Tips To Apply Successfully For Funding

Let’s face it, if you don’t have a proven track record or some notable credit worthiness, it is tough to get financing. Risk factors and high costs of servicing small accounts are the major reasons for banks and financial institutions to stay away from people who don’t have a good credit history.

However, the silver lining in the cloud is – business finance, small or big, is the bread and butter for banks and other financial institutions. If you can convince them that you are a good investment opportunity, you are on!

Following tips might make your application irresistible for banks or other institutions.

1. Be Thoroughly Prepared: You need to satisfy the lenders regarding your track record and your future viability. The documentation required for this has been discussed in my other article All About Small Business Funding.

If you are just starting out, you need financial projections for at least next three years. A financial projection typically comprises of:

Estimates of your income and expenditure
Working capital estimates
Cash flow statement
Projected Balance Sheets
Precise loan utilization detailing
Profiles of decision making people i.e. top management who would be handling the project(s) for which you need financing
Comprehensive business plan
Some of these documents require professional expertise and you would need a professional accountant to prepare them.
You would also need the following documents apart from above mentioned documents, if you are already an established business and want a small business loan to fund your working capital requirements or your expansion plans.
Copies of the Balance Sheet, Profit and Loss statement, and tax returns of the company
Personal financial statements and tax returns for last three years

2. Anticipate Questions: You need to be well prepared, and need to have a fair understanding of the lending process to anticipate questions you are most likely to face.

Remember, lenders need to be convinced about your loan repayment ability. Ideally your business plan should also include answers to your banker’s questions. The most frequently asked questions are:

How much money do you need? Be exact! You can add a little extra for contingencies.
Long term or short term? Be prepared to go into detail supported by your documents, the time you require to repay the loan.
What are your loan utilization plans? Explain whether it is for capital expenses, working capital, and expansion or to set off old debts.
How you will repay it? You got your cash flow projections here to explain repayment time frame. Use your financial projections and business plan to convince the banker of your repayment capability.

3. Don’t Be Apologetic: Remember; banks look for good opportunities to invest. Be confident that you are one of the better opportunities the bank has come across and project that confidence to the banker. It is a deal on equal terms. Banks are not doing you any favor by giving you a loan. You are giving banks good business too. You are an entrepreneur who can and will repay the loan.

4. State the truth and back it. Bankers are very smart people. If you make any unsupported grand statements, take my word, they will see through it, and you will come out looking as someone who is desperate for a loan. And bankers don’t touch such people with a barge pole! Better idea is to keep your projections, documents, figures and your statements on the conservative side. You will cast an impression of a cautious and methodical person.

5. First impression is the lasting one. Dress in a professional manner for the interview. All the loan documents must be typed; handwritten documents look unprofessional. This is a business transaction, so treat it as such.

Last but not the least, a word of caution: getting approval for a business loan is good and you are almost through to your path to realizing your dreams. But don’t forget to read the fine print. Loans have hidden costs such as: annual fees, bank charges, closing costs, commissions, and balloon payments. So stay focused and clear-minded about these riders during the loan process. Be sure about your goals, keep focused and work according to the plan. Your small business finance requirement may turn out to be just the dose you needed to turn your dream big!

What You Will Need to Get Small Business Finance

Poor credit is no barrier to small business owners wishing to obtain business finance. When a small business owner plans to expand business and finds that he has already used up available sources of funding and getting additional finance through regular sources may be too time-consuming, then finance from “non-conventional” sources may be a better option.

What would be the requirements for a business owner to obtain small business finance?

A running business

Startups are precluded from obtaining this type of finance on soft terms. In order to be eligible, a business must be in operation for at least a year.

A minimum amount of sales per month

Someone who has started the business recently and is generating revenues of less than $ 10000 by way of credit card sales may not be eligible for small business funding unless the case is assessed and considered on other grounds such as a potential for growth that the owner can justify and support.

Documentary proofs

Small businesses are usually proprietary types. A business owner, even one with poor credit, should not hesitate to obtain small business capital even if it means paying a higher interest amount because it can help him get back on track to fast growth. The documentation is minimal. He needs to submit proof of ownership. The other documents he must provide are bank statements for the previous six months, proof of identity and proof of residence.

An applicant may wish to get small business finance within 3 to 5 days for which he should apply online and keep ready scanned copies of the above-mentioned documents. These may be uploaded along with the preliminary application. Should the application be approved he may be required to furnish printed copies.

What is not required for the small business loan?

• An applicant need not have a stellar credit history.
• He may not have to furnish collateral or mortgage property.
• He may not have to furnish a guarantor.

It is fast. It is easy. However, there are a few things to keep in mind. An applicant must consider the factor rate applied. This is a fancy term for rate of interest though it is not specifically so mentioned. Repayment may range from 3 months to even as long as 36 months and it is tied to the credit card sales as a percentage of daily turnover or a fixed monthly amount. Should sales be high repayment is completed in a shorter time. In real terms, an applicant may end up paying processing charges plus interest that can be as high as 50% because the loan is unsecured. The best thing to do is to examine the offer and obtain such funds only from a lender who does not charge anything upfront, no processing charges and applies a moderate interest rate.

How To Obtain Small Business Financing Help When Banks Say No

We provided advice a few years ago about what actions business owners should consider if their bank rejected a small business financing request. The earlier advice is now likely to be especially relevant for many businesses since banks are currently saying “no” more frequently than they have in decades because of a deteriorating commercial lending environment.

A bank saying “no” can actually lead to an overall improvement in commercial financing options under many circumstances, although a business owner is not likely to hope for the business loan rejection in the first place. With requests for needed business financing and working capital, small business owners are increasingly hearing their bank say “no”. Most commercial borrowers are often not sure what to do next since such an awkward situation represents uncharted waters for them.

Even for long-term and profitable customers, banks are routinely saying “no” to small businesses. It is now common to hear phrases such as “thinking outside the bank” and “business loans without banks” when talking about strategies small business owners might need to analyze because this has become such a widespread commercial lending problem.

When contemplating the possibility of banks saying “no”, there are two especially common financing situations likely to materialize for businesses. One of these involves working capital loans (including commercial lines of credit) and the other commercial real estate financing. While a small number of banks are still proving to be reliable sources for some business financing options, recent nationwide commercial lending reports clearly show a drastic reduction in commercial loans for commercial real estate financing and working capital loans.

Small businesses have only rarely pursued the option of replacing their bank. However, an astute business owner will quickly realize that they have little recourse but to pursue such a path when their bank says “no” to routine requests for business financing. Improvements to the overall financial health of a business will be achieved in a pleasantly surprising number of cases even though this search for new commercial finance alternatives is undertaken under protest by most commercial borrowers. It should not be overlooked that one or two banks often operate in a near monopoly environment in many communities and cities. Business owners are often pleased to discover that they can not only replace existing bank financing satisfactorily but also improve their bottom line in the transition when they have literally been forced to find new business finance options.

A prudent starting point for commercial borrowers to adequately evaluate how to get working capital and other business loans when their bank says “no” is likely to be a lengthy conversation with a small business financing expert. A critical step to eventual success in formulating a strategy for obtaining new sources of effective commercial finance funding is likely to be finding and selecting such an expert, but it should be realized that this is not likely to be a quick or easy task for business owners. Ensuring that the commercial financing expert chosen is totally independent and not affiliated in any way with the bank which said “no” is an especially crucial aspect not to be overlooked in locating a reliable expert to help.