Want Small Business Funding Fast – Get your basics right

Your bankers should be your first stop in applying for small business funding. You and they have a history of working together. Familiarity goes a long way in pre-clearance of doubts and insecurities. Also banks offer slightly better rates for commercial loans than others.

But banks are more circumspect, and adherer of rules and guidelines regarding the borrower.

There are many other types of business lenders. The main differentiating factor is the type of loans they offer: secured or unsecured loans.

Banks usually offer unsecured ones, while independent financial organizations favor secured loans more.

These independent financial organizations are prepared to take more risks on startups and smaller businesses than banks. Often they specialize in particular industries, types of loans, or business sizes.

Essentials of loan applications

It is the first and perhaps the most important part of borrowing process, especially small business funding. Applying for a commercial credit requires a lot of preparation. Following are some key documents you are required to prepare:

• Financial statements: balance sheet, profit and loss statement, and tax returns of the company
• Personal financial statements and tax returns for last three years
• Cash flow estimates on the monthly basis
• Comprehensive business plan
• Precise loan utilization detailing
• Profiles of decision making people i.e. top management

The thoroughness and accuracy of these documents are absolute musts for successful borrowing, so it pays to prepare them carefully. Have your financial documents reviewed by a qualified accountant before presenting them.

Business Cash Advance, a Good Alternative:

But is there any alternative to loans so far as the small business funding is concerned? Yes, there are many other companies that are offering business cash advance to small business owners.

Business cash advance is not a loan and the organization offering this cash advance gets their money from the credit card sales that the business does in a specific period, there by reducing the burden of paying back the loan and the terms and conditions to qualify for such cash advance are also relatively simple and can be good alternative to bad credit small business loans as they come at very high interest rates.

There are quite a few organizations which provide such cash advances. Organizations like MerchantCashDirect usually provides cash advance for working capital needs. They more often than not, target specific industries.

I hope that I helped clear some doubts and given some useful information. If information is power, you are now empowered to succeed in your endeavor to secure loan, there by realize your dreams.

Tips for Small Business Loans

Often, funds are needed by small business owners for expansion, advertising or for some other purpose. Whatever the reason, there are a lots of financing opportunities available. But to get an approval for your loan application, you need to meet the necessary criteria.

* Your chances of obtaining a small business Funding dramatically increase if you have a detailed and convincing business plan. Any lender would want to confirm whether a customer seeks your products or services and how much profit you make. A business plan provides an insight into your management capabilities, information about the market in which you operate, and the kind of business you are.

* The higher the rate of return you can offer to your investors and the faster you can produce it, the more your chances are.

* The business plan must contain information regarding what sort of competitive edge your business has over your competitors.

* It’s important to get a copy of your personal credit report and check it thoroughly for any inaccuracies. All accounts should be current and there should not be any out standings. In case there is any derogatory information, it is better to explain in written exactly what caused those problems and why the problem won’t take place again in future.

* Get a photocopy of all your business records of the past three years such as financial statements, tax returns slips, interim year-to-date financial statements etc. Get them signed off by your accountant or tax advisor.

* Be precise and clear about how much funding you require and get the paperwork done to show why you need it and how you will pay it back.

Normally it takes several weeks to close a loan. And once a loan gets an approval, it can take 30 to 60 days to fund. But if you are looking for quick small business funding then there are investors in the market who provide small business loans hassle free and quite fast probably within 10 business days.

Normally these lenders don’t seek any documents. Instead loan is granted based on your monthly credit card volume. You easily qualify for a new or a small business loan if you process a minimum of $4,000/month. After you obtain a small business funding from such lenders; it’s left up to you how you utilize those funds.

Choosing Between Small Business Funding and Small Business Loan

For many, the term ‘small business funding’ and ‘small business loan’ may not make much difference until they are aware of the pains involved in getting a business loan approved, however small it may be, and comparatively the rather painless process of acquiring small business funding.

The common feature in them is that they both are sourced to sustain, expand or remodel your business. But they are widely different when it comes to the process and cost involved in obtaining funds through each one of them and repaying the same.

Let’s compare the process first

Process Initiation:

Small Business Loan: The process starts with contacting a bank or loan agent and filling a loan application form.

Small Business Funding: You already have a merchant account and are accepting payments through credit card. All you have to do is just fill in your details in a form and submit it, even online, to companies that offer cash advance.

Approval Process

Small Business Loan: The bank will pull out your credit rating, look into your credit history and check whether you have the capability to pay back the loan. In case you have bad, poor or even average credit rating, the chance of approval for your loan application is quite low. Even if approved, the rate may be considerably higher.

Small Business Funding: There are no credit checks here. You can get approval even if you have poor credit rating as this type of funding has nothing to do with your credit score.

Approval Time:

Small Business Loan: Along with poor chances of approval (in case of bad credit history) the loan approval time due to involved intricacies and formalities is much longer.

Small Business Funding: The time taken for such funding to be approved and the cash transferred to your bank account varies from 48 hours to one week. That means you don’t have to wait much to be sure that you have enough funds to back your business plans.

Now let’s compare the cost involved in the process

Closing costs and processing fees

Small Business Loan: The closing cost and processing can vary from lender to lender and the amount of loan. But one thing is sure no loan can be free of closing cost and processing fee and you have to bear the burden.

Small Business Funding: There is no closing cost and no processing fee involved. That means you repay only what you get.

Repayment Method and Time

Small Business Loan: Your lender will fix time for you and you have to strictly adhere to repayment schedules or else you will be charged with penalty. Every delay in repayment of your monthly installment can cost you late fine and other charges.

Small Business Funding: You are not tied with any strict repayment schedule. A mutually agreed upon percentage from your credit card sales automatically goes towards repayment of your loan. This makes repayment much easier.

Now let’s see why small business funding is not a loan?

This funding is allotted to you against your future credit card sales. That means the merchant bank anticipates that you will have good sales in future buys your future credit card receipts. Hence the bank buys your future credit card sales and agrees to provide you with the working capital you immediately required.

So what are you waiting for? If you are in business for at least 1 year and have good volume of sales through credit card, you can apply for small business funding immediately and get the much needed working capital within a few hours in your bank account.

Some More Tips For Availing Business Grants

In my last post I offered some tips to avail business grant if you want funding for your small business. Following are some more tips to make business grants a good financing option for your small business.

1) Grants are given on a cyclical basis. Find out about upcoming deadlines and of course there would be a wait for several months for a decision. So don't expect a quick answer because it doesn't happen that way.

2) If your requirement is for larger amounts of funds, one grant would not meet all your requirements, so do tap other funding sources such as banks providing small business financing.

3) Whatever you do don’t lose your business focus. Keep watching your business process. It's easy to get distracted by the allure of grant money and this can become the focus of your energy rather than building your business.

Grants – A Good Option For Small Business Funding

Money rules in the business world. Even if you have great idea, it can not be brought to fruition until or unless you have money to back it. Forget the start ups, even well running businesses especially small ones run into rough weather if their funding life line suddenly dries up. One route that you can use to get the money you need is to look for a business grant. These grants are available for financing small businesses if you satisfy certain criteria.

Here are some great tips to getting that grant approved.

1) Find out if there is any grant available in your area. Your local grant agency, local council economic development officer are good source to do that. Some business in the same line of business can also give you required information.

2) Find out the reason for your funding requirement, whether it is for working capital, to meet running expenses, or some capital addition. This is important because grants won’t be provided for general running costs, they will support a specific outcome.

3) To avail grants one has to satisfy quite strict selection criteria such as age, gender, ethnicity, unemployment or to those having a specific purpose such as research and development or innovation. If your idea doesn't fit into it don't try to force it. You can always go for Small Business Funding provided by banks and other lenders.

4) Do make personal contact by phone or ideally meet the grants officer personally. Whatever you do don't just send in your application cold. Find out your idea is suitable and it is worth applying in the first place.

5) Prepare a thorough business plan to bring with it but make sure it stands out from the crowd. Most importantly you will need to present a thought provoking vision, a passionate commitment, clear benefits and robust cash flow forecasts.

Are You Planning To Buy A Start Up? Read On Before You Do

Accurate valuation, no matter you are big or small company, or you are

Man or Women seeking New Business Loans, then it becomes more important when you are planning to buy out a small business which is not into operations for long i.e. a start up. A new organization which has just commenced its operations, does not necessarily gives clear picture by numbers alone, and there is not much past to go by.

Apart from factual valuation you need to assess the viability of the idea and of the industry it is dealing in.

So how should one evaluate a startup? It’s pretty complex, because the company doesn’t really has any revenue, assets or perhaps established industry to accurately reach at a price.

The method expounded below is one of the most widely used. At the very least, this method provides a starting figure to be adjusted according to a variety of external factors.

Terminal Value:

Terminal value of a company is the value at some point in the future. This point may be an expected liquidity event or a point where the company starts earning profit. The easiest way to do this is to compare with a similar company.

Another method is to check out the price/earnings (PE) ratios for the existing companies in the industry, and factor in the expected earnings in the terminal year.

Note: this terminal value is the best case scenario - everything goes right. Discount rate method recognizes the possible negative events to arrive at a figure.

The Venture Capitalist’s Required ROI:

In this method a VC decides upon the one time investment figure and its expected annual rate of return, and then using the formula [(1 + IRR)^years x Investment] arrives at final figure at the end of the period.

Apart from above described methods there are two other methods of valuing a start up. They are discount rate method and multi-stage financing. I will discuss them in my next post.

Though it is out of context here, but it is important to know that if you have bad credit ratings and you want small business loans for your working capital needs, you can always opt for cash advances. Companies like MerchantCashDirect provide Fast Business Loans if you have done certain amount of business in credit card receipts over some time even if you have bad credit ratings.