If you own a business or are looking to start up a business, it is likely that you will come to a point where you require some extra working capital. Perhaps you need to pay some bills, or perhaps you want to expand your business or redecorate. Whichever the reason may be, small business loans may be just what you need. However, due to the state of the global economy, getting a small business loan can be very difficult. There aren’t very many lenders available anymore that are happy to hand out money, particularly not to high risk customers. There are options available and it could be useful to learn a little bit more about why it is so hard to borrow money and what you can do to get the financing that is essential to your business.
Why It Is Hard To Find Small Business Loans?
In years gone by, people that needed a loan would simply approach their bank and request one. However, due to the collapse of the global economy, banks are now very reluctant to offer small business loans. It is almost impossible to get a loan from a bank nowadays, because they have such stringent acceptance criteria. Generally, people need to have a squeaky clean credit rating for starters. They will also need to be able to show profitable income for a period of at least one year. In most cases they will also be asked for collateral. This is often not possible, particularly not if you are looking at setting up a business. After all, these businesses don’t have the necessary paperwork to back their application. This can be a big problem, because even if you have a fantastic business idea, you will not be able to start it without that initial capital.
What Can Be Done to Find Financing for Your Small Business?
There is no need to despair, luckily. There are still plenty of lenders available that will consider giving small business loans to organizations that have had previous problems, or people that are looking at starting a business. Before you start comparing and applying for small business loans, it could be useful to have certain documentation ready. It will always be beneficial to have a well-written business plan that shows how you intend to use the money and how this will benefit the growth of your business. Make sure it includes budgeting for the repayment of the loan. A great software to guide you through the creation of a solid business plan can be found at http://www.paloalto.com/business_plan_software. If you are hoping to start up a business with your small business loan, make sure it is very clear how the loan will help you and how you can be as certain as possible that your business will be a success. Also, have any paperwork at ready that shows any income and expenditure that you have as a business – or are likely to have if you are hoping to start up. Include every single bill there is, including such things as utility bills and staff costs, as well as an estimate of profits.
Different Types and Ways to get Financing for Your Small Business
There are a number of options available in terms of lending money. Merchant cash advances, for instance, are a very popular option. With these, you receive financing based against future credit card sales. You will be provided with a credit card processing machine, so that your financing company is able to take a percentage (usually around 8-14%) of every credit card sale that you transact. These merchant cash advances tend to be quite short term and it is very important that you have a plan in place to repay this financing in case your future credit card sales alone do not cover it over the period that you have taken out the financing. These types of loans are often confused with credit card receivables financing, which are very similar. The difference is, however, that with the first option, you borrow against future sales, but with credit card receivables funding, you actually sell your future credit card sales. Hence, with one you will pay interest, with the other you will not. Other options include accounts receivable factoring, which is basically selling off any credit that is owed to you at a discounted rate and unsecured business loans, which are the hardest to get in the current market.
If you are considering getting small business loans, you should spend some time comparing the market. Use an online comparison website like SmallBusinessLoanRates.com to determine which types of small business financing best suit you and your business. Once you know which type of financing to apply for, you can start comparing the lenders and determine which one is likely to offer you the best rates and programs.
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