An Alternate Way To Financially “Kick Start” A New Business




Posted on October 16, 2011 by biz

Have a great business idea but cringe of the thought of sidling up to a bank manager and asking for start up capital? There’s another funding option available thanks to the web, and it has nothing to do with a business loan or business line of credit.

It’s called Kickstarter.com.

Kickstarter.com is a website that is designed to help fund the development of new and creative projects. These projects are funded through an online pledging system on Kickstarter.com which actively funds many projects such as film, writing, food related projects, and more. Anyone who wants to try to post a project that they feel the public will buy into and sponsor, is able to do so. The website is easy to follow and gives plenty of guidelines and directions on how to get your project funded.

To try to get a project funded, one must first apply online at Kickstarter.com to have their specific project put on the website. Kickstarter acts as the facilitator and gathering place to be a monetary resource reaching out to the public for donations to fund these projects.

Once you get to the website, you should first read all the rules and guidelines that Kickstarter has posted to see if you meet the requirements to have your project accepted. The person who posts and owns the project decides how much funding they need to raise to bring the project to completion, and they choose a deadline for the monies to be raised. If the monies are not there by the target date chosen, there is no money exchanged or collected. The donors who choose to pledge money to the project have Amazon collect the payments and to begin a project, one must hold an open and active United States banking account.

Kickstarter and Amazon both get a small percentage of the money raised, but neither claim any portion of ownership with the project or what may be produced from the project. Once a project is initiated on the website, it will be able to be seen by the public and an archive is started for it. Once the project has reached the completion stage, the information on the site cannot be removed.

Of course, there is no assurance that a project creator will receive the money needed to support or start a project, this is strictly a public choice. There are also warnings posted that advise people who want to sponsor that they are on their own and warn people that lead projects that they will be held liable if they don’t deliver what they promise. 

All in all, Kickstarter.com is a great choice for creative types who prefer not to use banks and traditional lending institutions to fund their projects.

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Peer To Peer Lending For Business Financing



Posted on October 5, 2011 by biz

There are many ways to raise capital for staring businesses. A couple of the best ways include taking a bank loan or business line of credit. Other ways to finance a start-up consist of using savings or small business credit cards.

Then there’s something called peer to peer lending.

Peer to peer lending is a form of lending between individuals under a signed agreement. This strategy for raising money for business has mushroomed as a result of hard economic times which have seen banks shy away from lending money to startups and or unfamiliar individuals. However, this form of lending is best suited for people starting small businesses because the money raised is usually too little for starting large operations.

Peer to Peer lenders offer their services to individuals who are starting their own businesses, but the money is advanced to them as personal loans. This then reflects on that individuals credit report. It is a form of financing that is often used by micro-businesses and small business start ups. Even when the loans are used for business purposes, they are still considered as personal debts by the borrower from the peers.

There are quite a number of peer to peer lending websites online which start up entrepreneurs can use to get money. The amount borrowed will however depend on your business model and the amount of money available for borrowing.

The way the peer to peer lending works is when an individual visits a peer to peer lending website, they create an account and after reading the guidelines of the website which vary from one to another, the amount of money needed is entered at the site, and the highest rate of interest they’re willing to pay. The best peer to peer lending sites operate similar to online auction sites. The loan is auctioned for seven working days and during this time the interest rate might go down significantly. The applicants have a right to stop the auction at any particular time they may wish to do so.

An individual seeking peer to peer money to start their new business will need to have a good personal credit score — usually 640 or above to qualify for the loans.

Peer to peer lending usually has no prepayment fees and the interest rates are fixed with a one-time closing fee included in the agreement. Since the peer to peer loan is unsecured, there is no collateral needed by the financiers at all to give the money. The applicant upon agreeing to commit to the loan, will need to provide directions to his or her bank, as monthly payments are deducted automatically. Peer to peer lending is usually a short term loan, with  the maximum term of the loan being three years or less. 

If you’re in need of some capital to start a business venture and you don’t want to go the traditional route such as banks, credit unions and such, then peer to peer lending may be a good option for you. Just be sure you read all the fine print at the website where you obtain your loan.

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Bad Credit Business Loans



Posted on October 2, 2011 by biz

People with credit reports in good standing are typically able to obtain small business loans or a business line of credit, and to do so with low accompanying interest rates. Banks, credit unions and other lending institutions generally look at individuals with high credit scores as being responsible citizens who are likely to repay debt and to be responsible with the money of others as well. Credit reporting agencies such as Experian consider scores over 700 to be those in good standing.

Before you apply for a small business loan or business line of credit, it is important to know what your credit score is. If you are unsure about your credit score number, you can obtain it from Experian, Equifax, or Transunion. You can request a free credit report from the three credit reporting agencies every 12 months. A score of less than 620 is usually considered to be a bad, or sub prime, credit score. If your score is at 620 or below, you may want to check your credit report for instances of identity theft and for errors. If problems or errors exist, report them and work to have them resolved.

If there are no errors found, then it is a good idea to diligently pursue improving your score, before you apply for business financing. The first step to take on the road to repairing your credit is getting current and staying current with your existing debts and financial obligations. Scores do change as new information is added to your file.

If you need a loan fast and don’t have time to improve your score, you may still have options. Lenders may consider your existing employment and income and still be willing to extend a loan to you. Be prepared, however, to potentially pay high interest rates if your credit score is less than optimal. Keep in mind that high interest rates mean higher payments, so shop around for the best rates and deals.

You may also want to consider asking someone to be a co-signer on your loan. Be sure to ask someone who has a high credit score, to increase your likelihood of obtaining the loan. Again, a good score is generally thought of as 700-720 or above, but the higher the score, the better your chances of procuring a small business loan or business line of credit.

If a bank and/or co signer are unwilling to take a financial risk on you, you may want to consider financing your business with small business credit cards. Many banks offer business credit cards to sole proprietors, new LLC’s and corporations with high enough limits that they can be used to finance a new start up. If your credit score is not perfect you may still be able to qualify for a business credit card, you may just have to pay a higher rate. But remember, you can always pay off the balance in full each month and avoid finance charges.

If you can’t qualify for a small business credit card, look into obtaining a prepaid credit card. These types of card are generally only available for small balances, so if need an amount up to $1,000 they may suit your needs. While that does not sound like much it can be plenty to start a business online, as expenses such as web hosting and web design can be outsourced to other countries for very low fees.

The bottom line is that there are many business start-up loan options available to you, even if your credit score has substantial room for improvement. So don’t give up on your dreams of entrepreneurship just because of a less than perfect credit report.

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Small Business Borrowers: Beware of Predatory Lenders



Posted on September 30, 2011 by biz

Before you apply for a business loan or business line of credit with any lender, you need to be aware of predatory lending practices that prey on unsuspecting victims.

The FDIC describes predatory lending as unfair and abusive loan terms on borrowers. There are laws in the U.S. against many of the practices commonly used by predatory lenders, but it doesn’t stop many of them.

While no legal definitions are known to exist for “Predatory Lending” it runs rampant in all over the world, and contrary to what many people believe, it is especially prevalent in the United States.

Predatory lending is quite simply deceptive, or fraudulent practices that many lenders incorporate into their marketing and loan origination process. Small business start-ups need to be particularly careful when borrowing money or taking out a credit line.

A few different forms of lending that are sometimes used by predatory lenders include payday loans, overdraft loans, and even small business credit cards with extremely high interest rates. That’s not to say that those lending methods are predatory by nature, but one has to be careful when borrowing money via those avenues as well as many others.

Predatory lenders in the small business loan arena usually target lower income people and people with bad credit who are looking to get a loan to start a business. They also tend to target people with some kind of collateral that they can lay claim to when payments are missed. A house, a condo, a car or other property can be repossessed or foreclosed on by a lender and they the lender can profit from reselling the property.

There are many ways to borrow money for a business venture and even non-predatory lending can become quite expensive if you’re not careful. You need to be very vigilant when reading loan documentation so that you know exactly what the interest rate is, what the interest rate will be in the future and what the penalties will be for late or missed payments. The devil is in the details as they say, and you could end up paying a very high price if you don’t pay close attention to those details.

You may want to have an attorney or financial advisor look over any loan application or other loan documents before signing. While it may cost you a few dollars for their services, it could save you thousands of dollars or even your car or your home if you fall victim to a predatory lender.

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Start Up Business Loans: How To Get Them



Posted on September 27, 2011 by biz

The richest people on the planet are not employed professionals. Rather, they have their own businesses and make a fortune by generating sales and income. However, starting a business, especially amidst economic uncertainty can be quite tricky, especially with limited capital.

For this reason, business-minded people should consider getting a start up business loan. This type of loan is similar to personal loans that help applicants get assistance with their finances. The only difference, however, is that start up business loans are used for starting a business rather than for personal expenses, and business loan rates tend to be a bit higher than non-commercial loans.

Even though it costs a bit more, it isn’t too difficult to obtain a loan for a business. However, before signing a new business loan contract, it is ideal to seek the assistance of a professional advisor to know more about the loan. A financial advisor will explain everything that a person needs to know about a start up business loan and how to get one. People will also learn about some of the repercussions of getting this type of loan and how it may affect business and personal finances.

Start up business loans are usually offered by banks and other lending institutions. Like most businesses, they do not want to lend money without getting it back with interest. In most cases, they won’t even lend to people who have bad credit. This is why taking care of your credit score is important for people who want to start a business. People with bad credit can apply for this loan, though the chances for approval may be quite low.

Showing a business financial plan is an excellent way to convince a bank to approve a loan. It is important to give complete details of the money that will go in and out of the business so that the bank will get a clear view of how the loan will be repaid. If the proposed financial plan of a business is not clear, then a start up business loan application may fail. That being said, showing an excellent proposed financial plan to the bank can help new businesses get their loan approved.

A start up business loan can be acquired by putting up personal property as collateral to obtain a secured loan. This gives banks more security in loaning money. Other assets can be used as collateral for a loan. The problem, however, is that secured loans may incur higher interest rates, which can pose a problem for new businesses.

When applying for a start up business loan, always make sure to look at the contract. Banks may impose high premiums or add extra payments that people may not be aware of. Therefore, check the details of the loan so that no extra charges are incurred.

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How To Get Business Financing



Posted on September 22, 2011 by biz

When you decide to start your own business, the first thing you need is start-up capital. Unless you are one of the lucky few that have plenty of cash to spare, you are going to have to find the money somewhere. The big question is where? There are actually several options you can explore.

The first place most individuals go to begin the search for financing is the Small Business Administration or SBA for short. In order to receive their assistance you must fill out an application and have a business plan prepared. Although, they are not direct lenders, they have numerous programs that can help you with funding. They can assist you in obtaining a loan through commercial sources, while they guarantee the repayment of the loan.

Also via the SBA, there are Surety Bonds available for contractors; which are three-way loans between the contractor and the project manager, with the SBA guaranteeing the loan.

Venture Capital or SBIC loan is another SBA option, where funds are raised through a public/private investment fund regulated by the SBA, and loaned to you at lower interest rates.

If your proposed business will be involved in research and development, the SBA may be able to help you with a federal grant from a related government agency. Small manufacturers may qualify for tax-exempt bonds which can be used for upgrading current facilities or expanding operations. This is a debt-security loan from state or local government sources that the SBA can direct you to.

When your small business has been the victim of a natural disaster, the SBA has resources for low interest loans for repair and replacement of real estate, machinery and other business interests. The SBA also offers training and counseling to teach you how to start and manage a business.

If none of the SBA options work for you, then other sources of financing need to be found. There are many different ways to acquire the funds that you need, and you will have to determine which will be most appropriate for your needs and type of business.

There are revenue loans for entrepreneurs. These are flexible payment loans in which the payment is based on incoming revenue, and the interest rates fall somewhere commercial bank loans and venture capital funding.

You can always apply for a commercial bank loan or business line of credit. These traditional avenues usually have slightly higher interest rates than SBA loans but can be easier to attain for some businesses.

Some large risk management and insurance companies also offer business loans, although these are usually corporate financing. You can also seek investors or partners to ease the financial burden of starting a business, but this will require splitting revenue as well.

If you own your own home, this could be a source for an equity loan. This can be a rather dangerous solution, if your business enterprise should fail you could end up with a lien on your primary residence, not a situation you want to find yourself or your family in.

No matter where you eventually obtain your loan, you will need a business plan completed as part of your loan application. It is recommended that you perform extensive research on each of the business financing options above before making any decisions.

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What is a Paydex Score and How Does it Affect Your Business Credit?



Posted on September 22, 2011 by biz

Your Paydex score is a measure of your business’s credit worthiness as measured by a company called Dun and Bradstreet (D&B for short). The term Paydex is a registered trademark used for Credit Information Services-Namely, Rating Payment Performance and owned by Dun & Bradstreet, Inc.

Paydex is sort of like a FICO credit score, but for businesses. It basically tells lenders how long you take to pay back your business creditors such as vendors and suppliers.

Here’s how Paydex scores work…

The maximum Paydex score is 100 and the lowest is zero. But you don’t need a score of 100 to get credit for your business, a score of 80 means you pay all your bills on time and that’s all lenders are looking for. In fact, many lenders will work with you if you have a score of at least 65-70.

So if a score of 80 means you pay everything on time, how do you get above 80? Simple — if you pay bills ahead of the due date, say on day 20 of a 30 day net payment schedule, and your Paydex score will go above above 80.

It should also be noted that Paydex scores are dollar weighted averages which means that larger balances will affect your score more. For instance, being tardy on a single $10,000 debt would offset paying four $2,500 bills on time.

If your business is fairly new you may not even have a Paydex score assigned to you by Dun and Bradstreet. That’s because it is usually only assigned after a handful of different companies have reported your payment history to D&B.

If you have a new business and you want to build your business credit, Paydex is a good way to do it. You would simply call the suppliers or vendors you plan to work with in your business and ask which ones report payments to D&B. (Hint: It’s usually the usually larger suppliers.) Then make sure all your payments to that vendor are either early or at least on time. It takes a while to see this reflected in your credit score but it will happen over time. (Remember that you want to pay off your larger balances early since Paydex is dollar weighted.)

Your Paydex score is something you can control simply by paying back vendors and suppliers who report to D&B, either early or on time. Along with your personal credit scored, a good Paydex score will help you when you go for a business line of credit, a business loan or even apply for business credit cards.

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How and Where to Apply for Unsecured Business Loans



Posted on September 19, 2011 by biz

Many of us have the vision and ideas to start a business, but how do we attain a substantial amount of funding until the business is generating revenue? If you want to get your business up and running, the solution may be to apply for an unsecured business loan for your small business.

A business loan is the solution towards supplying your business with funds to operate while it is continuing to grow. This type of loan is often used to cover start up costs when opening up a new business. These funds can be used in any way that is pertaining to the operations and functions of your new business.

When it comes to applying for unsecured business loans, it is pretty much like applying for any other type of loan. Of course, the difference lies in borrowers being required to put up some type of collateral to secure a loan. One great thing about unsecured business loans is you will not have to put up any form of collateral such as business real estate or even personal holdings such as stocks or bonds.

Of course you cannot expect to get as low an interest rate with an unsecured loan as you would get if you chose a secured loan. But for new and expanding businesses who are new to business with little or no track record, business loan rates are not the most important consideration, it’s the ability to get the loan.

For a loan officer to issue you an unsecured business loan, you will be required to present them with a business plan and a copy of your business credit history if you have one. If this is your first start up business, your personal credit report will be taken into consideration to receive a loan. Banks require a copy of your credit history and business plan because they want to be sure you will be able to repay them. Having a business credit score is very important to the survival of your business if you are going to be using business loans. To guarantee your business has a good credit history, you should make sure all your liabilities and payments are paid on time and in full.

The best way to go about establishing a good credit rating for your business is to start out by taking out some small loans with a few lenders. Another way to establish a good credit rating for your business is to use business credit cards and setup a line of credit with vendors. All you have to do is remain consistent with your payments, and you will have enough credit history to qualify for unsecured business loans.

It may take a while to get your business situated enough to qualify for unsecured business loans. But when you do, it will be worth the wait to have access to funds that will maintain company operations when needed. Access to these funds will guarantee your business will continue to succeed. If you opt for a business line of credit you’ll have another benefit — you will only be charged interest on the portions of the funds you used. That means you won’t have to worry about forcing yourself to use up your entire loan.

Unsecured business loans and lines of credit are great for business and most companies can benefit from these financing options, at least until they generate enough revenue to function on their own.

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Small Business Loans for Women



Posted on September 15, 2011 by biz

Small business startups have been popping up all over the market for years and many people have resorted to starting their own small business to take control of their own financial destiny. Women and minorities have some advantages when it comes to applying for small business loans, because there are several programs available that support and lend to only new startups, women and minorities.

Small Business Loans for Women

The best places to look for small business loans for women is to start with the SBA (Small Business Association), they provide lots of information women need to start up a new business, get ideas and get started financing a business.

The SBA has have three major loan programs for small businesses, such as the 7(a) loan program that is given to businesses that that have special requirements; the micro loan program which is a small short term loan; and finally, there is the CDC/504 loan program that is a long term business financing program.

The next place to search for loans are local banks and credit unions. If the business owner is looking for a loan or a business line of credit this is an excellent option. The loan approval is based on the personal credit of the owner. Next are the other private funding sources such as foundations, grants from the government (very hard to come by), other government agencies, and small business development centers, as well as community development centers. Business women organizations that specialize in helping startups, women and minorities are also an excellent place to explore.

Loan Application Process

A small business loan for a woman is processed the same as any other type of loan, the lender wants to see that the business owner has a well thought out business plan. This plan should list the owners, staff, inventory, cash needed for startup, product or services involved, education and experience of the owners, customer demographics etc. The applicant must also complete a loan application and provide personal background information, financial statements, business financial statements, ownership and affiliations, certificates and licenses, income tax return information for personal and business, leases, and overviews and history of the potential or existing business.

Small Business Loans

Obtaining a loan is not easy but the options are out there , there are women’s funding networks, veteran business loans for women and minorities, academic institutions, women organizations, and state programs that are in place to assist women business owners and startups. Researching and investigating these lenders is key to getting your business off the ground and profiting.

Knowing your idea, your concept and how these things will be executed is the first step in the long list of things to do when starting a business. Knowing what your niche is, and who the demographic will be is essential to obtaining a loan from any type of institution, if there is a need and a desire for your product or service in a certain area most lenders are more prone to lend the business owner the money to start or grow their business. All of these things are facts not only for women, but for men as well. Anyone starting a new business or expanding a business that is already running, needs cash to do it.

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Factor Financing: Financing Your Business With Invoices



Posted on September 13, 2011 by biz

Factor financing is a way to finance business activity via invoices. Do you have a business that’s either in the beginning stages or already making sales and revenue? Need extra money to achieve a new goal? In this post I will tell you how you can take your invoices and turn them into cash.

Invoice factoring to acquire cash is a simple process. What happens is that your invoices are taken by a company that offers factor financing, and you are given cash to either expand your business with more equipment, payroll, expenses, more capital or anything else that you may need.

This makes for a great alternative to a business line of credit or business loan. There are many companies out there that offer this type of business financing with low interest rates. They have different ways that you can apply either online or by going to their office.

When you decide on a company to handle your factor financing, you usually get up to 80% of your invoices. Then when your customer pays the factoring company you will then get the other 20% minus the company’s fee. When using this process, the company in which you are going through already knows that you are good for the money because the goods or services have already been sold, so they have you send a copy of the invoice to your customer as well as to them.

A lot of businesses go this route to make sure they have constant cash flow. Factoring against your invoices are a great way to go so that you don’t have to wait the net 30, 60, even 90 days to get paid. It gives your business the money you need to continue the flow of business without the wait. Cash against invoices is kind of like when a person gets a cash advance against their paycheck except with financial factoring, they are getting most of the money up front but the company they go through takes their cut out of the final 20%.

Another nice thing about the factoring companies that business owners go through is the fact that they take the headaches out of getting their money. They give the owner the money and then the customer pays them.

Whether starting your own business or needing the cash flow to keep a business running, a business owner will find that getting cash from their invoices is a proven way to go. It’s a win win situation with the factoring company helping the business owner out with the cash they need right away, without having to wait until they are paid in full by the customer.

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