Understanding Small Business Finance

If you are an entrepreneur, then you know that there is always a need for small business finance to keep things going. Being able to get the money that is needed for your business means that you need to make several financial and non-financial considerations.

Firstly, before you search for funding for your business, it is important to know what type of financing required. Would the business need debt financing (a loan for running your business) or equity financing (money that is taken from savings or investors)?

Small business finance through debt financing means taking loans from credit unions, banks and other traditional financial institutions. Among the loans that are available are short-term loans which must be repaid, with interest, within a specific period of time. Such loans may be termed as demand loans as the lender can call in the loan for repayment any time. Small business finance longer debt loans are normally used for financing assets like renovations or investments in equipment.

There are many businesses that make use of lines of credit as a source of small business finance. They make arrangements with lending institutions for a set amount of available credit that they can draw upon when need arises. Lines of credit allows businesses to use the cash when they need it and they only need to pay back the amount that has been used and interest is paid on the outstanding balance of the line of credit. Numerous lending institutions offer credit cards as a means of small business financing. These cards are used by establishments to finance their operating expenses. But, credit cards can be expensive because of the interest rates. The cards are ideal for use if the balance is paid in full monthly.

Small business finance through equity is normally used in a limited manner. Informal source of equity funding includes friends and family; while the formal sources include venture capitalists. Venture capitalists generally have a considerable pool of resources that allow them to finance ventures and participate in some of the more crucial decisions in the business. However, these capitalists conduct studies before making the decision to provide funding.

There is also some equity small business finance that are received from people who are called as “angel investors”. These are normally people who have deep pockets and are willing to provide funding.

100 Financing Investment Property

100 financing of investment properties refers to 100% financing from outside for your investment in real estate. Funds that are brought from one’s own savings, on loan from friends or relatives are in a way not much different from capital whereas real debt or Investment property financing comes from financial institutions. These entities – banks, mortgage firms and lending organizations like credit unions — lend funds to the applicant on the trust of a collateral security or based on the income, credit-worthiness and repayment capacity of the individual. Even if these criteria are satisfactory, an investment property financing institution may ask to be shown the business plan of how the applicant means to generate income using the pieces of property he or she means to buy and consequently pay off the loan or conclude the mortgage. The lender has the right to know how the business is going to be conducted because the revenues of this business determine how fast the loan is going to be repaid. With the turn in the economy, 100% financing investment property has almost been done away with.

100 financing investment property

In the United States, there are three credit bureaus, Equifax, Experian and Transunion, that maintain records of the lines of credit extended to each individual and how they are being handled. The credit reports formulated by these bureaus reflect how many credit card accounts a person has, how many times he or she has defaulted in payment or gone over the credit limit; other forms of financing availed by the individual such as home mortgage, auto finance or student loans, are also listed. Lenders and creditors have access to these credit reports and use them to check if an applicant is worth the risk of being given a loan. The exact features that point to an applicant as being risky can be found out after a professional analysis of one’s credit report. A high Debt to Income ratio and loan to value ratio are some of the red-flags. These areas have to be improved so as not be saddled with an exorbitant rate of interest and terms that are not favorable to the borrower. Some unfavorable terms are floating interest rates that send the finance charges through the roof upon a single defaulted payment. To prevent this eventuality, it is better to choose a deal with a fixed (flat) interest rate or a low ceiling rate on the interest rate slab.

Lending fees, high interest rates, discount points (another form of lending fees paid upfront to prevent the interest from racing up) can actually break the bank. In fact, there are many cases in which discount points have been deceptive and one ends up paying more for them, than the actual interest (finance charges) that would have been paid if the interest rates did go up. To prevent such goof ups, it is a good idea to take estimates from two or three lending organizations, compare their offerings and then choose the one that appeals most to one.

The worst pitfall to guard against is when some lender tells you that you are eligible for 100% financing of investment property. Those idyllic days are over. In fact, they are past their sell by date because there were not so idyllic. There may be such plans available on subsidy from the government for the exclusive use of first time homeowners who belong to the low income group. But this does not include investment property dealers. Traditional methods of 100% financing are now called owner financing and are still available but they are not an attractive option. It is not surprising that requests for owner financing are viewed with suspicion of default by lenders and therefore, that avenue is best avoided.

Benefits of the Referral Process With a Unique Small Business Financing Program

This unique small business financing program offers many benefits, and not just to small business owners. This program allows referrals, and this can help you make a nice sum simply for referring small business owners to the program. The referral program is a situation where everyone involved wins, and there are no losers. This program requires no credit checks, tax returns, or any of the other documentation that is usually required. It is one of the best available small business financing options, and the referral program means that you can earn extra money simply by telling other small business owners about this fantastic program.

Referrals are paid for by the lender to help identify other small business owners who could benefit from this program. Many small business owners have networks of other small business owners, who may belong to the same trade groups or associations. In addition, many of us know people who own a small business and could really use financing right now to help in these tough economic conditions. The referral process is very easy, and takes almost no time at all. Anyone you refer will put your name as the referral source on the paperwork, and when your referral qualifies for the financing then you are paid a referral fee. You get money simply for helping an acquaintance or friend get the money they need for their small business. This financing program is risk free, because the processing fee is completely refundable if you are not one hundred percent satisfied with the amount of financing offered.

The referral program offered by this financing opportunity means you can help out any small business owner you know or meet, and benefit from it. The extra income you can make from referrals can really come in handy, especially with the slow economy and financial crisis that is raging. The best part is that this small business financing program sells itself, because of all the benefits offered and the fact that there are no disadvantages. You do not not to push to sell the benefits of this financing program, once small business owners realize the enormous potential and the ease and convenience offered. Financing is critical for any small business to grow and expand, and the financial crisis has made getting this financing extremely difficult from banks and other traditional lenders.

This new and unique small business financing program is a lifeline to small business who need financing but do not meet the perfect credit and documentation requirements that are needed in the current climate. The referral program means that you can get the small business financing you need plus earn some for telling people about the program you use. Unlike all the other financing options, this program is very flexible, and requires a small amount of documentation. Bad credit is okay and can still get approval. This program has helped many small businesses get back on their feet by providing the financing needed. The fact that you can earn money for telling people about this fabulous financing program is just another benefit, for a program that has many.

Small Business Financing Options – Despite the Credit Crunch

There’s no question that the financial crisis and ensuing credit crunch have made it more difficult than ever to secure small business financing and raise capital. This is especially true for fast-growth companies, which tend to consume more resources in order to feed their growth. If they aren’t careful, they can literally grow themselves right out of business.

Amidst all the gloom and doom, however, it’s important to keep one thing in mind: There are still options available for small business financing. It’s simply a matter of knowing where to look and how to prepare.

Where to Look

There are three main sources you can turn to for small business financing:

Commercial Banks – These are the first source most owners think of when they think about small business financing. Banks loan money that must be repaid with interest and usually secured by collateral pledged by the business in case it can’t repay the loan.

On the positive side, debt is relatively inexpensive, especially in today’s low-interest-rate environment. Community banks are often a good place to start your search for small business financing today, since they are generally in better financial condition than big banks. If you do visit a big bank, be sure to talk to someone in the area of the bank that focuses on small business financing and lending.

Keep in mind that it takes more diligence and transparency on the part of small businesses in order to maintain a lending relationship in today’s credit environment. Most banks have expanded their reporting and recordkeeping requirements considerably and are looking more closely at collateral to make sure businesses are capable of repaying the amount of money requested.

Venture Capital Companies – Unlike banks, which loan money and are paid interest, venture capital companies are investors who receive shares of ownership in the companies they invest in. This type of small business financing is known as equity financing. Private equity firms and angel investors are specialized types of venture capital companies.

While equity financing does not have to be repaid like a bank loan, it can end up costing much more in the long run. Why? Because each share of ownership you give to a venture capital company in exchange for small business financing is an ownership share with an unknown future value that’s no longer yours. Also, venture capital companies sometimes place restrictive terms and conditions on financing, and they expect a very high rate of return on their investments.

Commercial Finance Companies – These non-traditional money lenders provide a specialized type of small business financing known as asset-based lending (or ABL). There are two primary types of ABL: factoring and accounts receivable (A/R) financing.

With factoring, companies sell their outstanding receivables to the finance company at a discount of usually between 2-5%. So if you sold a $10,000 receivable to a factor, for example, you might receive between $9,500-$9,800. The benefit is that you would receive this cash right away, instead of waiting 30, 60 or 90 days (or longer). Factoring companies also perform credit checks on customers and analyze credit reports to uncover bad risks and set appropriate credit limits.

With A/R financing, you would borrow money from the finance company and use your accounts receivable as collateral. Companies that want to borrow in this way should be able to demonstrate strong financial reporting capabilities and a diverse customer base without a high concentration of sales to any one customer.

How to Prepare

Regardless of which type of small business financing you decide to pursue, your preparation before you approach a potential lender or investor will be critical to your success. Banks, in particular, are taking a much more critical look at small business loan applications than many did in the past. They are requesting more background from potential borrowers in the way of tax returns (both business and personal), financial statements and business plans.

Lenders are focusing on what are sometimes referred to as the five Cs of credit:

o Character: Does the company have a strong reputation in its community and industry?

o Capital: Lenders usually like to see that owners have invested some of their personal money in the business, or that they have some of their own “skin in the game.”

o Capacity: Financial ratios help lenders determine how much debt a company should be able to take on without stressing the finances.

o Collateral: This is a secondary source of repayment in case a borrower defaults on the loan. Most lenders prefer collateral that is relatively easy to convert to cash, especially equipment and real estate.

o Conditions: Conditions in the borrower’s industry and the overall economy in general will play a big factor in a lender’s decisions.

Before you meet with any type of lender or investor, be prepared to explain to them specifically why you believe you need financing or capital, as well as how much capital you need and when and how you will pay it back (if a loan) or what kind of return on investment a venture capital company can expect. Also be prepared to discuss specifically what the money will be used for and what kind of collateral you are prepared to pledge to support the loan, as well as your sources of repayment and what measures you will take to ensure repayment if your finances get tight.

You should also ensure that your financial statements and records are current and that your internal control systems are adequate for handling the level of accounting and bookkeeping lenders and investors expect.

How to Successfully Capitalize on Special Finance Leads?

In a highly competitive market, it is very difficult to generate quality special finance lead by the dealers. The process results in unnecessary wastage of time, energy, and money. In spite of spending a lump sum amount on advertisement and on running PPC campaigns in Google, still a dealer fails to produce the desired number of leads to meet the monthly target. Dealers who cannot generate their own leads depend on the professional lead providers to supplement the flow of new sale opportunities.

All providers produce new sale opportunities through their own marketing efforts. They usually have a couple of websites for an effective auto lead generation. Through advanced adverts offline and online and use of social media, the highest quality of leads are generated in real time. Pay-Per-Click (PPC) campaigns are used extensively to generate as many leads as possible.

When sending the leads to the dealer client, the professional lead generators ensure they are sending only the best quality leads. A team of efficient professionals works to separate the good quality leads from the bad ones. Usually a provider uses a lead tracking software to track the number of leads coming from different sources from websites, landing pages, blogs, advertisements, etc.

Bad quality leads are generated when so-called potential car buyers don’t respond to calls being made from the lead generating company’s office or for that matter don’t reply to the emails sent at least 48 hours ago. Such sets of people are termed as ineffective leads and the list containing the personal details of such individuals are not sent to the dealer. Effective leads are those that respond instantly to a call or an email and show a genuine interest to buy a car.

There is a misconception amongst many dealers that the providers send a lead’s personal details to multiple dealers. The lead generating companies have teams that check whether the same leads are being sent to more than one dealership or not. Cross checking of leads received should also be done on the dealer’s part to reject duplicate leads.

The reason for the huge popularity of the external lead generators lie in the fact that they guarantee the generation of maximum high quality leads. Once people fill up an online inquiry form to learn more about a dealer and the auto loan application and approval procedure, the generator instantly starts following up with those people. Through regular communication and responding to the queries of potential car buyers, special finance lead can be generated successfully.

Experienced service providers spend all their time in doing quality research on the type of target audience a dealer wants to have. The providers will use the latest, innovative marketing strategies to create a long lasting impression in the minds of the people. One of the best chances to increase visibility is to have a strong presence in various social media web platforms for maximum auto lead generation. Through maintenance of social media accounts and regular posting of interesting articles, relevant news, photos, and videos on Facebook, Twitter, LinkedIn, Google+, and so on grabbing the attention of potential car buyers can be increased to a large extent.

Matthew S Barredo is an expert researcher of special finance lead. He has over 7 years of experience in the genre of finance auto lead and the same. In this article, he has tried to educate the readers about choosing an ideal car lead generating company and auto lead generation for steady sales and profit.