Business loan − Business loan alternatives

Can’t qualify for a business loan? Don’t worry. Consider these easy to qualify options.

After weeks of answering questions, providing endless financial statements, and playing the “hurry up and wait” game, you find out that your banker is unwilling to give you a business loan.

Now what? Do you go to another bank and try again? Possibly. But most banks have similar lending criteria. If you did not qualify for a loan at one bank, your chances are not fair that you will be eligible for a loan at another place. However, it doesn’t hurt to try.

However, other financing products are easy to obtain – and in some instances – work better than a business loan. Here is a straightforward quiz:

Does your business:

  1. Have commercial customers?
  2. Invoice at least $10,000 a month?

Is your most significant challenge:

  1. Waiting up to 60 days to get paid by clients?
  2. Paying suppliers?
  3. Meeting payroll?

If this describes you, then you could be the right candidate for either factoring or purchase order financing. As opposed to bank loans, these two financial alternatives are easy to qualify. An essential requirement is that you do business with healthy commercial customers, such as big companies or the government.

Factoring is ideal for business owners that cannot afford to wait up to 60 days to get paid for their invoices. Factoring provides you invoice based financing, giving you the money you need to pay rent, suppliers, and meet payroll. As opposed to bank loans, factoring has no upper limits. The amount of money you get is based on your invoicing. The more you invoice, the more financing you qualify.

Purchase order financing is ideal for distributors, wholesalers, and resellers that have large purchase orders that they cannot afford to fulfil. Under a purchase order financing arrangement, the financing company pays your suppliers on your behalf and helps ensure proper shipping of the goods. The transaction is settled once you invoice your customer and they pay.

Both factoring and purchase order financing can provide you with the financing you need to take your business to the next level.

Business loans − Finding the right one

Business loans are not very difficult to come by these days as might be thinking. What with so many governmental and private financial lenders vying with each other for a share of the business loan market, there are brighter chances for businessmen and women to get one provided they have their credit ratings and documents right in place.

Small Business Loans

Small business persons feel the need for loans when they are short of investment at the time of start-up or when they find their business can do better if financed. Small companies can approach the US Small Business Administration (SBA) for loans tailored for different needs of companies.

Critical Analysis of Business Loan Needs

When it is time, you know you can’t proceed without financing either the expansion or augmentation of your business. But many conditions and issues need to be addressed critically at this stage.

  1. If yours is a start-up, it’s an uphill task as it is generally deemed that your credit history is still to develop. So much so, lenders perceive you as a risk. Financing most of it through friends and relatives plus own resources augers well initially by lowered interest burden.
  2. If the loan is for working capital, chances are better for you on the following counts. You have a credit history, credit score, possible assets for collateralization, and business experience plus ready market/orders.
  3. Business expansion loans are based on your projected growth in turnover and profit margins.
  4. Loan processing times play crucial roles in choosing loans and lenders. Choosing lenders that take longer may harm your business.
  5. A line of credit can suffice working capital needs some times. Here the rate of interest will not burden much as you pay only for the used portion.
  6. Nature of the need more or less decides the type and tenure of the loan, for example. The working capital requirement may be taken care of by line of credit; equipment or real estate purchase requires a long term loans (Basic 7 (a) loan-guarantee) etc.
  7. Also playing critically here is where you hunt for loans. Grants, SBA guaranteed loans have different interest rates, documentation, and processing than private institutions which process faster but have strict terms and conditions.

Loans benefit by retiring old debts at new, relaxed payment terms because of consolidation. If this is your intention, highlighting the different payables contrasted against each other stands a better chance. Lenders are quick to catch this point as the accrued benefits are in an unambiguous state.

Rather than anything, it is your innovativeness that opens avenues for loans. Rationalizing may even reduce the need from the original loan estimate.