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Most small business owners usually only think about one thing when their business needs capital and that is to get a single loan to cover all of their needs. The problem is that trying to find a single, all inclusive loan for all your businesss needs can be very expensive, time consuming and inefficient. You would be better off matching your loan with your needs.
It is kind of like visiting your doctor. If your doctor is a general practitioner he/she will refer you to a specialist for, say, you heart or for your allergies. The specialist has better knowledge about their specialty and can better serve your needs. Then, when all of these specialist have taken care of your more specific ailments the general practitioner can resume helping your maintain a satisfactory level of general, overall health.
The same is true for your business capital needs. Thus, lets say you need $100,000 for your business where half would go to buying new equipment and the remaining would be split between operating working capital (more inventory) and advertising (general business development).
If you go to your bank and ask for a single $100,000 loan your chances of getting that money is slim that is a lot of money for a bank to be lending out without tons of collateral (although the equipment could be partial collateral taken in whole, the collateral does not cover the entire loan amount). If your bank does agree, it will access a high interest rate and huge fees due to the risk of such a large unsecured loan.
Another option is to match the loan to the need. If you need equipment find an equipment loan specialist. Here you will get the equipment you need at a much better rate and terms than from your bank they specialize in helping small businesses get the capital they need even for start-ups. Plus, these types of secure loans are easier to qualify for and normally do not put as much emphasis on personal credit histories as do traditional lenders. Then, for the working capital, use working capital assets like factoring your Accounts Receivables, Purchase Orders or Credit Card Receipts. Then, for the advertising capital this is the time to approach your local bank or other business or personal loan provider for a smaller $25,000 loan which should easily approved at much better rates and terms as there is less risk for the lender (bank pricing interest rates and fees - is usually based on cost of funds and risk).
This is a much better option than running from bank to bank only to be turned down.
Bottom line By matching your needs to your request not only do you get the funding you need to grow your business; sometimes at much better rates and terms than from a single, larger loan from your bank, but can also better position your business in the long-term for future bank capital should you need it going forward. The goal is to get what you need to start or grow your business and not spend all your time fighting with your bank for a single loan that you will probably never get.
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