Business Line Of Credit




Posted on August 24, 2011 by biz

A business line of credit gives a business owner available cash anytime they run short of funds. It can be used to purchase inventory, supplies, pay bills, meet payroll and as a general emergency fund.

A business line of credit is not a loan. It’s more of a “loan in waiting” as you only use it when you need it. The aspect that makes it better than a loan in the eyes of many business owners is that you do not have to pay interest on the money until you actually start dipping into the credit line. Plus, you only pay interest on the portion you actually use. It’s sort of like a financial safety blanket that keeps you from having to use higher interest vehicles such as business credit cards to meet your financial obligations.

The first place most businesses go to get a business line of credit is at the bank or credit union they use for their company checking, savings and investments. Simply ask to see a manager at the bank. Timing is important though. You may want to ask about it when your bank account has some measurable assets along with consistent deposits. This proves your company is making money and is financially sound. If you are a new company with little assets, be prepared to show your business plan to the bank before getting a business line of credit approved.

If you prefer not to use your existing banking institution, you can apply online for a business line of credit. Many big banks offer credit lines from $25,000 to $100,000 right at their website. Rates are usually variable for this type of credit and are based on the current prime lending rate.

There are basically two types of credit lines, unsecured and secured. An unsecured line of credit means you don’t have to back it with collateral such as business assets. A secured line of credit usually requires some type of blanket lien on your business assets, investments or real estate. Obviously an unsecured line is preferable, but you need a solid credit score, business history and some assets in order to qualify for an unsecured line of credit.

When applying for a credit line, many banks will want to see that you’ve been in business for at least two years and they’ll want to look at your past two years business and personal tax returns. There are exceptions of course, but for the most part, lenders with less restrictions and requirements will have higher interest rates.

Once you start dipping into your credit line you’ll start paying interest on the part you’ve used. Many banks will automatically deduct your payments from your business account so be sure to ask if that’s their policy. If so, you’ll want to make sure you subtract payment amounts from your account so you don’t end up having to borrow even more when your account runs low. It can be a cycle that’s hard to break if your sales slow and you have lots of financial obligations to meet.

A business line of credit is worth applying for if money is tight and you don’t want to tap into your personal assets in an emergency. Just make sure you shop around for the best rates, rather than taking the first offer you see, especially online.

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SBA Express Loans



Posted on February 8, 2012 by biz

SBA Express loans and affiliated programs are government programs to streamline and expedite loans for certain privileged groups of borrowers. These are usually veterans, active duty military personnel, and borrowers from communities that have been through a declared crisis or disaster, or been declared distressed for some other reason.

The federal government of the United States has set up the Small Business Administration to support to businesses and businesspeople when their enterprises are smaller and more vulnerable. The mission of the SBA is to bolster America’s economy by supporting strong small businesses and help quick economic recovery in disaster-struck communities. The Small Business Administration is there to give the “3 Cs” of capital, counseling, and contacts to small businesses all throughout America.

The Small Business Administration hosts the SBAExpress program, which is a program designed to help get a small business started and keep it going. The SBAExpress program provides accelerated turnarounds for SBA loan reviews. In nearly all cases the response to the loan application will return within 36 hours.  SBAExpress loans also feature the lowest business loan rates available, usually 2.25 percent to 4.75 percent over prime varying with  the size and maturity of the loan.

The SBA Patriot Express Pilot Loan Initiative is there for survivors of disasters, military veterans and their spouses, and other members of the military community who need to establish a small business or help one to expand. The SBA, with its vast array of resource partners from the military and business community, are ready to assist their clients with economic training and counseling.

It is essential to the success of the program that it be accessible and easy to use. Clients have access to the best small business planning tools available. Veterans, especially service-disabled veterans, are eligible for this program, and active-duty service members are eligible for the military’s Transition Assistance Program. Reservists are eligible, as are National Guard members, or the spouses of any of the above. A widowed spouse is also eligible if the spouse in question died in service or in a service-related incident.

The loans from the Patriot Express program are legally allowed to be used for most small business needs, including the costs of starting up and moving in. Equipment purchases and real estate purchases for the place of business are allowed, as is stocking the inventory and keeping a supply of working capital. Management expenses and the costs of expansion are all reasonable uses. These expedited loans are ideal to prepare a business for the possibility of the owners being deployed. They are also available to help a business recover from a declared disasters.

Contact your local SBA today to learn more about SBAExpress Loans.

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Banks Getting Back Into Lending To Business



Posted on January 21, 2012 by biz

Business credit has been hard to come by for the last few years. As most people realize, the near collapse of the entire financial system at the end of 2008 changed a lot of things. Among them were the banks willingness and even their ability to loan money.

In 2008 and 2009 many banks actually failed and were taken over by regulators. While people in nearly all cases were not left without protection, thanks to the FDIC backing, it did put a severe damper on the availability of money.

Not only did loans for mortgages and other personal uses dry up, but money for businesses went away as well. The months and years that followed saw a sharp decrease in small business loans. Even getting a business line of credit or having small business credit cards issued from banks has been challenging.

After the bailout it looked like the lending environment may be changing, but the fact is, banks have been slow to start lending again. Things did start to rebound however during 2010 and even more so in 2011. This trend looks to be continuing in 2012, as the financial crisis is slowly becoming a distant memory.

However, one aspect that has kept progress at bay has been the financial crisis in Europe. As long as there is uncertainty on the horizon, and Europe is a source of financial uncertainty for many banks, including Citibank as well as Bank of America, then lending improvements will be slow.

If you own a business or are interested in starting one, but you do not have the capital, the best place for you to start may not be a bank at all. If your business idea is one that you feel can get backing, you may want to take on partners or investors instead of borrowing money from a bank. Another non-traditional funding source more and more people have been using is called KickStarter.com. People with project ideas can post projects there for the purpose of getting financially bootstrapped by others who like the idea. Millions of dollars in backing have been secured at that site and it is growing in popularity.

If all else fails, there are always SBA loans available, which are basically loans from banks that work with the Small Business Administration. In order to qualify for a loan though, you will need lots of documentation as well as a decent credit rating.

All in all, business lending is certainly on the uptick in 2012 and should keep improving. One thing is certain, banks are much more willing to take a chance on loaning business capital than they were say, 3-4 years ago. Remember, many great businesses were born out of the great depression and other major recessions, so don’t let the current economic environment keep you from going after your dreams of owning your own business.

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Business Debt Consolidation



Posted on January 17, 2012 by biz

Debt is epidemic in 21st century America, both personal debt and business debt. Debt is at such an epic proportion these days, probably due to the fact that capital was so easy to get in the early part of the century, but so difficult to pay back after the stock market crash of 2008.

While consumer debt gets most of the attention, many business owners find themselves in serious debt difficulties as well. For businesses who got in over their heads with a large loan or by dipping too deep into their business line of credit, a consolidation loan may help the buy some time. A business debt consolidation loan can help a business out from under high interest debt and help manage the amount that is paid back to lenders.

Of course, these loans are not for every business, but where they are a good fit, they can rescue a business owner currently drowning in debt and possibly even save the business.

Business consolidation loans are intended to replace multiple loans and other financial liabilities of the business, and consolidate them into one new loan with one payment, hopefully at a lower overall interest rate or APR. This new consolidation loan will pay off the other debts and give the business owner relief from collection calls and the stress of excess debt.

Individuals with poor credit may face a higher interest rate on their business consolidation loan. However, consolidating the debt into one loan can still be good way to combine loans and shift it all into one lower overall monthly payment. This could ease the financial burden enough to take stress off management and give them more time to open new revenue streams.

To apply for a business consolidation loan, a business owner must have a reliable monthly income from the business. Many loans also require collateral (for a secured loan) and if not enough is available a co-signer may be required. The bank, credit union or other financial institution providing the funding may also want to see your business plan, tax records or other proof of income to verify that the business can make the payments on the new loan, and make them on time.

Debt consolidation loans for business may be secured or unsecured.

Secured loans require collateral, and are more suited for property owners or homeowners. These loans can be quite effective for paying off large amounts of debt, because they have low interest rates (APR) and payback terms, and other loan clauses are negotiable.

Unsecured debt consolidation loans are suitable for those who do not have collateral. Unfortunately, since they don’t require collateral, they usually have higher APR, plus stricter loan terms and payback terms, which are usually non-negotiable. Unsecured consolidation loans are more suitable for small amounts of debt because of the high interest rate and loan restrictions.

Of course if the debt burden is small enough, say less than $25,000 you may want to consider consolidating the debt onto a low interest no personal guarantee business credit card. While this is not an option for most corporations, it is a viable solution for many sole proprietors, independent contractors, and small home business operators with low overhead.

Sometimes the best way to lower your monthly payments in your business is to take out a consolidation loan for business debt. If you’re able to lower your payments enough by refinancing debt at a lower interest rate, then consolidating loans can be a viable option for getting the business operating in the black again.

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Beware Commercial Loan Covenants



Posted on January 8, 2012 by biz

Most business loans contain something called “covenants” which can become a major headache for a small business, and is something every business owners needs to be aware of. When you take out a loan or business line of credit from a bank or other financial institution, loan covenants are put in place by the lender. These covenants are in place to protect lenders but can cause adverse conditions for business owners, such as recall of a loan.

The problem comes when you violate a commercial loan covenant without even knowing it and find that you’re in default of the loan and facing penalties or other negative consequences. In some cases the bank will even have the right to recall the loan and demand payment in full when you violate a loan covenant. Most small businesses can’t afford to repay a credit line in full and end up in the uncomfortable situation of having to borrow at a higher interest rate to satisfy the loan recall.

Lenders use covenants to manage risk. But to borrower’s, especially small businesses with limited financial resources, they can be troublesome.

For example, let’s say you own a small flower shop and you open a $100,000 business line of credit with a local bank. When applying for the loan all you’re really concerned about is getting access to the money your business needs to get up and running, and getting it at a low interest rate. After you’re approved, you’re so excited that you don’t pay as close attention as you should to the fine print and the covenants of the loan. But you trust the bank due to a working relationship you’ve had with the for year, and you accept the terms of the loan and get access to the funds.

A year goes by and you’ve accessed more than half of your credit line but you need more money for a small greenhouse section you’re adding to your shop. So you tap into the rest of your credit line and zero it out to complete the project. Unfortunately, one of the covenants on your loan stipulated that if you zero out the credit line the bank has the right to recall the loan in its entirety. The bank contacts you and to your surprise, they want payment in full. Obviously you don’t have $100,000 laying around to pay them back so you’re in a tricky financial situation that was easily avoidable.

In this situation you’d be forced to refinance the balance you owe at a much higher rate or find a new lender. Had you paid more attention to the loan covenants you could have avoided this situation simply by leaving a small amount of available credit in your business line.

The are other situations where covenants can come into play as well, such as the requirement of liability insurance and more. The bottom line is that every business owner must take the time to know the details of the agreement when they borrow money, or hire a lawyer or financial advisor to spell out all the terms of the loan before they sign on the dotted line.

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Your Business Plan Helps You Get Business Credit



Posted on January 1, 2012 by biz

Whether you are an established business or just starting up, you’ll need capital. If that capital will come in the form of financing from a bank, you don’t want to think about approaching a bank to ask for a business loan, without a comprehensive business plan.

From the bank’s point of view, a business plan holds the answers to key questions they must know before deciding to grant your loan request. Answers to questions like:

  • How does the business and the management operate
  • Why, how and when is the company expected to make money
  • How much money does the business need and when will it be able to pay the bank back
  • How much personal financial risk have you invested in the business
  • What is your experience and are you capable of running this business

Putting together a solid business plan may seem like an overwhelming task; but, most of the information needed can be found in key business documents.  The business plan puts all that information together and develops a guide to how the business is set up and how it operates.  Also, it tells what the future goals of the business are.

When you think of a business plan, most people think of financial statements.  While financial statements are a crucial part of the business plan, it must also include the following:

  • Executive summary – a brief summary of the business identifying key elements
  • Industry Overview – explanation of the business’s industry and trends
  • Market Analysis – Identify the business’s target market, the business’s competition, what is their advantage. Give a detailed explanation of your competitive sales strategy, pricing strategy, and advertising strategies.
  • Operating Plan – An outline of the business’s operating systems and management, including human resources, facilities, equipment, inventories and suppliers. Basically, an explanation of how the business works.

Again, an important section of the business plan will be the financial section. A current balance sheet, income statement and a cash flow projection, as well as, projected statements for 6 months, 3 and 5 years should be included. These projections should show the effect of the funds received from the bank, how the money will be spent and how it will be repaid.

Remember, your business plan and your loan application will ikely be be the bank’s first impression of the business. That’s exactly why your business plan needs to be professional and give a realistic view of the business venture. Professional does not have to be costly; but, do have your financial statements reviewed for human error before submitting your proposal to the bank. Also be prepared to present your personal financial information to the bank to support your business loan request, as well as the personal information of anyone else who will hold more than 20 percent interest in the business.

Having a solid business plan in place before applying for a business loan, will increase the likelihood of your application being accepted, and your loan being approved.

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Be Careful When Financing A Business With Business Credit Cards



Posted on December 21, 2011 by biz

Small business credit cards are an easy way to finance new or existing business. In this opinion post I’ll talk about the strategy I used and some of the mistakes I made.

I financed my small business which is mostly an online business using small business credit cards. I did not want to go to a bank or credit union to get start up money for my business simply because I had enough credit available to me via business credit cards.

Online businesses do not require much start up capital since things like web hosting is inexpensive and I could develop my own blogs using WordPress, which is free. All I needed was a few thousand dollars for everything I needed to start my business, including a small place to work, all business expenses including insurance, utilities, and web services.

Small business credit cards provided more than enough capital and it was easy to obtain. The first card I applied for and obtained was a US Bank Business Visa. There was an annual fee of $75 but I justified it with the points I’d earn. These points could be used for travel and other rewards such as gift cards to major hotel chains. All in all I found the card manageable for the first few years as I was able to pay off the balance in full and avoid the 9% interest on balances.

Over time however, I found myself using the card more than I wanted to. I would justify the expense with the points I’d get. Once you start paying interest of $5,000 or more the points never make up for the interest you pay monthly. 

When it comes to business credit cards, get as low a rate as possible and stay away from rewards credit cards unless you’re 100% sure you can pay off the balance in full each month. Business credit cards with no personal guarantee can be an attractive means for funding a business but they can still get you into a financial bind.

Another mistake I made when I was starting my business was transferring balances from a higher rate credit card to my new small business credit card. This actually cost me money in the long run. Here’s how:

When you transfer a balance not only is there a fee to do it, that balance that you now have at 0% or 1.9% or whatever the promotional rate offer was, now becomes the balance that all future payments apply to first. 

So, let’s say you have a business credit card with an APR of 9%, that has a $5,000 balance. And you have another card that you owe $3,000 on that has a 15% annual interest rate. You transfer the $3,000 balance to your business card during a “0% for a year” promotion to save interest.

What the banks don’t go out of their way to explain (read small print) is that now every payment you make to your business credit card gets applied to that potion of your balance that is at the 0% rate. And now that your balance is $8,000 you can’t afford to pay the entire balance off each month.

That $5,000 you owe them keeps racking up interest at the regular 9% APR. So in essence you’re now paying down a 0% balance month after month while the bulk of your balance is not being paid down at all. Do the math and you’ll find that in the end you did not save much if any money, especially after you pay the “processing fee” for transferring the balance.

The best way to save money when doing a balance transfer is to transfer a balance from a high interest card to a credit card that has no balance on it. That way all you pay is the fee for transferring the balance.

Financing a business with small business credit cards is easy and can provide enough capital for many types of business. Just make sure you shop for a good low interest cards, weigh the points/rewards options carefully and most of all, be careful when doing balance transfers!

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Business Credit Outlook For 2012 And Beyond



Posted on December 12, 2011 by biz

The business credit environment looks to feature low interest rates and high competition in 2012 and the coming years. Many lenders are on the market, and they have a lot of reasons to make their products competitive. Interest rates across the board are at their lowest in years. This trend will continue, and business owners can benefit from these conditions.

What this means to many businesses is that they can get the working capital they need for start-ups and expansion. Machinery and new equipment can be purchased with loans, payroll can be met and businesses can grow. The coming years looks to provide a number of these benefits to businesses. One of the best positives in the loan industry for businesses, is that interest rates will stay at record lows, at least for the forseeable future.

Interest rates are a primary concern for business loans and credit lines. These rates are currently at record lows. While most experts agree that this trend looks to continue in the coming year, many analysts also predict that rates will even go a little lower. This is great news for business owners who are in the market for a loan.

The federal government has consistently lowered the Federal Reserve prime rate throughout recent history, making money cheaper and more readily available. This affects all segments of the market. The amount of money that is needed to purchase loans is directly correlated to this prime lending rate. When lenders pay less, businesses can also get lower interest rates. Most experts predict that the coming year will see interest rates dip another half percent or so.

Competition for lenders to attract borrowers is also still very high. However, in the current environment, it can still be difficult for new businesses to get the loans they need. Bankers and other lenders are hesitant to loan money after some of the recent scandals and financial setbacks for 2008. This issue will get a little better, but it may still be hard for a new business to get the financing it needs until banks loosen up a bit more with their lending practices.

Established companies, with a firm line of credit, should be able to attract a variety of lenders. Credit records are an essential component that lenders consider. For this reason, most borrowers should make sure their credit reports are accurate. 

Overall, the coming year and beyond, promise good things for the business loan environment in general. The economy is slowly rebounding from the recent financial crisis, and this is great news for many sectors. Businesses and lenders should expect the availability and demand for loans to slowly increase.

The business loan environment should continue with record low interest rates in the coming year and well beyond. A variety of issues make this situation favorable for borrowers. Economic growth is slowly rebounding, but not at a pace that is fast enough to raise interest rates dramatically. Many first time businesses will still have trouble attaining the required financing, but with SBA loans and other government backed incentives, new as well as existing businesses can thrive in this economy during 2012 and beyond.

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Applying For A Business Loan Online



Posted on December 1, 2011 by biz

Trying to start or expand a business, and need a loan? You may qualify for a bank loan or business line of credit, it varies depending on the bank, and the type of business you’re running.

The first step to getting the best bank loan you can get would be to build a credit history if you have not yet. Building a credit history gives banks an idea of your level of responsibility. Your business credit is very similar to your personal credit, but having both is very important. Keeping things separate can help protect and build the value of your business, and your personal assets will be safer as well.

Although it is important to have a business credit history, your personal credit history plays the most important role for receiving a bank loan, especially if the business does not have a long operating history. Most banks will assume that you will be operating your business the same way you manage your personal finances.

Working with banks on small business loans can be easy or difficult depending on how prepared you are for the loan. You must have a business plan and keep it updated, as banks tend to lend more to businesses that have everything planned properly. Most banks strongly suggest that you prepare a plan with as much detail as possible, which may even include information about you and any partners involved in the company, repayment plans, your marketing strategies and your projected revenue forecasts.

If you already have a business it would be best to start with a bank that you may already do business with. The bank you already do business with already knows your financial behavior, and they are most likely to give you the most money at a fair interest rate, especially for those who have shown a history of solid financial responsibility.

While lots of people really do not like banks, you need to consider their side of the story. Banks risk a lot when dealing with loans, the biggest risk they take is with the repayment uncertainty they face. If you can portray a lower risk of the uncertainty about you, then you will be in a better position for the loan that you seek, and better business loan rates as well.

The approval of small business loans depend on many factors including the person, credit history, the bank itself, the type of business, and the business plan. There’s no one perfect bank or loan for every person, you have to look many factors before you can find the right bank to fit your needs.

Many big banks offer online loan applications including but not limited to Citibank, Wells Fargo, Centennial, Citizens, Bank of America, Chase and more. There are also other options if a bank loan seems impossible, such as credit unions. Credit unions are usually smaller, and you may be able to talk with higher-level decision maker to express your plans. Bigger banks have more rules and processes linked to loans. There may be someone there that believes in you, but they may not be able to provide you with help.

When applying for a business related bank loan or line of credit, take all these facts into account and you’ll increase your chances of being approved for the capital you need to start or grow your business.

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Do Banks Loan Money To Start A Franchise Business Such As Subway Or Dunkin Donuts?



Posted on November 7, 2011 by biz

Even with the economy not doing so well, certain franchises are still extremely successful. Places such as Dunkin Donuts and Subway still generate enough business to bring profits to the franchise owner. The reason these franchises are so successful are many.

For starters, the product pricing is competitive, the franchise owners benefit from corporate advertising and promotions, and let’s face it – everyone loves quick coffee and sandwiches. For those reasons and many more, many people believe that buying a franchise will provide them with steadily growing incomes. The next logical step is wondering how to get the funding to purchase one of these establishments.

There are many ways that an individual can raise business capital to purchase a franchise. One way of obtaining business funding is from friends and family members. Supporters who believe in the person’s potential will be more than willing to make the investment.

Another way one can gain funding to purchase a franchise is through government assistance. Several grants are available for serious individuals who want to start their own franchise. Single mothers and minorities have more opportunities available.

Another way to raise money to start a franchise is to sell assets. Selling things like automobiles, jewelry, and electronics will help the person to gather the funds needed to get started in the business world. One can make quite a bit of money by auctioning off expensive items.

Banks also loan money for starting a franchise business. The trick to getting a bank to finance a franchise is to show them the money you’ll make with your venture. This involves coming up with an accurate business plan. The business plan will have to show potential growth for the franchise. It will also need to show how the customer will be able to use income from the franchise to pay the loan back. The business plan must cover all aspects of the franchise’s moneymaking ability.

Banks are also very nervous about lending money to a person who has an adverse credit history. The individual should have a good credit history at the very least. A good credit history shows the bank that their investment in the franchise will not go unpaid. Excellent credit history shows them that they can trust the individual with their money.

With the right plan and credentials, it can be very easy for a person to convince a bank to finance a business venture. While different franchise opportunities all have different requirements for net worth and available capital, it is possible for creative entrepreneurs to raise the capital needed. All it takes is careful planning, organization, and total honesty on the part of the applicant.

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Banks Back Into Small Business Lending



Posted on October 29, 2011 by biz

In 2010, President Obama signed into law the Small Business Jobs Act, which approved $9.1 billion in small business loans. Small businesses allow for more jobs to be created in an unsteady and wavering job market. Thanks to these loans, small business created roughly 180,000 new jobs per month in 2011, compared to 68,000 in 2010. So, which banks give out the most money to small business owners?

Wells Fargo is at the top of the list, with $15 billion in small business loans being given out in 2010. During the first quarter of 2011, the bank had already lent $3.7 billion more than in the first quarter of 2010. Wells Fargo currently has a second look process for all loans and trains their employees across the US to advocate for the small business owner.

Next is JP Morgan Chase, who committed to $12 billion in small business loans in 2011, up $2 billion from 2010. In the first quarter of this year, the company has already approved 100,000 loans. In order to help process the increased number of loan requests and ensure that each request gets a fair review, the company hired 250 additional small business bankers this year. They, like Wells Fargo, also have a second look policy, so each request that gets turned down will have a second person at the bank to look at it.

The third big name in small business lending is Citibank. In 2010, they pledged $6 billion toward small business loans, up from their 2009 figure of $4.5 billion. Their 2011 numbers are not available, but first quarter lending has increased from last year. The bank has also streamlined their application process, re-evaluated it’s approval criteria, and instituted a second look policy. Small business entrepreneurs are also given counseling from the company’s small business solution center to help them improve their business plans.

The dollar amounts from each bank are the amounts approved by the Small Business Administration (SBA), who plays an active role in lending money to small businesses. The SBA provides guidelines for loans, and the loans are then made by partners of the SBA, such as banks. The SBA guarantees that all loans will be repaid, which takes away some of the risks to lending partners.

For anyone thinking of starting a small business, now is the time to seek out a loan, especially from one of these banks invested in helping out the small business owner. Many bank allow you to apply right on line, directly at their websites. If you’re looking to start a small business or fund an existing company, things are finally looking up.

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