Is saddling the little guy with more debt the answer?
Banks across the country are denying loan requests from financially credible small businesses. Federal Reserve chairman Ben Bernanke has urged community banks to lend to small businesses, calling it “crucial to America’s recovery.”
Lenders say they want to help the small business owner and the economy, but there just aren’t viable borrowers. This is due, lenders say, to the fact that the loans needed by small business owners are for one of two reasons: helping a business stay afloat or business expansion. And with falling real estate prices, many small businesses don’t have the necessary collateral to back up their loans. Banks are feeling picked on by the federal government, which keeps pushing for new lending.
So why would a small business owner want to borrow money right now? The average answer is to reduce debt levels, a smart choice in a depressed economy. The other concern for the small guys is the new health care reforms and how they will affect businesses with fewer than 50 employees.
Washington has ramped up pressure on community lenders as well as large commercial banks to set up small loan funds. Regulators have attempted to grease the wheels with a program called TARP Jr., a $30 billion dollar small business lending fund for community banks.
But if most banks are claiming there are no viable borrowers, this doesn’t seem like much of a solution.
But something has to be done to give a boost to small business, which employes about half of Americans and accounts for 60 percent of new jobs. Will pushing loans on them be the answer?
The experts aren’t too sure. With consumer spending down and the overall economic climate unsettled, entrepreneurs don’t seem to be confident that this investment in the U.S. economy will pay off. And they fear that the little guys will be saddled with bigger debt.
One answer could be unsecured loans. A small business owner can obtain a loan from $10,000 to $5 million, with no collateral, minimal documentation, no annual fees and no prepayment penalty. All with rates starting at 7.93 percent.
Small business loans
Small business loans for a bigger life
At some point in life, many people feel like they have to start working for themselves. For some, it’s the constant exhaustion of working full time and raising a family. Maybe it’s a necessary return to the job market after divorce or the death of a spouse. Or, maybe it’s simply the years-long regret of never pursuing their dreams.
Unfortunately, changes that seem imperative frequently seem impossible, too. That’s when it’s time to investigate small business loans. Small business loans can put you in control of your life, make the impossible possible, and make dreams reality.
Many people are discouraged or are afraid to start their own businesses because they don’t have enough money saved to launch their new endeavors, or they assume they won’t qualify for small business loans because they’re too young, too old. Admittedly, small business loans can be hard to obtain, but there are resources available beyond the community bank.
Small business loans are perfect for starting an in-home, sole proprietor business as a tax preparer or graphic designer – the sort of businesses that require less than $5,000 to begin. Creative types can set up a studio or workshop to realize their dreams of making and marketing their own jewelry or pottery with only a modest investment.
Small business loans can take someone who loves travel, outdoor life, hunting and fishing, and get them out of their frustrating routine of soul-deadening work. There are franchises available for only $6,500 that allow them to arrange trips for other likeminded adventurers, and visiting the locations and lodges themselves is part of the job.
Setting up energy auditing businesses—one of the many “green” jobs that are in high demand—is easy with small business loans of roughly $35,000.
If you’re thinking on a larger scale, small business loans of $500,000 to $10 million will let you buy a franchise restaurant, hotel, hardware store or walk-in medical facility.
Life is short, but there’s still time to take control of yours.
Business line of credit
Question: I’m not sure if I need a business line of credit, a small business loan or a mortgage. I’ve bootstrapped my business for two years. I recently hired another employee and would like to hire two more, but I don’t have room in my current rented space. I’ve set aside enough money to buy and renovate a bigger building, but it’s hard to make payroll when I am waiting for payment. Should I take out a mortgage for another office? Should I take out a business loan or a business line of credit?
Answer:I recommend paying cash for the new space, and taking out a business line of credit.
A business line of credit a good way to cover smaller short-term expenses, like new electronics, furnishing and supplies—the sort of things you will need for a new space with more employees. A business line of credit will tide you over through the ebb and flow of A/P and A/R, and help you make payroll while you are waiting for payment. Payroll is one of the most common uses for a business line of credit.
If you can afford to move your business to a new level without going in debt, do it. Use the cash you have to invest in a new space because it is not a good idea to take on the increased overhead of a mortgage at the same time you are increasing personnel expenses.
Business lenders are not going to make an investment in your business if you have not already done so. Taking out a mortgage makes your new offices a debt instead of an asset you can use as collateral. Pay cash and lenders see you have made a huge investment and have little or no debt, and they will be happy to give you a business line of credit.
You will also be building your business credit score by staying within the limits of your line of credit and making regular payments. Moreover, you will have a higher credit line with better terms, and your next loan will be easier to acquire.
Small business lending
Small business lending to get boost from TARP funds
The U.S. Treasury Department announced today that Main Street is about to get some of the same home cooking enjoyed by Wall Street.
As much as $1 billion from the Troubled Asset Recovery Plan will be made available to banks, credit unions and thrifts certified by the Treasury as Community Development Financial Institutions (CDFIs). CDFIs are committed to lending to businesses in poverty-stricken rural and urban areas.
During a time when small business lending dropped off precipitously, the Obama administration has met with bitterness from voters and struggling small business owners resentful of the $700 billion given to some of the largest Wall Street banks, which, in turn, refused to loosen the purse strings and spread the wealth.
Earlier this week President Obama asked Congress to make another $30 billion of the remaining TARP bail out money available for small business lending from community banks. Last week, in his State of the Union address, Obama stressed the urgency of creating new jobs to stanch the small business failures contribution to high unemployment levels. Roughly half of American jobs are in small businesses.
Congress is not required to approve the money to CDIFs, but because the small business lending plan is an altogether new program, Congress must approve it. Congressional members, however, are already giving the lending plan a stiff arm.
“The law is very clear. The monies recouped from the TARP shall be paid into the general fund of the Treasury for the reduction of the public debt,” Sen. Judd Gregg, R-N.H., said in a Senate Budget Committee hearing Tuesday. “It’s not for a piggy bank because you’re concerned about lending to small businesses.
Last month, the 22 banks that received TARP bail out money announced they were cutting another $1 billion from small business lending for the tenth straight month.
Startup business loans
Startup business loans becoming more available
New business owners looking for startup business loans knows it’s been all but impossible to get credit since fall 2008, when Lehman Brothers crashed and burned. There are, however, signs that things are getting better, and several things would-be borrowers can do to improve their chances of getting startup business loans.
The Small Business Administration (SBA) processed 12,393 loans in the final quarter of 2009, a total of $3.8 billion; that’s a 200% increase over the number of loans processed in the same period of 2008. While the SBA only guarantees loans, the increase means lenders are again willing to make loans, including startup business loans.
That’s the good news; the bad news is that the final quarter numbers from 2009 are still only 60% of the numbers from the same period in 2007. In other words, things are better, but still very competitive, and acquiring startup business loans is going to be a lot of work and require a lot of investment.
- First off, banks will turn a cold shoulder to applications for small business startups if the owners haven’t already invested everything they have: personal real estate, savings, life insurance and credit cards.
- Scrape together money wherever possible. Young entrepreneurs have opportunities to participate in student competitions with cash prizes. Award winners impress bankers who would rather make startup business loans to winners.
- It might be painful to take on partners, but doing so brings more assets and talents to the table, while reducing risk. And remember, banks want to see a lot personal asset investment before they’ll commit to startup business loans.
- Business plans have to be magnificent and accompanied by polished and professional presentations and personal pleas.
- Start small, startup business loans aren’t awarded to businesses without track records. Wait until the revenues have accumulated to show stability and promise.
Small business loans for women
Filed under: Small Business Loans For Women, Uncategorized
Loans for woman-owned businesses
Small business loans for women have always been hard to come by because women often have fewer personal assets than men. That’s not to say it’s impossible to find small business loans for women, but that making the right choices can help get the loan, avoid excessive debt, increase business and decrease stress.
Scaling back on the amount of loan requested so it’s more proportionately in line with personal assets is one to increase the likelihood of obtaining the necessary loans. But how can business owners do that without sacrificing perceptions of professionalism?
- Even though it’s easy to use a free package to design a business website, hire a professional instead. The investment is minimal for an advertisement that has the potential to reach millions of potential customers. Besides that, this is an essential component of a marketing plan that can yield small business loans for women.
- Hire a free-lance blogger to continually update web content and drive traffic to the website. The cost will be roughly $5,000 a year for one or two new posts a week.
- Pay for a virtual assistant to answer phone calls, forward messages, make travel arrangements, maintain appointment schedules and create basic correspondence. It’s cheaper than hiring a full-time employee and boosts professional image and productivity.
- If the goal is small business loans for women-owned home-based business, improving workspace is a tangible use of money that bankers like, whether it’s a business loan or a home equity loan. Private entrances are essential.
- Rent a conference room on an a la carte basis to avoid conducting presentations and high-level meetings in a spare bedroom. Consider women’s centers or local nonprofits if their mission is appropriate to your product or services and will help project a desirable image.
Whatever the intended purpose of small business loans for women, the most important element to the business loan application will be a very detailed business plan that plays up the creativity and resourcefulness it took to find ways to grow the business while achieving maximum bang for the borrowed bucks. Contact American Unsecured for more tips on acquiring small business loans for women.
Need a loan? Get an online loan.
Your first decision will be whether or not to get a loan, but your second one will be where you’ll get a loan. In the past, small business owners went to a local bank when they needed a loan. Now, smart business owners know the way to get the best loan is to get an online loan.
One of the underpinnings of capitalism is that competition benefits the consumer, but getting quotes from several brick-and-mortar banks is too time consuming. Applying for an online loan solves that problem.
In most cases, online loan applications are approved or rejected within 24 hours, and in some cases, in just minutes. That quick turn around makes it easy to apply for an online loan with several lenders to compare their terms and rates. Once a decision is made on which loan offer to accept, the money can be electronically deposited into the borrower’s bank account with 24 to 48 hours. Read more
What type of business loan is right for your business?
Whether you have a fledgling business or one that’s been long established, at some stage of the game, you’re going to need a business loan.
Needing one and getting one are two different things, though. You can maximize your chances of getting a business loan—any business loan—by knowing what to expect from the lender.
At the very beginning – At this stage of the game you’ll need seed money, but you can’t get it as a business loan from the bank. You’ll have to use your own assets, get a business loan from family or friends, or take out a personal loan. Wherever it comes from, this money will be used to create your business plan—an essential for starting a business and getting a loan later on.
Almost there – This is the time for a startup loan to purchase inventory, and to lease or buy equipment or the location for your business. The importance of a thorough business plan can’t be overstated, but that alone won’t get you a business loan. You’ll need to show the lender that you’ve invested a considerable amount of your own financial assets, and are prepared to contribute more.
When you apply for this first business loan, a big part of the bank’s decision is going to be based on your personal character, reputation and financial history, so be prepared.
Well underway – Get a business line of credit before you need it. There will be times you need to increase inventory, do some additional hiring, replace equipment or respond to a sudden emergency. You’ll need to show the bank you have enough excess revenue to make the loan payments, so don’t wait till you’re in dire straits to apply
Ready for the next stage – Your business plan should be evolving as your business does. When the time is right for expansion, you’ll use that plan and your projections obtain a business loan to help you continue growing your business.
Contact American Unsecured and let one of the nation’s largest loan-consulting firms help you obtain your business loans. Since 1999, their experience and bank partnerships have helped others acquire hundreds of millions of dollars in personal and business loans.
Small Business “Angels” Can Help Save Your Bacon
Any small business owner can relate to the concept of having a great idea but not enough money to finance it — especially if your company’s future is riding on getting that money.
That’s where an “angel” investor can help.
Angel investors operate under the premise that with a little due diligence and a lot of elbow grease, good companies operating under the market radar can become great - - and very profitable – companies. Read more
Small Business Loans
There’s a lot to learn before you start your own business. A good place to start is with a quick lesson on small business loans.
To start with the basics, there are secured and unsecured small business loans, and there are unsecured lines of credit. Before you decide whether a loan or a credit line will best meet your needs, let’s look at the difference between secured and unsecured. Read more