Choosing the Right Business Loan For Your Company

Operating a business takes money and just about everyone has heard the expression you have to spend money to make money, but where do you get the money if you aren’t independently wealthy, or established? A business loan is the answer to most business needs. It doesn’t matter what size a business is, almost every business owner at some point has to consider a loan. A business loan can help a business get started, expand once it’s on its way and growing, or get a business through the tough spots that happen occasionally. Deciding on a business loan is a key step, but which loan is right for you and how do you decide between the many different various types?

Skip the Loan and Use Plastic

Some business owners opt for a slight variation on a business loan and choose to use credit cards to back their startup, expand on an existing business, or help their business through a tough stretch. The positive reason for using credit to fund your business is that it is often easier to get, or already existing in a personal credit card, but there are a couple of serious negatives to using this type of business financing. The first negative is that unless your existing credit line is unlimited there might not be enough funding on your credit cards. The second negative to using personal credit cards is that your personal and business cash flow is not separate. This can create havoc if you need to use your credit for important personal needs and it can have a similar effect on business funds if you suddenly have to tap into your credit for personal reasons. Lastly, the interest rate on credit cards is normally much higher than any of the various types of business loans.

A Bridge Between Credit Cards and Business Loans: Lines of Credit

A line of credit operates much the same as a credit card. You apply for a business loan line of credit and based on your qualifications you are approved for up to a certain amount. You are not charged on the loan until you actually use the money and are only charged for the amount you actually use. Another similarity between lines of credit and credit cards is the loan is often an unsecured loan meaning no assets are used to guarantee the loan such as homes, cars, the business itself. However, unlike a credit card business lines of credit have interest rates much closer to a traditional loan level.

On the downside those interest rates are usually variable like a personal credit card and go up or down over the period of the loan. Another downside to lines of credit is that like a credit card your payments will usually be only a little more than the interest rate each month.

This may seem like a plus at the start because the monthly payments are so low. The catch there is that lines of credit to not extend forever. There is almost always a set number of years for the loan amount to be available. At the end of that time (and sometimes within the last two years of the payback) money is not longer available. After that period, the payments are higher to make sure the money is completely paid back by the end of the loan.

If you have the discipline to make yourself pay more than the minimum every month in order to pay down the loan, this can be a good loan to get. It allows for times when money is tight. You can pay the minimum at those times without risking a default on your loan.

Traditional Types of Business Loans

Even if you do not have an extensive amount of credit, and if you don’t think a line of credit is right for you, all is not lost. There are many more traditional styles of business loans to choose from:

- Working Capital Loans: These loans are what most people think of when they consider getting a business loan. They come in two types, secured and unsecured. Unsecured versions of working capital loans are usually only available to those business owners with stellar credit, a sound business plan, and an established business with a proven track record. Startups are usually too risky to be granted unsecured working capital business loans. Secured working capital loans are a little easier to get although the amount of collateral needed to obtain these loans is often based on the credit of the borrower. These loans make it possible for all types of business to conduct their affairs on a day-to-day basis with available cash. Loans are commonly secured with homes, and other valuable assets.

- Accounts Receivable Loans: These are short term types of financing available when you hit a tough spot and now you have money coming in at a particular time. Your business’ records of accounts receivable act as a security for such loans. On the downside the interest rates of these short term loans are usually higher than a long term standard loan, and you can end up in a vicious circle of using your assets (receivables) before you get them and then not have money left before your next income period. This type of loan should only be considered in a select few types of cases of emergency such as the need to meet payroll, purchase inventory at a value, or other necessities.

- Business Only Loans: This type of loan is applied for using the capital and assets of the business alone and not any personal credit or credit history of the owner. It is only available to a business with a solid record of reliable income, the long-term prospect of fluid operation, and very strong business credit scores.

Other Function Specific Loans

There are times during business operation when you need a loan for a specific type of purchase such as to buy new or replace old equipment, the purchase of real estate for the business, or other dedicated needs there are loans designed to be separately available for just those times.

Getting The Loan

The best way to ensure success in getting your business loan is to be prepared. Enter your bank with a well-formulated business plan in hand and make sure your credit is up to par. If you know of any spots on your credit history, be prepared to explain them. Lenders are human too, and know that there are situations that are unavoidable but if you can prove your trouble is in the past and you are on more solid footing it will help a lot in getting the loan you desire. Letters of explanation to go along with your loan package help if there were situations such as illness, or caring for a sick loved one that caused problems in the past.

One of the things that stops most people from attempting to get a loan is fear of rejection. Knowing what to expect can alleviate that fear.

Five Key Steps to Starting Your Business

Global access of the internet has created an opportunity like never before, literally thousands of business opportunities are available by typing in a few short words in Google.  How do you decide what is best for  you? Well, as with everything else that people do there are only a few key steps to success, but it all starts with you.  Before you get started it’s important that you decide what it is you want out of your opportunity. The odds are the same in starting a new business today as they have been for a very long time. Are you willing to do what it takes to beat the odds?  Where do you start? The following are 5 key steps to starting a successful home based business. 

First and foremost in starting your business venture, it is imperative that you know why you are getting started.  In our lifetimes we all dream of owning our own business for many reasons, many never get past the dream stage and it is more wishful thinking than a dream.  But, for you to successfully persist in your business, it is imperative that you understand why you want to start your own business, it is only when you truly understand this, that you will have the will to be consistent and persist when things get tough. So, i ask reason do you have that is compelling enough to set you aside from the other 90 percent who start and fail?  This really is a key step.  If you are trying to overcome a temporary situation, it is not a big enough reason. You have to be willing to pour your time and any available resources into your business in order for you to succeed. Nothing in life comes to the person who expects it for free or little effort so, conquer the first challenge and define your dream so big that you will be willing to do whatever it takes to get you started, keep you motivated and persist through the slow times. 

The second step is to do your research. It is important to find that business that appeals to your sense of being, what are you willing to invest your time in? Remember, this is your life and time you are investing in so it’s important that the business appeals to your values. My personal experience has led me to understand this more than anything, I have tried different network marketing ideas over the years, I learned a lot through the systems and support systems, but until I found an opportunity that appealed to my inner sense of value I struggled. It really was not that the health benefits of the product were not of value, there are many great products and innovations out there that appeal to as many people as there are online, so, chose the opportunity that tugs at your heart and adds to the dream  led you to start your business.  It’s been said in many ways that when you follow your heart, you can not go wrong. So chose wisely and invest in a business that not only adds value to your life, but one that you value with your life… because every minute you put into it, you are investing your life in it, make it count.

What are you willing to give up?  The third thing that is very important as you venture into the world of an entrepreneur is that you do have to make some changes in your life.  If you value American Idol, more than you value your dreams and goals, you will never succeed in anything but finishing off that bag of chips you sat down with.  Again, this all comes down to what you value most but you do have to give something up in order to succeed. I am NOT saying sacrifice your family time and taking time away from the things you hold dearly, but you will have to prioritize  your time and your money to make your business grow.  Success comes from the process investing in your future, so find those things that add little or no value to your life and wean those out and start carving out time to build your business.  I highly recommend that  you read a simple but powerful little book called The Twelve Pillars, by Jim Rohn. In it, he does not suggest you give up your day job, but, it is the hours after you help make someone else rich, that you have the opportunity to create something for yourself and your family.  Again, it is important that you add value to the lives of those around you! 

Consistency! You will never succeed at anything if you do not develop consistent systems to build your business. You need to be consistent. Set your goals, prioritize your time and take consistent action toward achieving what you set out to do.  Consistency builds momentum in your business. If you want to build your business fast you will have to consistently put a lot of your time and energy into it. If you want to build it strong, you will have to be consistent in reviewing the foundation, your values and goals that keep you on target to build a successful business.  Failure comes easily to those that do not persist at what they chose to do.  I have seen countless people come and go but what they do not do is consistently do the small things to set the stage for a successful business.  It is important that you make the time you are going to invest in your business count, so determine the steps that add value to the customers that you are attracting, and consistently put your efforts into those things that help it grow. As your business, grows you will be thankful that you invested the time to develop systems to be consistent. Every successful business has systems in place that “automate” their business.  Treat your fledgling business like a big business and invest in and develop systems to maximize your efforts and help you be consistent at what you do. Your initial systems may be as simple as an early morning brainstorming and to do list to set your daily goal, checking your list regularly and keeping track of your time and effort will help you make the corrections and spot activities that do not add value to your business or your customers.

Finally, you are investing a part of your life in a business, enjoy it!  Smile, take time to appreciate the opportunity in front of you and make the most of it. We have all been around that  sour person at work or some other place that just does not seem to enjoy anything in life. In fact, it at times seems that the main source of joy in their lives is to point out all the unfortunate events that affect  their day. Don’t person, if you already love your job and go about it with a smile on your face, you are the kind of person that will be able to draw and attract others to your business.  Share that enthusiasm and enjoyment with others and you will grow through the toughest of times. It is true for all of us, we all have the “Seeds of Greatness” within  us, it really is up to each and every one of us to make the most of those seeds, to prosper and grow with our businesses.  

If you are serious about changing the course of your life and starting a business, take time the time to do it right. I have said (not always done) “It takes less time and money to do it right the first time”.  What is important is that you when you decide to become an entrepreneur, that you do it wisely and honestly. It is only then that  you truly add value to the world around you and you reap the rewards that you seek. Make the most of the time you invest in your life, share it and grow it enthusiastically and your dreams to will come true. 

Seven Ways to Evaluate the Reality of Opening a New Business

Entrepreneurship is timeless, even in an era of economic change, and many of today’s new business start-ups could become as successful as many others in the era of the old economy.

Today’s entrepreneurs face different challenges to yesterday’s old ones, but they need to seriously evaluate the reality of opening a new business.  

1. Evaluating Time

 In a job, we usually earn a fixed hourly salary based on how many hours we work, but this is not a luxury for business owners. Business Owners do not earn an hourly rate, and often put in more hours per month, than many Corporate Executives.   Time takes over business owners, your business may become more than a full-time job with lots of overtime, and the rewards may not be financial. Being able to accept this may determine if the business you plan to run, is successful or not.  

2. “Informal” Stakeholders

Contrary to common beliefs, Entrepreneurs are not totally free or even as independent as an employee in many cases. There are still many “informal” stakeholders who have a vested interest in your business, even if you own the business 100%.Informal Stakeholders could be anyone from an Office who issues permits, to the local electricity company, to even your accountant. Without these people you can not open the business, and you pay these stakeholders for the right to run your business.   In Germany, over 25 different “informal” stakeholders become involved with you as soon as you open a business. These are compulsory “stakeholders” who you need to pay for one service or another to simply open a business.

This does not include a Bank or Credit Union, if you borrow any money for the business. The actual minimal cost of these 25 “compulsory” stakeholders could run as much as 1200 – 1500 Dollars a month, without even opening your doors for business.   Be aware of any compulsory “stakeholders” before you open your business, evaluate their involvement, and your legal rights with each stakeholder. Before the recession 95% of new businesses failed in Germany because of the high cost of dealing with these stakeholders.

3. Existing Customers

Taking over a business does not mean you inherit the existing customers, often many choose not to deal with you, because they had a relationship with the previous business owners. Look towards building up a new customer base, instead of depending on the loyalty of existing clients.  

4. The Business Name

Starting a new business from scratch is often preferable to taking over an existing business, because you may inherit the reputation and name of the existing business. A failed business, often carries a tainted name, so it is often better to change the name and if it is located in a building, the appearance of the previous business.  

5. Over-Confidence 

Being a success before you open your new business, does not guarantee your new business venture could be a success. Often over-confidence clouds the realism behind your new venture, and often it is better to be quietly confident, and aware that any business is a learning process  

6. Legal Issues

A large business is often a separate legal entity, but one mistake business owners make is become legally responsible for business debts. The current economic recession has taught us that Corporations may have toxic debts, but for the stakeholders private assets are not legal liabilities on the business name.The recession has hurt more smaller business owners because they were personally liable for the business debts, so ensure your company is  separated from your own legal debt responsibility.  

7. Evaluating Advice  

Real estate Agents, Lawyers, Bankers, Accountants and Business advisors all can give you sound advice about your business, but are not responsible if that advice does not work, neither are they legally responsible if their advice is wrong. Being aware of this fact, could help you cut away the hype over the need of these parties to earn money from you, because they need you to set up a venture to earn fees from you.  

Be particularly aware of Real estate Agents and Lawyers, both can give advice but often the advice may hinge on how much commission they earn from you. Ensure you choose your own lawyer, and treat the Agent as partly trustworthy rather than completely believe them. Millions of people lost their life savings in the crash of 2008, but none of their stockbrokers were responsible for that loss……

A recent survey has shown that the majority of self-made millionaires failed in their first business ventures. In fact many continued to fail, but with persistence learnt from the lessons of failure to become a success. Your new business could fail, but it also has a good chance to succeed, one reason entrepreneurship eventually awards success.