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6 Steps to Creating The Perfect Business Loan Package

Bank lending has really been tight over the last few years. Most business owners now think that the only word their banker can say is “no.”

The reason: This last financial crisis has changed the lending game. Banks and other lenders will not just provide you a business loan because you have a great smile or a novel idea. You have to get in there, roll up your sleeves and really entice them to lend to your business – make them approve you!

Know that when lenders do begin to approve more loans again, the flow of new business loan applications will really flood in. Thus, to ensure that your loan application gets funded, you have to find ways to get your business noticed – making it not only stand out but stand above all the rest.

Here are a few tips to get your business loan application moved to the top of the pile:

Pick the right bank or lender: Not all lenders will emerge from this financial mess in the same position they went into it. Some will have changed their entire lending philosophy. Some will no longer loan to small or mid-sized businesses – focusing only top tier/low risk companies. Some will only provide loans based on companies in certain industries or that have specific collateral. And, some may be out of the business lending arena altogether. So, start with your current bank or past lender and see if or what they have changed in regards to their business loan policies.

Further, all banks and lenders have changed their loan approval criteria. This was not done to hinder businesses from seeking loans but more from the threat of new governmental regulations. Thus, if your business was able to get a business loan or working capital line of credit prior to the financial meltdown – that does not mean that it will qualify for one today or even tomorrow with the same bank or lender.

Collateral and Guarantees: Banks are now more focused on repayment and not just one form of repayment but several. Banks and other lenders always look to current positive cash flow as the first source of repayment. But, that is no longer enough. What happens if you have a slow month or if the economy tanks again? Lenders will start looking for additional (complementary) forms of repayment from sources like personal guarantees or large amounts of and/or highly valued collateral.

Collateral will be key in this new lending market. If you are serious about your business’s future prospects, then you should have no problem putting up collateral against a business loan request. Not only does collateral provide your lender with an additional source of repayment but could really show your banker or loan officer that your business is serious – essentially helping you close the deal.

Keep in mind that different collateral has different value. Banks and other lenders don’t look at how much you paid for a piece of equipment or a piece of property. They look at its value as how fast they can sell it at fire sale prices to recoup their losses.

The best collateral – where your business would get the best value against a loan – is collateral that has high liquidity – like accounts receivables, investments, purchase orders or even personal liquid assets of the business owner or of the management team.

Make sure your business loan application clearly states what collateral and/or guarantees you or your business is willing to provide as well as its current, conservative market value. Providing this information up front will demonstrate to your lender that you are here not to fight with them over this hotly contested issue but are willing to play within their rules. Plus, banks like easy deals and deals with tons of collateral are usually the easiest to get approved.

Remember, if you don’t show and won’t demonstrate that you are serious about your business and that you have not taken the time to understand your lender’s collateral or guarantee policy, then your banker or lenders will treat you the same way and move your application to a bottom drawer or the round file in the corner.

A Clear Story: Make sure that your loan application tells your story. Not just what your company does but also why it does what it does, who (your customer segment) it targets and satisfies, how its current management can build value in the future (based on what it has done in the past) and what the funds will be used for – specifically. Putting in your business loan application that you will use those funds for general business purposes just will not fly any more. Banks and other lenders want to be repaid and must be satisfied that you and your business will deploy this new asserts (the loan funds) in such a way to generate enough new revenue to pay back the loan and interest as well as grow your company.

Financial Statement and Tax Returns: Banker and lenders will not just take your word for your financial condition or be satisfied with a quick printout from your accounting program. Stated income loans are a thing of the past. Lenders will be looking for both audited financial statements and/or completed and filed tax returns – at least 3 to 5 years worth. These financial statements not only provide additional information to help your lender make their decisions but can really validate your business’s potential; both of which will further your ability to receive that sought after approval.

Further, many lenders today will contact both your customers and suppliers to back up some of the information provided in your financial statements. While this may seem like a huge hassle – it is just the way the game is played now. If you go into this process knowing what financial documentation is required and planning for it (also taking to your customers and suppliers before hand) then the burden will be lessened on both you and your loan officer.

Forecasts: Combined with financial statements and tax returns, your loan application should include well-formulated financial forecasts. Not only will this show the strength of your management ability to direct the company moving forward but forecasts (if done properly with a best-case, worse-case and most likely-case scenarios) can help your lender determine if your business will still be able to repay their loan under different market conditions. Additionally, these forecasts should show most likely scenarios both with and without the loan proceeds.

As always, tie your forecast to your expected loan term and make sure that all numbers trend with past results – if not, make sure you have a detail explanation of why.

Network: Lastly, do your homework on who your bank or lender has worked with in the past. Most banks or financial companies have their core customers – those businesses that can just pick up the phone and get whatever they want. If your business can receive references or introduction from them – that is likely to put you over the top and get potential lenders knocking on your door.

If that is not possible, look to those who you have dealt with in the past (like other lenders or suppliers) or to those who provide your business revenue (like customers) for references. These groups will show your lender that they will continue to support your business in the future – making you a better candidate for a business loan.

The bottom line here is that if your business really needs outside capital to grow then make sure that you put the same intensity into your business loan application as you do into your business. Walking into your bank and asking for a business loan is much different than walking into your butcher and asking for the cut of the day.

Not getting what you want from your butcher may disappoint you but not getting what you need from your banker or lender could destroy you.

As we emerge into this new economy, you as a business owner, must understand that business lending has changed and if your business needs outside capital to prosper and grow then you must make sure that you have a well prepared business loan application before you even consider walking into your lender’s office.

Home Business: Additional Sources of Income

If you are looking for an additional business system to earn for you some extra money, why not start up a business at home itself. Today there are various ways one can make good additional income from home. Home business has predominantly increased in the recent years because of its scope and flexibility. Unlike the regular office job, home business is not time dependent for running successfully. All it requires is a good understanding of what business you should start and how to make your business reach the market.

Most home business systems however are dependent on the Internet. So, primarily it is important that you have a computer and a good internet facility at home. Nevertheless, having an internet connection and computer will help you enlarge your network across many location and ultimately across the globe. The entire business set up you plan depends on what product or service you are capable of selling. There are various streams of home business that you can choose from depending your experience, skills, or knowledge.

Affiliate Marketing

One of the most established home business includes affiliate marketing. In this business, you basically contribute selling products and services of other brands through your own web site. This business works best for people having a strong understanding of such marketing strategies. This kind of business is even more appealing, if you have knowledge of what products to choose for promoting. The more the product is sold, the higher revenue is generated by the owner of the product. A small part of that revenue is the remuneration for your contribution. So, it is vital that you know which products are in demand and how to promote them through your web site. The faster the product sale is, the higher your earnings are.

Direct Product Selling

Direct product selling is different from affiliate marketing in that you have to sell your own products. However, there are two different approaches in this stream of home business.

Selling Used Products

First, you can sell all unused household stuff through some online shopping site, such as e-bay. It is likely that there are certain products always lying at home unused but may be helpful for other people in your locality or other areas. In this approach you may need to do minor repairing of the products to make them worth usable. You must also do some good researching in finding potential buyers to purchase your product for the cost you quote.

Selling New Products

Second, you can create new products and sell them in the market, either in person or online. This approach of home business is applied to certain skilled people. For example, if you are skilled in creating software or hardware that can help your neighbors avoid spending for similar but expensive products, you are good to start a suitable home business. Most home mothers are good in making jewelry. Jewelry is something that every neighboring woman would love to purchase without having to move around in a busy market. There are many such products people find hard to find in markets. So selling new or used products can be one of the suitable home businesses for some additional income. However, you need to spend quality time in widening your products and promoting them efficiently.

Writing and Publishing

Are you a good writer and do you understand what many of the readers prefer reading? If so, let your writing skills make a good business for you at home at your own comfortable time. There are various websites that allow you to publish relevant articles from a variety of topics. While readers navigate through the Internet (say Google), they click the links displayed to read an entire topic. So, if the link is the link to the article you have written and published, you gain traffic to your web page. It is important that your article is reader-friendly, simple, and based on some current trending topics. You should also know how to pull traffic to your web page. Many ad campaign services, such as Google Adsense, Kontera, etc., also generate revenue when people visit their posts while going through your webpage. Based on the number of visitors to your article page and the revenue generated by the ad services, your income is calculated. Therefore, it is important that your article must have maximum traffic to make a good extra income for you.

You can also write a helpful e-book and publish on various websites or even sell them through websites, such as Docstoc and Constant Content. E-book business has been a most reliable source of additional income.

So, by utilizing your writing skills you can spare a few hours of your day and writing articles and publish them daily. To publish an e-book, you will need to spend time regularly to complete writing an e-book with quality and useful information and then make it worth selling.

Freelancing Services

Freelancing jobs are predominant nowadays because it results in immediate access to your earnings. There are various websites posting freelancing jobs where the client posts the desired job for a fixed or hourly price and contractors bid on the job with an amount they think they can work for. One or more suitable candidates get the job to be completed within a specified timeline for a finalized price. Even this home business requires a computer with internet facility so that one can find a suitable freelancing job and communicate with the client as and when required.

Catering Services

Another important and interesting home business streams is providing catering services. In localities where students or employees staying alone have no time to cook their own food, one can offer to prepare food for them at a nominal price. In many offices, employees require good food from a reliable caterer. Catering services can be done at your home if you have the minimum space required to meet the needs of setting up this business. In the beginning, you can do it alone if the number of customers is less. However, as your home business grows, you may need to hire people to join your business so that you can run your catering service effectively.

Door-To-Door Service Offering

Door-to-door service offering is an open-ended business. This kind of business may not always be done from your home, but your home is the best place to start this kind of business. The various services that you can provide in this approach include:

  • Tutoring school kids
  • Counseling people in your locality for higher education of their children
  • Providing support for gardening at your neighbors’ garden
  • Looking after working couple’s kids as in daycare
  • Working as a financial advisor or insurance advisor

The scope of home business is vast in terms of finding a suitable business stream to start right from your home. But the success of home business greatly depends on your skills, knowledge, interest, and efforts. Like every business, home business requires a well defined plan for execution. Start making extra income by setting up a suitable home business stream.