Got a great idea for a business? Or do you want to expand your current venture but need a cash injection? This guide will help you understand some of the different kinds of lenders and types of loans so you can figure out which is best for you
Typically, those who start up a small or medium enterprise borrow a portion of the capital for the initial investment. One of the main reasons for small business failure is lack of funds. You need to have access to capital, should the unexpected happen, otherwise your business might fold.
Bank loans
Banks do not take risks, and if you are planning to launch a new enterprise, it can be difficult to raise the capital. With a new business, there is no history for the bank to evaluate, so you need to put together a business plan. A good business plan will include a 3-year forecast of turnover and expenditure. Even with a good business plan, many banks will shy away from entrepreneur businesses, due to the high failure rate. Before approaching your bank, you need to know what your business requirements are. Perhaps some of the items are non-essentials, so only include investments that you cannot initially do without, anything else can be included in further development packages. Anything that is not essential will likely be challenged by your bank manager.
Expanding your business
If your business is existing and you require a business loan to expand, it might be easier to fund the expansion, as the bank can see your progress. You still need to justify the reasons for the loan, and more importantly, how you will make the payments. If you have a percentage of the capital you require, then the bank may be more inclined to invest. If you are prepared to risk your own money, it says a lot about your commitment. Any assets you have could be used as collateral for a small business loan, which of course, is necessary in today’s business world. You may want to purchase some land near your factory, and extend the vehicle parking area, so you can use a mortgage calculator to find out how much the monthly payments would be.
Other sources
If your bank is unwilling to fund your investment, there are other ways to secure a business loan. There are several reputable, online brokers, who can help if you are looking for small business finance, with a range of repayment options to suit your needs. A broker will have connections with many finance houses, which increases the chances of finding the right lender. The terms are usually more flexible than the bank with a lower interest rate. You will need to show that you can afford the repayments, and they will likely require a business plan, along with the loan application. These online brokers are both fast and convenient, often your proposal will be approved, and the money transferred into your account within a few days of making first contact.
Whatever your business idea, you need to do your homework thoroughly. A good business plan should reflect this, then you should have no problems securing the capital to launch your new enterprise. More and more people are turning to self-employment, as it offers a much brighter prospect than working for someone else.
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