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Archive for the ‘Business Finance’ Category

Have you had some trouble obtaining financing for an excavator for your construction or excavation business? If so, you are simply not alone. In a response to America’s housing related crisis, there has been a major credit contraction that has trickled down to every type of financing available-including financing an excavator.

There is however, good news. There are ways to get financing for your new or used excavator if you have bad credit.

First, if you have a Trans Union credit score of 600, there is a strong likelihood that you’ll be able to purchase AND FINANCE an excavator from bank owned or off-lease inventory. Often times financing concessions are made by the bank or lender to enable them to quickly get the equipment off their books.

Some of the concessions they’ll make includes the following:

o Lowering credit score requirements (600 at this point).

o No Bankruptcy requirements (except that it be discharged).

o No Time In Business requirements-This is huge right now! Many banks and leasing companies have either stopped lending to start-up companies or they make it very hard to qualify AND they put relatively low caps on the amount they’ll lend ($25,000 is a common cap for new companies at this point).

o Reduced paperwork. Just a simple application is required AND NO financials.

o No down payment. You can typically get in with just one payment up front.
Second, there are still excavator finance options for even the lowest of credit scores (in the 500′s and 400′s). Now we’re talking about severely damaged credit. There is not a bank in the world that will help you now, BUT IF you have secondary collateral you may be in luck.

When working with this type of severely damaged credit you’ll need collateral in a 2:1 ration. For example, if your new excavator is priced at $35,000.00, you’ll need additional collateral in the amount of $35,000.00. Other equipment that you may own outright (auction value is used to determine value), real estate, land, and autos valued at $10k or more are examples of commonly accepted secondary collateral.

Be realistic in your expectations. If your credit is very damaged and you’re a start-up company, don’t expect super low bank type rates and payments. Remember, the bank won’t approve you for those low rates and payments because you simply don’t qualify right now. That’s OK. You will eventually.

The thing to keep in mind is that you MAY be able get the equipment to expand, grow, or start your new business. How much will you net or gross by acquiring the new equipment? Does it exceed or greatly exceed the monthly payments for the excavator? What kind of revenue will you pass up without the equipment? Think revenue over trying to get the lowest rates. It’s not realistic without the whole package (2-3 year business history, good personal credit of all owners, good corporate credit, good bank statements for the business, good tax returns, etc.).

The uses for a Microloan can be for making payroll or purchasing equipment. You could also use the capital for supplies, office furniture, of just about anything except for paying your current debt.

The loan term will vary according to loan size. If a small business is purchasing $25,000 in new equipment, the term could be for up to 6 years. However, if you need $1500 for a computer and printer, the term will not be for the full six years. As far as loan amount, currently the Maximum loan amount is $35,000. This will probably be increased to $50,000. The interest can range depending on the lender; generally speaking the interest will not be more than 13% and can go as low as the lender will allow. With everything there are exceptions to the rules and that would apply to the SBA Microloan program.

As a business owner you will also need some collateral. Many banks refer to this is having some skin in the game. If a small business owner has no collateral, or is not willing to give up some collateral, then the banks has no reason to lend money to you. Keep in mind that a Microloan is a small amount of money. This does not mean that you cannot receive an approval for a start up business or to expand. One example is if someone would like to start a coffee shop. If after doing all your homework and creating a business plan you discover that you need 30,000 to open your doors, a Microloan is an option.

A Small business owner should be prepared to have some documentation ready. A business plan, cash flow and P&L. You will also need to have business insurance on any collateral that you plan to use.

Many times small businesses need help with meeting the requirements that the SBA has for guaranteeing loans. This is not a problem; the Small Business Administration has tools to help you and can direct an owner to where they can find help. In most cases the advice will be free and will help you run a better business.

The SBA has other loan options if you are in need larger loan amounts or a longer term. However the Microloan is one of the best kept secrets for funding expansion projects or starting a new business.

For the UK people who need finance for business purposes despite their risky credit history, they should search the market for bad credit business loans that are specially carved out for their circumstances. These loans are comparatively easier to access even if you are having few cases of late payments, CCJs, payment defaults and arrears. You can start a new venture with the help of the loan. You can buy furniture, equipment, and machinery; pay the salaries and so on.

Depending on the loan amount, you can borrow secured or unsecured loans for business. The secured loan is available against a valued property for collateral. Such loans are immediately approved due to collateral. Another advantage is the comparatively lower interest rate. This means that these are ideal loans for bad credit history.

The unsecured bad credit business loans are ideal when you require smaller amount for short period. If you can prove your business income and the lender is satisfied with your plan of business and your repayment capability, then you can borrow without collateral.

However, the unsecured option of loans is expensive. The interest rate will be on the higher side. Through secured business loans for bad credit borrowers too have higher rates but the rate is lower as compared to the unsecured loan.

Bad credit business loans should be availed after you have checked your credit report for any errors in it. The lenders will take out your credit report to assess the risks. If you can repay some old debts, then getting the approval for the business loans becomes lot easier.

To get these loans at competitive interest rates, all you need to do is to search right offer of bad credit business loans on Internet. The online loan market for the UK business people is competitive and you should take advantage of it by searching an offer of low rate loan. Timely repayment is important to improve your credit history.

A commercial loan broker is a specialist intermediary between businesses seeking funding and commercial lenders, acting on behalf of the client business. Taking advantage of the services provided by a commercial broker when seeking a business loan is essential where no established relationship exists with a bank or the client is not sure what the going rate is for any particular funding type. The consequences could be that any business loan taken is over priced, that could be a very costly mistake indeed!

The typical broker will have access to a network of lenders and have specific knowledge of any loan criteria, thereby allowing the targeting of the right lender for any set of business requirements and circumstances, therefore maximising the chances of a successful application.

Many customers of commercial loan brokers have usually already approached a bank and had a loan application turned down, sometimes more than once! The reasons for this are numerous but could be as simple as the client not presenting their business plan very well, insufficient security or maybe the client is regarded as sub-prime by the bank lenders. However once a business has exhausted the bank route, few have the knowledge of where to go next. In fact, approaching a commercial loan specialist in the first place could have resulted in the placement of the financial requirement with the right lender first time!

A good commercial broker will initially take the time to understand your business and future plans before approaching any lender. If the business proposition has the potential to be financed then the broker will package the deal, select the most appropriate lender or lenders and ensure that any offer is priced competitively.

Brokers normally make a commission on any business loan placed, but not always, some will always charge a broker fee, others will only charge where no commission is available. The most important thing where a fee is charged is that it is success based, upfront broker fees should be avoided at all costs! One possible exception to this is where a business plan does not exist and your intermediary offers this service.

As every experienced businessperson knows, great business opportunities don’t come around every day, so when one does come along, the last thing anyone wants is to let it slip away for lack of funding. Because few of us have the cash-in-hand to up and purchase a good franchise when it comes along, however, the average entrepreneur has to resort to finding financial resources elsewhere. Here are some of the more common means of paying for that perfect franchise opportunity.



Commercial Banks

This is the most commonly used avenue for obtaining financing for a new franchise business, particularly for a home based business, and it’s a fine way to go. Generally, a person can get a loan from a bank for up to $100,000 on nothing more than personal credit, which is perfect, because home based businesses typically don’t reach prices in the $100,000+ range.

If, however, an entrepreneur were looking at starting a franchise that was over that pricing threshold, a commercial bank would still be more likely to finance him than they would his non-franchised small business counterpart. The simple fact is that far more franchise businesses see a successful 10-year lifespan than do independent business ventures, and banks know this. In fact, the difference in 10-year success rates is 92% to 20% in favor of franchises, making any bank’s choice of whom to finance a much easier decision.

Knowing that the franchisor has a successful track record and a solid business plan absolutely counts in the eyes of the bank. They take that business connection so seriously, in fact, that it’s often possible for the franchisee to use it to either whittle down the interest rate a little or obtain a larger total loan than he would have gotten without the franchise connection.



Private Investors

Whether they’re family and friends or only business partners, private investors can either be a great business advantage or a terrible trial in your career.

Just the same as any lending agency, a private investor contributes to the initial purchase and startup for your work at home franchise, helping it get off the ground. Then, as the business begins to see money come in, the investor gets a predetermined, and generally rather large, cut of the gross income each month until his initial investment is paid back. Then, depending on the contract terms, he still receives a certain cut of the income for the remaining life of the business.

This can be a great plan for all parties involved, but it can also be a headache if the investor is not as interested in the success of the business as he is in filling his wallet. Sometimes an investor will take such a large chunk of the growing business’ monthly gross income that there doesn’t even remain enough to adequately maintain operation.

It’s important to lay out a very clear contract at the beginning of the relationship with any investors, so that the person who got your business off the ground doesn’t also become the one who shoots it out of the sky.



The Franchisor

Knowing how hard it can be to amass the capital to start a franchise business, even for capable businessmen who would bring as much to the company as they would receive from it, many franchisors have begun lending franchise fees and startup capital to franchisees. This is becoming an increasingly popular means of obtaining financing for a franchise opportunity, in part because it’s so much easier for the franchisee than going to a third-party lender. However, there’s always a price for convenience, and in this case, it’s generally a higher interest rate.



Home Equity

For some people, this is the way to go. Home equity loans offer some of the best interest rates available, so for those who have a sure-fire work from home business plan and perhaps a home all to themselves, it could be a good option for getting business under way. However, the franchisee with a wife and kids has to stop and ask himself if risking the home equity is the wise move for the family as a whole.



Small Business Administration

As surprising as it may sound, the government is a great place to find the financing necessary for a franchise business, because they are genuinely interested in getting more small businesses up and running around the country. That is actually the sole reason for the existence of the US Small Business Administration.

Though they themselves don’t actually provide the capital to start and maintain businesses, the SBA does provide a 75% guarantee (up to $750,000) to private lenders on behalf of businesses that they feel have what it takes to succeed. Needless to say, this kind of support prompts most lending agencies to provide the loan.

The SBA does require some information though. What they most want, and reasonably so, is proof that the business is worth their backing. Potential business owners must provide a complete picture of the business, its plan and goals, a cost outlook, and a history of their own experience in similar business. In many cases, this process is accelerated for people buying franchises, because all that information has already been provided by the franchisor and recorded in the SBA’s franchise registry, which officially makes it a trusted and acceptable business for the SBA guarantee.



Weigh the Differences

The biggest difficulty in finding a financing source for your business is determining which is right for you and your situation. As you continue to learn more about the different ways that you can get the financing you need for your specific business endeavors, keep in mind that your situation is going to be different than everyone else’s, and therefore, so will your perfect lender.

There are specific and measurable strategies and benefits to using business credit to build your business faster and cheaper than without business credit. The old adage is, “the banks will only give it to you if you don’t need it.” The key is to maintain at least twice as much business credit as you need to hedge against any slow times or to be liquid enough to take advantage of once-in-a-lifetime opportunities. It’s not easy for most people to raise $250,000 or more for a small business to expand but if you understand the options available and take the steps necessary it can easily be realized.

The most important thing about obtaining large amounts of business credit is to have an officer of the company, with impeccable credit, personally guarantee the loans. If this isn’t possible, you will still be able to access a significant amount but the process it will not happen overnight. For those small business owners with no credit or bad personal credit there are still options to access quick financing, one being bringing on a silent partner to do nothing but guarantee the financing. Make sure and run this by professional counsel before trying to implement.

The easiest kind to obtain is business credit cards and the majority of which have phenomenal promotional deals such as 0% for 12 months or 2.9% for life, just for example and it is very possible to have access to $50,000 to $150,000 in revolving business credit in within a short period of time. There are even cards that will easily hand out $25,000 and allow you to balance transfer that amount into your business checking account so during the promotional period you have free access to these additional funds.

Traditional banks also offer two other widely used business options, the line of credit and equipment financing. It is similar to a credit card with the only difference being that you have cash access to 100% of your available credit. The best part of having at least one line is that you can write yourself checks and not pay the fees that are typically associated with credit cards. Depending on the age and financial state of your business you can qualify for anywhere from $10,000 up to $1,000,000 in a cash access line of credit, think of the possibilities. These are typically thought of as unsecured financing because there is typically no collateral or equity that secures the financing.

The second type of bank financing is called equipment financing, which is can be thought of as secured financing for things that a business needs to operate. The best thing about this type of financing is that banks are much more lenient as to the amount of funds they will approve your business because the funds are secured by the equipment you purchase. So whether you need a printing press, a new lawnmower or in some cases a new company car this financing option might be for you.

No matter what, you need to have good personal credit in order to secure the highest form of business credit. If you are building to obtain this same financing without a personal guarantee I suggest you work on perfecting your personal credit at the same time. You will be happy you did when you are trying for those $1MM lines of credit.