Small Business Administration (SBA) Loans
As a new entrepreneur looking for capital, one of your first options for a loan will be the SBA, or to be exact, asking for an SBA-backed loan. SBA loan applications are made through a bank. The SBA guarantees a loan to the bank, so in case the borrower defaults, the bank is guaranteed a portion of the loan by the SBA. (You are still liable for the loan, so your obligation does not go away) This makes it easier for banks to lend to budding entrepreneurs, but it does not mean that the bank can lend indiscriminately. The bank will analyze the application to protect its interest as well as the SBA’s.
The SBA does not lend directly to the business owner. It is important that the bank you are working with is knowledgeable about SBA loans, as it will initially process your application, not the SBA. The SBA will review the application once the bank approves it.
What will the bank look for in your application?
Learn the Truth About the Small Business Administration Loans
There is a lot of misconception about small business administration loans, and what they are meant to do. Once you read this article, you will understand what it takes to get this loan, as well as some sample reasons as to why.
This is a type of loan that is usually given out to already established businesses. They want to either expand, or need to do a total office upgrade.
Of course, this doesn’t have to be the reason, but they are the most common ones.
For some reason most people think this is the type of loan you would get BEFORE you start up your small business. However, they are quite mistaken.
This loan does not need a business plan, just a general outline of the last 2 years revenue, and profit. This should be pretty easy to do as long as you kept good records, and being in business, you should have at least had an accountant.
If you have not been in business for at least 2 years, with a good revenue flow, then it will be very difficult to get this type of loan, and you might be looking at getting a personal one instead.
The reason they look at your business and not you, is because the business is the entity requesting the money, so they have to base their answer on repay ability within the business it self. This would be like if you went and got a personal loan. They would look at your employment history, and make sure you make enough money to repay the loan.
Now that you have a better grasp on the truth around a small business administration loan, you will know if you qualify to even apply for this type of loan. Have you been in business for at least 2 years? And have a good revenue flow with good profit margins? If this sounds like your business, then you have the battle half way won already.
Small Business Credit – The Ten Steps to Build Credit For Your Business
A lot of small business owners do not take the time to establish business credit for their organization. When we first embark on our business, our personal credit and assets are key resources that enable us to access credit and capital for our enterprise.
The sooner you develop business credit, the better!
Good business credit is the lifeblood to your organization. In these economic times, we begin to understand the crucial need to establish business credit. It makes a world of difference in regards to the interest rate you receive, how much capital you have access to, and setting terms on lease payments, insurance premiums, and business loans.
At some point, in the life cycle of your organization, you should begin to build business credit as a separate and distinct entity from your personal credit. The two business credit firms are Dun and Bradstreet and Experian. Although, I am not partial to one or the other, I used Dun and Bradstreet to build business credit for my company at the end of my first year of being in business.
Recently, I applied for another business credit card. They still used my personal credit as a reference. Your business must be in existence for at least three years before the financial institutions, creditors, and trade providers begin to use your business credit as a primary resource.
Here are the ten steps to build business credit:
1. Establish your business as a separate entity (i.e C Corp., S Corp., LLC.)
2. Find out the requirements for the lenders and credit bureaus.
3. Establish credit with vendors base on your personal credit. Have them report your transactions to the credit bureaus.
4. Take out a loan through SBA (Small Business Administration) or a business association
5. Obtain a Dun & Bradstreet D-U-N-S number.
6. Do business with small vendors. Did you use a caterer for your last holiday party? Do you have a water bottle company that delivers water bottles to your office on a weekly basis? Do you have a small print shop that you utilize for copies and binders? Find out if your payment history with major vendors are already being sent and reflected in your credit history. Sometimes, they are and sometimes they aren’t. If they aren’t, then utilize them as one of the vendors to be contacted by Dun and Bradstreet or Experian.
7. Once you have established a payment history with these small vendors, submit their information to Dun & Bradstreet. These vendors must be members of Dun & Bradstreet as well in order for you to utilize them as a reference. Dun and Bradstreet will call them to verify your payment history with them. Dun & Bradstreet will ask you for six vendors. Give them more. Some of your vendors may refuse to submit your payment history.
8. Obtain a Paydex score. Make sure you have at least four vendors reporting your payment history so that you can obtain a Dun & Bradstreet rating. The Dun & Bradstreet rating is different from the Paydex score. It is critically important because this is what institutions use to determine your financial standing.
9. Check your business credit twice per year to ensure that your records are accurate.
10. If necessary, identify ways you can improve your business credit.
If you take heed and follow these ten steps, you will surely be on your way to controlling your own financial destiny! Much Success!