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  Category: Articles » Finance » Loans » Article
 

Business Funding, Where To Go?




By Erin James

The rate of interest on personal loans can be fixed or variable. In case of a
fixed rate personal loan, the rate of interest remains the same throughout
the loan period and consequently, the amount of monthly payments also
remains the same.

Loan market in the UK is swamped with enormous number of loan
options. Different loans have been designed keeping in mind the diverse
needs and expectations of the UK residents.

The payday loan is credited directly into the bank account of the
borrower. They may not have been able to maintain the desired gap
between application and approval because of the uncertain nature of the
expense for which the loan is needed. In spite of this, the borrower is
given an instant loan, while the service charges are upped.

You can use a personal loan for any of your miscellaneous needs. You can
even use a personal loan to make daily purchases. However, you must
avoid using personal loans to pay for daily expenses.

Business Funding

Every business needs money at one time or another. The process of
obtaining financing can be daunting and the chances of success limited if
it is approached in a disorganized or haphazard way. Lenders are
conservative critters; however it is important to understand that it is their
job to lend money, and they are happy to do so if their risk is reasonable.
The chances of obtaining a business loan are greatly enhanced if you
adhere to the following procedure.

KNOW WHAT YOU NEED

Understand how you intend to use business financing, how much funding
you need and how you intend to repay the loan. Be able to communicate
this clearly and confidently with prospective lenders.

UNDERSTAND YOUR CURRENT SITUATION

If you are an existing business, are you profitable, and does your balance
sheet have positive equity? What does your credit look like? Have a clear
understanding of any existing liens and lien priority. Know your credit
score and answers to derogatory credit issues (liens, judgments, slow
pays, collection actions) before presenting your application. If there have
been credit, profitability or equity issues in the past, present a credible
argument as to why these issues have been resolved or how this loan will
change this situation.

KNOW YOUR OPTIONS

All lending is critiqued from a risk standpoint. Certain levels of risk will
qualify for certain types of financing. The level of risk is reflected in the
cost of the financing. The more secure a lender's money is, the less it
costs you. Get creative. Financing takes many forms, and is available from
a wide range of sources.

Standard (conventional) bank financing usually offers the best interest
rates, however it is the most difficult to qualify for. These loans appear as
a long-term liability on the business balance sheet. Conventional loans are
available through banks and other lending institutions and can be
guaranteed in whole or part by the SBA.

Revolving Lines of Credit are another form of business financing. This type
of loan is secured by accounts receivable or inventory and is available from
a bank or an Asset Based Lender. Credit cards are a form of revolving line
of credit. An Asset-Based Line of Credit (ABL) is considered alternative
financing and is available to borrowers who are too highly leveraged for a
bank.

Unsecured loans, on the other hand, require no collateral but almost
always have a higher interest rate than secured loans.

Some of these like the credit check are necessary for determining the
reliability of the borrower.

Personal loans are loans taken by people for personal reasons. This might
sound as a vague definition of personal loans.

Consolidation loans have loan terms ranging from 10 - 30 years. A good
consolidation loan would be that which fits beautifully in your financial
situation. Consolidation loans are advantageous to almost anyone because
of the ease with which you can customize them to your financial stability
and your choice.

Secured loan helps borrowers in making the best use of the equity stored
in his or her property that helps him in borrowing a larger amount of loan
and that too for a longer loan term.

Real Property, Equipment Leases and Notes are another form of business
financing. In these contracts the collateral for the loan is the property or
equipment itself. When there is no outstanding balance owed on the
asset, the property or equipment could be used in a Sale-Leaseback
transaction. Here, the asset is sold to the lender for cash, and the
borrower leases the property from the lender until the loan is paid.

Landlords can be a source of financing. It is not uncommon for a landlord
to contribute dollars or rent concessions to the development of a tenant¡¯s
space. For this loan, the landlord may require a Percentage of Gross Sales
Clause in the lease as repayment. Extended vendor terms for purchase of
product may provide short-term operating capital loans.

In the event that additional credit strength is required, loan guarantors or
borrowing someone¡¯s credit may help the borrower qualify for less
expensive financing. Be flexible. Your final package may be comprised of
several lending solutions

PRESENT A CLEAR AND UNDERSTANDABLE PROPOSAL Lenders need to
know who you are personally, professionally and financially. The lender
needs to evaluate Income Tax returns (Corporate and Personal), financial
statements (income statement and balance sheet) and a cash flow
projection. The balance sheet has to look a specific way. The Current
Ratio should be at least 1:1, and the Debt to Equity Ratio should be at
least 4:1.

Be specific as to how the money is going to be used and how it will be
paid back. Lenders want to know what is securing their debt. Lenders
evaluate the quality of the collateral, and want to insure that it is
adequate to secure the debt in case of default. A secondary source of
repayment is required prior to granting standard financing. The personal
guarantee of the borrower is often required. In some situations, a lender
may seek secondary collateral. Secondary collateral is simply some other
asset in which you have equity or ownership, i.e. equipment, property,
inventory, notes. Business funding is not difficult if the borrower is
creative and realistic. Know how much money you need and how you are
going to use it. Be prepared to defend your needs and anticipate the
lender¡¯s questions. In the event that a lender cannot grant your request,
perhaps it is the way a loan is packaged. Find a lender who is willing to
make recommendations that will help you find financing. A good lender
will tell you quickly if they can help you or not. If an intelligent and
organized package is presented, a timely response is warranted.

The loan can be repaid over any term between 5 and 25 years,
depending on your available income and the amount of equity in the
property that is to provide the security for the loan.

Debt is a hard thing to live with, reduce debts today! Online processing of
loans is of special help in making instant loans possible. Online processing
of loans does not simply mean using a computer for sorting and arranging
data. Repayments options have to be studied carefully and understood
before you apply for secured personal loans. Most people repay their
secured personal loans before time and usually early repayments carry
repayment penalties. Rate of interest very appropriately depends on the
loan amount, repayment term and personal condition.

There are lenders in the UK who can arrange loan for you and that too at
a lower rate of interest.

The Federal Direct Unsubsidized Stafford/Ford Loan is a direct loan the
government charges you interest while you are in school.
 
 
About the Author
Learn more ways to reduce debts today.

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