General Business and Finance Blog

With the increasingly chaotic investment climate for residential financing in the United States, more residential real estate investors are exploring commercial property and business finance opportunities. It is important for prospective business owners and investors to educate themselves about options for the business loans and commercial mortgages they will be needing.

Environmental requirements for business finance will be a complex issue for numerous business investments. Environmental issues involved in a business loan will primarily depend upon the commercial lender as well as the type of business. More extensive requirements can impact both the cost and timing for a commercial mortgage loan.

Tax returns and financial statements for a business loan are likely to be a concern for all commercial borrowers. Whereas residential mortgage financing is likely to involve only personal tax returns, most business financing will include a review of business tax returns as well. Business financial statements and personal financial statements will be required for certain kinds of business opportunity financing and commercial real estate financing.

Secondary financing will often be a means of acquiring desired commercial loans. The use of seller financing or secondary financing is a prudent business financing strategy to reduce capital requirements for the borrower. Secondary financing will not be accepted by all commercial lenders.

An unexpected requirement for many commercial loans involves sourcing and seasoning of funds. When purchasing a business, some lenders will require that borrowers document where the down payment is coming from (sourcing) and how long the funds have been in that location (seasoning). If a borrower cannot adequately provide this documentation, the choice of commercial lenders will be more restricted.

Collateral and cross-collateralization for business loans will be an insurmountable obstacle for some commercial borrowers. Collateral requirements for business financing will depend on many factors such as down payment, type of business, credit scores and the type of financing needed. Cross-collateralization refers to lender requirements involving personal collateral such as a home used as collateral for a business loan.

Any requirement for a business plan when obtaining commercial mortgages is likely to be expensive and time-consuming. A business plan is not always required for a business loan, but when one is required this will add significantly to the cost and length of the loan process.

An increasing problem for commercial borrowers seeking refinancing is an unreasonable limitation for getting cash out of the new loan. Commercial lenders differ significantly regarding restrictions imposed on the amount of cash out to the borrower when refinancing. Some lenders will not permit any cash out whatsoever while others will limit cash received by the borrower to a particular amount. The preferred approach is to use a lender that will allow cash to be paid out up to an agreed loan-to-value (frequently 75%).

It is important to to thoroughly analyze business financing lockout penalties. A lockout penalty is much more severe than a prepayment penalty in that such penalties can effectively prevent a commercial borrower from selling or refinancing during a prescribed period (often two to five years).

In addition to the issues noted above, numerous other key business finance and real estate mortgage issues will also be important to evaluate. Commercial mortgage requirements are very different from residential financing requirements in the United States. We have prepared several other business finance overviews addressing additional factors that will be significant for most commercial borrowers. Separate report topics include SBA loan refinancing, business opportunity financing, stated income business loans and commercial appraisals.

If you want to set up or considering setting up a business of your own, you must bring one thing in mind. You must know that you will need money to make sure that the business functions as it ought to. For the purposes of this study, we shall think of business finance as all the money that will be required for the smooth functioning of the business. This will include money from a variety of sources such as loans from lending institutions, cooperatives and these loans may be acquired either on short term or on long term bases. One thing that should be borne in mind is that it is necessary for every person to understand the fundamentals of business finance. This study is not only meant for those coming into business for the first time. Keep in mind that at every stage in the business, there will be a need to finance to expand, transform or even give a new facelift to your business. The good side about this study us that it will enable you to know where you can seek for finance for your business, it will help you to better manage these finances so that you should avoid falling into debts by paying your loans and it will equally let you know what type of loan is appropriate or not for your business.
Knowing the Essentials of Business Financing
Ahead of opting for any source of finance that might be open to you as an investor, there is always an obligation for you to not only become aware, but to understand and appreciate the importance that financing has to do to your business. As of now, one of the sources of finance to your business is venture capital. Venture capital will refer to a venture group that is willing and able to pump in finance to your business. But it should be kept in mind that this is done with the intension that the venture group will become part of the business. It will have to take part in the running of the business and equally in the profits of the business. In some cases, the option of an angel financing may also be available. This is a situation in which high risk ventures will be financed for the reception of high profits. Another source of financing is corporate venture capital financing. This is almost the same thing with venture capital but the difference is that groups and not individuals will be involved into the financing. You can also think of taking a loan from a bank or any financing establishment.
If you are an experienced financier, you will realize that identifying and making use of these sources of finance is easily done if you are aware of all the essentials of business financing. This will be difficult for the novice. What has been realized is that most lending institutions have already created and developed some form of confidence with those already in business, plus the fact that they think their money will be better protected with those who already have some worth to prove.
It May Be Necessary To Integrate Your Business When Seeking For Financing
The rationale for confidence building will vary from one lender to another and will also depend on the lender’s personal conviction about the business. It is normal that every lender will want to scrutinize and make use of any former financial record of a business before it can give loans to that business. In other cases, it is known that sources of finance may be easily opened to groups of business than to individuals. This is the more reason why you must understand all the essentials of business financing before making an application for it. Sometimes, it is necessary that as a sole proprietor, you may decide letting a takeover of your business. This is to give your business a positive credit worth so that it can stand a good chance of being financed. But you must make sure that you seek expert advice in doing this. Remember that there are so many essentials in all of the above and you must be skilled enough in these before you can achieve any success.

If your business still does not have a merchant account that allows you to offer full credit card services, you are turning your back on profits. Just take a look at all of your competitors. All of those that pose serious competition accept credit card payments. Those that do not have credit card services do not have great sales figures to show, either. Even statistics point to the fact that companies that have credit card services earn much more than companies that do not have credit card services. The average credit card sale is $40 while the average cash sale is only $9. That means you are losing potentially $31 per sale.

You may also be spending more by accepting only cash and check payments in your business. The processing of cash and checks has been found to be more costly, requiring more manpower in handling. Studies have shown that the average processing cost of credit card payments is only 2.7% of a transaction while the average processing cost of checks is 4% of a transaction and the average processing cost of cash is 4.8% of a transaction. Once again, you are leaking profits by refusing to accept credit card payments.

So how do you accept credit card payments in your business? This is where credit card services come in. The old route is to apply for a merchant account in a bank. You will then have to lease the software and equipment necessary to actually process payments and send the data to your account. If you want to accept credit card payments online, you need to apply to a payment gateway that allows real time credit card authorization for online transactions. You should ensure that your payment gateway is compatible with the bank or financial institution where you have your merchant account, and with the software and equipment you have leased.

In choosing the bank or financial institution for your merchant account, consider their expertise in combating fraud and reducing chargebacks. Also make sure that they are experienced in handling merchant accounts with online transactions.

If you are a small business owner, stick to a bank or financial institution that caters to small businesses rather than large companies. You may be able to get better rates and packages designed for your specific niche.

There are options for credit card services that offer everything you need in one easy package. You will not have to deal with various entities or go through various procedures. Often, these options also have added benefits, among them, quick reporting on your credit card sales figures. They may also offer interest on your credit card sales income, even up to money market rates.

One very important feature of your credit card services that you may not know of is that it can automatically qualify you to avail of small business loans. Once you have established a record of sales through credit, most credit card services will allow you to make cash advances that are practically like getting previously approved small business loans without having to put up any required collateral. The credit card services consider your future income through credit card sales as your collateral. This can go a long way in further growing your business.

Payment will not be a problem, either. For as long as you have sales through credit payments, you automatically get to pay your small business loans. It does not matter how much your sales are. Your payments are automatically deducted as a percentage of your sales. You are always covered.

Now do you still need further convincing on the benefits of credit card services for your business?

Getting a small business loan for the first time can be a stressful experience, especially during these hard times. Getting a loan from the bank, especially now has also fallen into hard times. So here are plans A and B to help you start your own small business. Plan A is for acquiring a small business loan from the bank, and plan B is your contingency plan, so take notes,PLAN AKnow yourself. Before approaching a bank or any other lender, be sure you know your own history in terms of personal credit. Is your credit history good or bad? Due to the current recession, you can be sure to see that banks have become more strict in reviewing records before making any decision for business loans. You can obtain your credit history from companies like TransUnion, Experian, or Equifax via fax, mail or online.  Also, be sure to check if the records are right. Companies with credit card services sometimes make errors in logging cancellations or adjustments to your credit limit. These misreported transactions in the past  may appear as available credit to the bank.Prepare a competitive business presentation. A good presentation should initially be able to make the bank understand what you plan to do with the money and not simply WHY you need the money. Remain objective in your explanations and try not to attach too much personal reasons in your answer. The bank’s concern is not with you, but with the money they will give you. A cash flow projection will be of good help during your presentation because the bank can quickly assess the benefits and risks for them. However, a cash flow projection is different with a cash flow statement. The projection is an expectation on how money will come in and out, while a statement shows how money arrives and leaves the business. You can make a projection on a monthly basis over one year for a better outlook of your expectations for the business. Prepare other documents. You may need to present other documents like a credit rating report. Though this is not an actual requirement, it will still be useful for the bank to know your loan payment history and other dealings with other credit card services. After all, most banks only approve businesses that are able to accept credit cards.Get to know the bank. It is also important to do a little research on your lender’s point of view. Again, the first question in the bank’s mind is, “what are you going to do with our money?” The second question would be, “Why should we risk our money for your business?” Providing the bank with the right answer boosts your chances of getting that business loan by more than 50% of the time. Bear important facts. You need to be honest to the bank on certain areas like, how much money are you willing to put in to the business, the collateral you currently have, and how much do you really know about the industry you’re planning to venture in. Enduring the bank that you’re not completely in the dark on your planned business will somehow put their minds at ease with regards to the loan they will be giving you.PLAN BIf all else fails with the bank, do not despair. There are other means of acquiring small business loans for yourself. Many business cash advance companies are now available to serve you. Borrowing money from these companies are relatively easier than getting one from a bank. They will review your credit record but they are less strict in terms of seeing a few bad records on your history. With a business cash advance, you will be able to start your own small business, expand, pay off debt or taxes, and get emergency funding. However, make sure that the company you will be applying to is legitimate with negotiable terms with payment.Good luck!

More and more people are setting up home businesses these days. Some of them may have been laid off from work. Others may have found difficulty finding employment. Still others may have chosen to change careers midstream after finding their true passion and deciding to make a living out of it. Setting up a home business gives you much more freedom than regular employment. You are now your own boss. It gives you more time with your family and for yourself. It eliminates the stresses of the workplace and the fatigue of commuting to and from work. This redounds to better physiological, psychological and emotional health and greater productivity. It is also a good way to start going into business because of the lower start up costs. You save a lot on overhead expenses by having your office in your own home.Despite the low start up costs of a home business, it is not a free ride. You will definitely still need some additional capital as you go along. The good news is that you can start very small and, because of this, you need not approach those intimidating banks and financial institutions for small business loans. After all, it is common knowledge that not only is the process of applying for small business loans lengthy and complicated, but approval is also mostly withheld anyway.What you should do is approach a merchant service, instead, and apply for credit card services. What has this got to do with your need for small business loans? A lot. Through the same merchant service from whom you get your credit card services, you can get cash advances that are just like small business loans, albeit with lower ceilings. That would not be a problem given your smaller capital needs.But what are credit card services? Is this the same as applying for a credit card? No. It is actually the other end of the equation. Credit card services allow you to accept payments through credit or debit cards in person, through the internet, by phone and by fax. The merchant service provides you with terminal equipment for physically swiping the cards and the software and high speed IP solutions necessary for all kinds of transactions.Having credit card services is actually necessary for practically any home business that is involved with sales. The ability to accept debit and credit card payments will boost your income. Having multiple payment options, such as person-to-person, online, phone and fax payments, will further attract more customers.Most merchant services require only a short minimum period to determine your business’ capability to generate credit card and debit card sales. Your average monthly income through your credit card services will be the basis for the amount of cash advances you will be allowed to make. You will not be required to put up any collateral at all. It is like getting pre-approved small business loans. But there’s more good news. You need not scrimp and save to muster enough cash for loan repayment every month. All you need to do is attend to your business and its profitability. As your credit and debit card payments roll in every month, a certain percentage is automatically paid to the merchant service for your loan. You need not worry about it since you will always be able to afford your payments. Your customers will ensure that. As your business grows and your sales multiply, you may qualify for bigger and bigger cash advances that you can use to further expand your home business. And you’re on your way to the big time.

Since June 15, 2009, the United States Small Business Administration has been processing deferred payment small business loans of as much as $35,000 to be given out to 10,000 small businesses. This is covered by the SBA’s America’s Recovery Capital (ARC) Loan Program.To qualify, companies should be private enterprises that are for-profit. They should have up to five hundred employees only and should be at least two years old. Furthermore, they should be able to prove financial need with a twenty percent decrease in sales, revenue or working capital. On the other hand, they should be able to prove that one of their two years in business has been profitable, and that with the infusion of cash they will be able to meet their existing and future debt obligations. This means positive cash flow projections. The ARC small business loans are intended to be used to pay outstanding debt such as payables to vendors. For this batch of small business loans, there are no fees or costs involved, except if the borrower defaults on the loan later. In that case the SBA-approved lender can charge costs for securing and liquidating collateral. The ARC small business loans also do not charge interest. Actually, the SBA pays the interest for the borrowers. Disbursement of the loan can take as much as six months but payment of the principal is also deferred for the next 12 months. After that, the borrower has five years to repay the loan principal.Each small business can only avail of one ARC loan. SBA-approved lenders will offer the loans until September 30, 2010 or until available funds run out, whichever comes first.There are, however, an estimated 30 million small businesses in the United States and only 10,000 of them can avail of the government’s small business loans. What if you do not happen to be among the 10,000 lucky recipients? How will your small business survive? There are even doubts being raised on whether as much as 10,000 businesses can indeed avail of the ARC loans. There are fears that there may not be enough lenders willing or able to participate in the program. Lenders will have to advance the full amount of the loan, will not receive payment on principal for a full year, and will not be able to charge any fees, thereby absorbing all administrative costs. This may be too steep for many lenders. They may not be able to afford to participate at all.This is where you as a small business owner can and should maximize your credit card services. We are not talking about your personal credit card services here. Instead, we are referring to the merchant services that enable your small business to receive credit card  and debit card payments. Surely, any business these days avails of these types of credit card services. After all, more people pay by credit card or debit card rather than cash.Most credit card services offer small business cash advances that can be as substantial as small business loans. These small business loans do not require any collateral because they are secured by your company’s future credit card receivables. This is even more convenient for your business because repayment is also built into those receivables. Credit card services automatically deduct a percentage from your income to go toward loan repayment. For as long as you have incoming sales, you can support your loan. Interest rates are often quite affordable considering how the loan can help your business.Small businesses should therefore look into maximizing these credit card services for small business loans. The survival of your business could hinge on this.

The global financial crisis has made it quite difficult for companies, especially small businesses, to get business loans. Ironically, it is also in this situation that smaller companies often need additional capital infusion to boost income. You may need to get small business loans to acquire a better business location, construct a new building, renovate your premises, pay for new equipment, fixtures or furniture or increase inventory and working capital. Most Small Business Loans Require CollateralTo get business loans, even small business loans, is a major challenge. First you need to identify which among the many types of small business loans you need. Small business loans ranging from $5,000.00 to $35,000.00 are called micro loans. For larger needs, such as for the acquisition of land, buildings and other major fixed assets, development financing is what you should find. There are also import export loans as well as franchise financing. Do your research to find out if you are qualified for small business loans guaranteed by the U.S. Small Business Administration or SBA. Any of these small business loans will require extensive preparations and paperwork. As a small business owner, you will need to prove your credit worthiness through a personal credit history report. Lenders will also require a business plan which includes your credentials as the business owner, your company financial statements, business assets and an analysis of your market. All of these should be packaged in a professional loan proposal which presents how the loaned amount will be used to strengthen the business and how you intend to repay the loan. Most of all, you need to present your loan collateral – the assets you will put up to secure the loan.  Quick and Easy Small Business Loans with No CollateralFor smaller acquisitions or day to day business needs, there is a way for entrepreneurs to get small business loans easily and quickly with no collateral. This is through merchant services.Merchant services provide credit card services to businesses. This enables them to accept and process payments through credit cards or debit cards either through face to face purchases, online transactions, or even by phone or fax. Merchant service providers supply terminal equipment for card swiping, as well as the necessary software and high speed IP solutions.Most businesses need credit card services since consumers routinely pay for goods and services through credit cards and debit cards these days. If your business has not taken this step yet, you may have been missing out on more than half of your income potential.These same merchant services also provide the solution for your small business loans. Collateral-free loans can be availed of through their cash advances, with the loan amount computation based on the monthly credit card revenue your business generates. Credit card sales requirements may be as low as $3,000.00 a month. You will not be asked for collateral since your future revenue is your collateral.  The best types of merchant cash advances do not require fixed monthly payments nor do they impose deadlines on loan payment. A certain percentage is instead deducted automatically from your credit card revenue each month to go towards loan payment. This way, you never have to worry about loan amortization.Once your cash advance has been fully paid, you may apply for another one. It is like having a revolving credit line. Make sure that you compare the terms of several merchant service providers, though, and read the fine print on contracts. There are so many merchant service providers competing for your business that you’ll surely find one that fits your needs.

In the midst of the global economic crisis, many small businesses are on the brink of closing down if not enough capital infusion is found. It is now even more difficult to get small business loans from banks, though. Ironically, the exact reasons why small businesses need such small business loans – the fact that business has slowed down and profitability has plummeted – are the same reasons why banks turn them down for loans.Small businesses now have to be more resourceful in finding alternatives to small business loans.Government Grants and Contracts Instead of Small Business LoansThe American Recovery and Reinvestment Act signed by President Obama in February 2009 caused the pumping of billions of dollars for the revitalization of the economy. Because of it, there are plenty of government grants and contracts available to small businesses. These can be alternatives to small business loans.But how can small businesses avail of the stimulus program?The Association of Procurement Technical Assistance Centers (APTAC) has the responsibility for helping small businesses obtain and perform federal, state and local government contracts. It has Procurement Technical Assistance Centers (PTAC) throughout the country, ready to help small business owners to get registered and find opportunities in the area of government grants and contracts. Counselors assist small businesses in filling out bids, proposals and quotations.The PTAC holds seminars teaching small business owners all the ins and outs of government legalese, including acronyms and registries. A one-day seminar with PTAC covers what small business owners may take months to learn on their own.The PTAC then helps small businesses with Central Contractor Registration (CCR), a requirement for doing business with the federal government. This registration can be so complicated that some companies take two days to do it when the PTAC counselor can help them get through it in 15 minutes.Local PTACs will be of help in acquiring state and municipal contracts.Other resources that small business owners should consult include the Small Business Administration (SBA) which also coordinates with the APTAC; the General Services Administration (GSA) which acts as the government’s purchasing department and provides information on becoming an approved vendor; the Federal Business Opportunities website (fbo.gov) where federal contract opportunities currently available are posted; and the Small Business Innovation Research website (sbir.gov) where grant and funded research opportunities for small businesses are listed.Cash Advances from Credit Card Services Instead of Small Business LoansAnother alternative to small business loans are cash advances from credit card services. This option is much easier than winning government grants and contracts.Most small businesses are already availing of credit card services that enable them to accept payments by credit cards or debit cards. This is practically a requirement to doing business these days, with people hardly paying cash for goods and services. Many small business owners do not know that they could avail of cash advances from these credit card services, though, and that such advances can actually equal small business loans. The amount that a small business can borrow is based on its average monthly income from credit card sales. This is so because the cash advance does not require collateral and future sales receivables from credit cards stand as the collateral. Payment will also be done through automatic deductions from those future credit card sales. There will be no set monthly amortizations. Instead, a certain percentage of the sales will be allotted as payment. The small business owner, therefore, need not worry over where to find cash for loan payments.Cash advances from credit card services are the best bet of small business owners as alternatives to small business loans.

Most people love to own a business of their own and attribute various reasons for this desire. In spite of this burning desire to own and operate a business they are very hesitant to put their best foot forward and venture out. What holds them back from Starting a New Business is certain Fear Factors indicated below.

1. No Self-Confidence:

They fear treading into unknown areas they have never been before. They don’t have the confidence of grappling with new problems and new issues that are bound to arise in their business. They are negative thinkers. They are more worried about failure rather than think positively about success.

2. No Money for Investment:

Since money plays a major role in starting a new business, it is important that you find ways and means of obtaining the money. The fear that hovers over their minds all the time is that they could loose their money in the event of their business ending up in failure. Hence they are unwilling to convince others to invest in their new business venture because within their hearts they are themselves pessimistic about the success of their own venture. This same fear restrains them from obtaining loans from lending institutions as well.

3. No Knowledge and Skills:

Most people who shy away from starting a new business or enterprise often give the excuse that they don’t possess the knowledge, skills or the expertise to set up a business. One need not possess all the skills and the expertise necessary to run a business. In fact many successful businessmen do not possess them either. You can get over this by employing people with the necessary skills to work for you or seek the advice of a business consultant. You too could upgrade your knowledge as you go along.

4. No Ideas:

Though money is not a problem to some but lack of ideas is indeed a major problem since they are unable to choose the right type of business. Identifying and choosing a Niche Business or a business that serves the need of the community should be the prime concern. If you want to be successful it is important that you do some research and set up a niche business, rather than a business that you love to do.

5. Bad Time Management:

Have we not heard people saying, “I simply do not have the time to do my present job and my other activities, how will I ever find the time to run a business?” Running a business does not consume more time than your job. It is not a question of insufficient time but it is your time management that is at fault and needs looking into. How well you manage your time is very crucial for the success of your business.

6. Bad Temperament:

Ups and downs are inevitable in business. The fear of encountering failure and the inability to face the consequences of this frightens them. A balanced temperament that can face successes and failures equally and withstand all kinds of pressures associated with it is essential.

7. Fear of Stress:

Whether you are on an 8 to 5 Job or running your own business you can undergo stress. Stress is not confined to business alone. Unfortunately some people fear that by running a business they could be unnecessarily stressed thereby creating health and family problems. Stress can be avoided with proper time management and avoiding the tendency to procrastinate.

Conclusion:

Paying undue attention to the above factors automatically creates a sense of fear and prevents you from giving serious thought to starting a new business. Thinking positively and associating with positive thinkers and go-getters will give you the courage motivation and confidence to take the first steps in starting a new business.