfront. It's especially true if you do not run a capital intensive business.

 

Returning to our discussions as it relates to obtaining business loans, we recommend that you at least have appropriate counseling place, including a certified public accountant as well as an attorney, which will assist you in effectively understanding the complex documents that will be required for you to sign at the time of the business loan closing. In regards to the interest rate but you can expect for a small business loan that is not secured by the small business administration, at the time of this writing, he can anticipate that you can effectively receive an interest rate on the loan in that ranges from 4% to 8% per year depending on your current credit score. Additionally, it should be noted that the interest rate pertaining to your business loan if you are acquiring a substantial amount of tangible assets with the funds that you are seeking. This is especially true if you're seeking to acquire real estate. This is primarily due to the fact that the acquisition of tangible assets, in the view of a financial institution, is far less risk far less risky than providing a general working capital to business that is not secured by any tangible asset. However, if your business is certainly in need of working capital and you may want to hypothecate your personal assets such as your home, car, investments, or other property so that you can effectively have tangible assets that secured a business loan or line of credit as you progress through your business operations.

 

Although this is somewhat off of our track as per our discussions pertaining to obtaining business loans, a business line of credit may be more suitable for businesses that typically render services in professional service capacity that has a significant amount of accounts receivable. In many of our future discussions, we will continue to focus on whether or not you should seek to acquire business loan versus a business line of credit.

 

As  it pertains to the business plan that you'll need to develop in regards to your specific obtaining a business loan program to clearly indicate how you intend to collateralized the loan that you're seeking while showcasing how you intend to repay this debt obligation in the timeframe that is specified by the lender. It is imperative that you have a well developed business plan in order to have the bank or financial institution in order to render an appropriate decision in regards to your credit application request. If you are uncertain as to this issue as it relates to your business plan then strongly recommend that you review our series of articles as it pertains to business planning and many of the tools are available on the site for specific businesses as it relates to business loans. Again, every financial institution that you apply to in regards to obtaining a business loan for acquire a full business plan that features an executive summary, the usage of funds summary, an overview of the product and services that you're selling, and overview of your organization, the market research for the specific market that you'll be operating within, a marketing plan, a personnel summary, and a full three to five year financial plan that showcases the profit and loss, cash flow analysis, and balance sheet of your business.

 

Other issues that you will face as you progress through you were activities, as it pertains to obtaining business loans, is that you need to have the appropriate credit score in order to receive the financing that you need. Over the past 10 years, the credit score for your personal life as well as your business life became less important as banks focused more on obtaining and generating leads and selling loans to the secondary markets rather than making wise investments into economically viable businesses. However, with the current collapse of the credit market, it is imperative that you have a credit score that exceeds 650 to 700 in order to receive the financing that you need. Of course, as we discuss the actual scoring of credit going to work on the FICO scale as it relates to your credit worthiness in the eyes of banks and financial institutions as it relates to acquiring business loans for developing and expanding your business. If, at this moment, your credit is less than stellar then we strongly recommend that you work with a licensed credit advisory firm that can actively assist you in improving your credit report so that you're more qualified for receiving the business loan they were planning for as relates to your business activities. This is one of the fundamental tenants to receiving a business loan in today's economy.

 

Of the things over discuss as it pertains to this general article in regards to obtaining business loans is working with a company that can effectively place the financing your financing with a lender that places capital. These firms are often referred to as loan brokerages. In many of our future discussions, we will continue focus on how you can work with the individual brokerage firms to not only develop the business plan for the loan package that is required in order for you to obtain the capital that you need, but also provide you with the advice that is required in regards to obtaining the appropriate credit facility. However, it should be noted that these firms often charge substantial fees as it relates to obtaining business credit facilities. It is not uncommon that a business loan brokerage will require that you provide them with any initial retainer of $1000-$2000 currently charging you anywhere from 2% to 6% of the face value of the loan if they're able to properly secure the business loan that you are seeking. However, if you are unfamiliar with the commercial lending process than working with a business loan brokerage will be in your best interest as they are often able to provide you with an extensive amount of advice as it relates to properly acquiring beat that capital facility.

 

Additionally, many of these individual brokerages often have hundreds of lenders that they work with and can provide you with the best rates possible as it pertains to your business loan needs. As we have discussed before, anytime you decide to engage any type of financial firm has it relates to your business loan needs then it is imperative that you make sure they are properly licensed within the state you're working within as it relates to securing commercial capital on your behalf. In many cases, this can be done very easily by simply typing in the name of the firm to your state licensing bureau as it relates to the regulations and monitoring of activities by individuals own brokerages.

 

The primary benefits, again, of working with these types of business loan brokerage firms is that you'll have access knowledge one lender to several hundred lenders that may entertain your business proposal as relates to your business loan needs. Much like a mortgage brokerage, a business loan brokerage operates on a commission basis so that they are able to shop around your business proposal to the lender said they work with on an ongoing basis. Again, if you decide to work with a business loan brokerage that it is also imperative that you continue to obtain the appropriate counsel that will guide you through the process of commercial lending. This includes a full review of the financial statements of your business, whether on an actual were a pro forma basis, as well as the complex loan documents that will be required by banks make the decision to lend that capital to your firm. The contracts are often involved with obtaining business loans are extremely complex and should be read by a qualified attorney prior to signing any obligation to a financial institution. Of course, we all know that in recent years many people have been duped into receiving capital for their real estate acquisitions, business acquisitions, or business activities that are not suitable for them that were completed with the intent to generate fees not only for the individual loan brokerage but also for the bank as well. As such, when you are shopping for business loan and you should treat your business activities as it relates to capital raising as if you were a consumer shopping for any other type of financing such as a mortgage, business loan, car financing, or credit card. In doing so, you'll be able to receive the best rate possible for your business activities as time progresses. This is especially true as you do not want to engage any type of financial transaction that ultimately work against your business when seeking to acquire  typical 5 to 7 year time frame for which business loans are granted. Again, you are still uncertain as to the facts and facets that are involved as it relates to obtaining business loans then strongly recommend that you consult with your certified public accounting as to which method of financing is most appropriate to you and how obtaining a business loan for your company can not only impact your business's operations but also your personal assets as well.

 

In one of our future discussions, we will touch upon several subjects as it relates to obtaining business loans. These continued articles will focus on conventional business loans, business lines of credit, small business administration backed loans, and other types of financing that may be in your best interest as you progress through your capital raising up of activities for your new or developing business. One of the strongest pieces of advice that we can leave you with, as it pertains to obtaining business loans, is that you should never rush into obtaining the capital right you need in order to launch or expand your business operations. It is far better to take the time to review individual term sheets from lenders as it relates to business loans. Many entrepreneurs often make the mistake of accepting an offer that comes across a table as it relates to business credit financing. However, again, you should always focus on the repayment terms, the interest rate, and the bank loan covenants that will come with your business loan. Though it is very tempting to accept any offer that comes to you from a financial institution it is very important that you make sure that these offers are in your best financial interests as well as the interests of the bank.

 

In short - obtaining business loans is extremely difficult process that is not insurmountable. You will need to have a well developed business plan, again, that showcases the profit and loss, cash flow analysis, and balance sheet of your business while concurrently providing the anticipated terms that you expect from financial situation as it relates to your business loan. Additionally, as we have discussed at this article, you can work with a number of different types of firms that actively assist you to admit acquiring the business loan that you need my shopping to hundreds if not thousands of lenders for which they have relationships. All of the topics that we touched upon within this general article as it pertains to business loans to further expanded through our continued series of articles relating to his list those financing and other credit facilities that are primarily geared for businesses.

 

We again recommend that you continue reviews these articles so that it can effectively guide you through the process of obtaining a business loan. TheFinanceResource.com is committed to providing you with the information on a regular basis as a relates to business loans, venture capital, angel investment funding, and other sources of funding that will assist you in obtaining the capital you need to develop or expand your business.

We also recommend that you purchase our business loan guide, which features an extensive amount of information as it pertains to obtain business loans, developing appropriate business plan for a financial institution, and providing you with resources that you can use as you continue to progress through your capital raising activities.



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