Does your organization need money to make it to the next level? Are you making this common mistake when you ask?
You are no doubt eager to get the funding that will allow you to launch your business or help you take it to the next level. In order to do this, you may need to secure a business loan. But you can’t just walk into a bank and waltz back out with thousands of dollars in credit. You will have to go through an application process in order to acquire the financing you need.
And there are all kinds of blunders you are likely to make along the way that could ultimately lead to failure. So before you enter the bank and risk rejection, you should make an effort to get your affairs in order and plan for potential setbacks.
Here are just a few common mistakes that you’ll want to avoid.
We work with companies to reach their next milestone – be that a new sales goal, improved profit margin, size of customer base or number of employees. We start by asking company leadership what they think the primary need is to obtain this objective.
They always tell me they need “money” but they fail to take these critical factors into consideration.
Mistake #(1): Not Doing Adequate Preparation:
There is simply no excuse for negligence when it comes to being prepared for your loan application. You need to take the time to find out what will be required in order for you to get through the loan process, from credit reports to past financials to possible collateral (if such is necessary).
Either call prospective lenders or meet with their agents to ensure that by the time you go in to apply, you have everything in order to make your application process successful. You can also research many investors online and see what they look for in a business.
When you ask for money be prepared. Be clear and direct.
The next thing in preparation is to know and understand your competition. Be able to discuss your competition in detail. Talk about how many clients your competitors has, what they charged, how they planned to differentiate themselves, and why they think they will win in the long run.
Be crystal clear about what you’re looking for in terms of funding. Be certain as to the amount, be certain as to type of lender, and know what you’ll do with the money. Don’t come across as “you’ll take anything” like so many other businesses do.
Mistake # (2): Not Knowing the Money’s Usage:
Not explaining what the loan is for. When applying for a business loan, you need to indicate how the money will be used. Lenders want to see that you know exactly what your needs are and how this loan will meet those needs.
Money can be obtained from one of three sources: new sales, a bank or from an investor.
The best way to get money is to simply obtain new (and more profitable) sales and bootstrap the company to the next level. When that approach won’t work, and an outside source of money is necessary, the biggest mistake companies make in trying to raise additional funds is their inability to answer one simple question:
How Are You Going to Use the Money?
We have seen many entrepreneurs and small business owners think they have smugly answered the question by responding “We will spend it on new sales people” or “We will use it to drive new marketing” or the classic “We will use it to hire key new employees”.
Inevitably, the investor or banker smiles, asks a few more questions and then chooses to pass.
They use excuses for passing that include “You are not in an area we typically invest in” or “You don’t have enough years of financials” or “I just don’t see the value proposition”.
The true reason? The entrepreneur has provided vague answers about where the money will be used and why.
The banker or investor wants to see that if they provide money, it will be used for a specific and measurable purpose: to purchase equipment, to build out new space, to improve inefficient processes or to participate in a proven distribution channel.
You only need to look at any charity fundraiser to understand this mentality. When successful charities go out to raise money, it’s always for a specific purpose: to send someone on a trip, to provide schooling for a specific child, to rebuild a building, or to cure a specific disease. They rarely ask for money to cover overhead and they are never vague about the direct benefit the money will provide.
When you are considering your pitch for money, make sure that “the ask” includes a concrete explanation of where the money will be used and how it will ultimately benefit your organization to make it to the next level. With this understanding, a bank or investor is much more likely to say “yes”.
Mistake # (3): Not Knowing Your Available Options:
Are you limiting your options? You may not be aware of all the options that are available to you when it comes to securing funding for your business venture. For one thing, loans can come from a variety of sources. Banks are certainly a good place to start if you will be one of 20% of loan applications they approve. Don’t stop there. You should also consider approaching business funding companies, credit unions, family and friends, angel investors, venture capital firms, or even related community organizations. And keep in mind that there are also many types of loans to look into, which your lender will probably be willing to enumerate for you.
Mistake # (4): Not Considering Financing Considerations
Have you failed to separate finances? Many small-business owners make the terrible mistake of failing to separate their personal and professional finances. But this can hurt you in every area of your life if you don’t correct it.
If you don’t succeed in business, your personal assets could be at risk. You may even need to have to file for bankruptcy. By the same token, any financial troubles you’re facing personally could affect your ability to get a business loan. So separate business accounts from personal and avoid comingling your finances. And think about making your business a separate legal entity in order to protect yourself.
Mistake # (5): Not Doing a Good Funding Interview.
Contrary to what most people believe, you are not entitled to a loan just because you have a great idea for a business or you’re already making money with one. You are asking for a favor, so you need to approach the situation accordingly. Be polite and professional at your interview and come prepared with the information and paperwork required. Only you will suffer if you flub the interview.
Mistake # (6): Not Knowing Your Credit Rating:
Do you know your current credit rating? Before you apply for a loan, you need to know where you stand. Get copies of your credit scores from the three major credit bureaus so you will know if you’re likely to get the loan approved.
Mistake # (7): Not Having your Finances Up-to-Date.
Whether you are seeking a personal or business loan, you shouldn’t apply without having the proper documentation. This is an area where many people put the cart before the horse, and try to get a loan without making sure their financials are up-to-date.
Mistake # (8): Not Having Equity in the Project.
Not unlike a down payment when buying a home, having some equity in a business project significantly enhances your chances of securing a business loan. If you’re not invested in the project, or in the business itself, the lender will be less enthusiastic about taking on such a risk.
Mistake # (9): Not Having Collateral.
You need to provide some collateral, should there be a default in payment.
Mistake # (10): Not Having a Business Plan.
If you’re starting or growing a business, you need to demonstrate how the business will operate and make money. A business plan is essential for a lender to see your goals and specifically, how you intend to reach them. You must include all applicable supporting data, including financials.
Mistake # (11): Not Reading ALL Loan Papers.
Not reading the terms carefully before signing. In your haste to get a loan, you may commit the common mistake of jumping the gun and signing without reading the details and terms of the loan. Not only should you take the time to read everything very carefully, but you should also ask questions about anything you do not fully understand. This could be an extremely costly mistake. Once you sign the paperwork, you are bound by the terms of the contract (whether you have read and understood them or not). If you can’t understand the legal jargon, hire a lawyer to explain it to you. But don’t complain after the fact if you fail to exercise due diligence.
Mistake # (12): Not Locking In Interest Rate:
Have you locked in the interest rate? Not locking in a rate. Interest rates change. If you think you’ve found a good rate, lock it in before it goes up. Too often, people make the mistake of getting greedy and waiting for interest rates to drop farther.
Mistake # (13): Making Major Changes.
Just as you do not want to open and close various credit cards before applying for a personal loan, you do not want to make significant personnel or other changes to your ongoing business structure before applying for a business loan. Lenders want to be able to see stability in how you do business and with whom.
Mistake # (14): Not Applying to the Best Lender.
Although there are various lenders available, many people still head to their local bank first without shopping around. Credit unions and other sources are worth investigating. For example, if you are a small business owner, you should consider what the Small Business Administration can do through one of their loan programs.
Mistake # (15): Not Considering Business Loan Opportunities for Military Veterans
The service of veterans has done a tremendous amount for the United States – on our own soil and around the world. Many continue their contributions to the country by channeling their skills and leadership into entrepreneurial endeavors that help strengthen our economy.
And now through the rest of the fiscal year, SBA’s Express Loan Program will make it easier to get loans in the hands of veterans so they can succeed in their business ventures.
Loan fees
Through the end of September, SBA has set the borrower upfront fee to zero for all veteran loans authorized under the SBA Express program, which supports loans of up to $350,000.
Additionally through the end of the fiscal year, fees on all loans (and not just for veterans) $150,000 and under are set to zero.
These initiatives make the loans cheaper for the borrower, which is just another way SBA is looking to serve small business owners – and those veterans who have served us – as they look for ways to access capital.
About the Express Loan Program
One great feature of the Express Loan Program is that it has an accelerated turnaround time for SBA review. You’ll receive a response to your application within 36 hours.
With a fast turnaround, streamlined process and easy-to-use line of credit, this program is SBA’s most popular loan delivery method – nearly 60 percent of all 7(a) loans over the past decade being authorized through the program. Since the program began, it has also been one of the most popular delivery methods for getting capital into the hands of veteran borrowers.
Getting started
Interested in exploring loan options to get your business started? Check out these loans that fall under Express Program standards. Our business loan checklist can also help prepare you for the application process, in addition to taking a look at the credit factors lenders will consider when you apply for an SBA-backed loan.
In the transition from military service to customer service, you’ll find great resources from SBA to help you find success. And if you’re looking for funding to get your business off the ground, these loan perks may make it possible to do just that.
A SOLUTION TO TRADITIONAL BANK FINANCING
Mistake # (16): Not Considering Specialized Funding & Loans That Do Not Make You Comply with all the Traditional Bank Requirements
Here is what I mean….
(1): Working Capital Loans
It’s a well known fact that the majority of small businesses struggle to secure the financing they need for growth. Your small businesses can now get micro business loans from $5,000 to $2,000,000 for a period of 3 to 18 months. Repayment is made seamless through daily ACH withdrawals.
Financing that is Quick and Affordable
Many small business owners need access to immediate, short-term financing, but don’t want to pay the exorbitant rates typically associated with non bank lenders. Our micro loans are up to 45% less expensive than a merchant cash advance!
Has your business been presented with a lucrative opportunity, and you can’t wait for two months to get the needed capital? Do you need to quickly buy or fix equipment essential to operations? Do you want financing to buy inventory at a discount? Are you going through a period of business growth, or are you in the process of applying for an SBA loan, but have immediate needs until that loan is funded? We can help with a short-term business loan today!
Who is Eligible?
- Businesses located in the U.S. or Puerto Rico.
- Businesses that have been generating revenue for at least 1 year, and typically have $100,000 + in annual revenue.
- More than 350 industries qualify, including retailers, service providers, contractors, and restaurants.
- We place more weight on cash flow and business health rather than personal credit scores. The threshold for funding is a credit score of at least 500.
- Typical small business applicants are those with a steady base of clients and credit card transactions or checks for services. They include: restaurants, plumbers, contractors, auto repair, beauty salons, grocery stores, retail shops, veterinarians and hotels.
The Approval Process is Simple!
To be considered for a short-term business loan just fill out our quick one page application and send us 4 months of bank statements and merchant credit card statements (if your business accepts credit card payments). If you want to include an annual Profit & Loss statement or additional bank statements (if your business is seasonal, for instance), you certainly can. In addition, business tax statements may be required based on the type of loan you select. Approvals are typically made within 24 hours, and you can receive financing in as little as 3 to 4 business days.
(2): Equipment Financing Loans
Need to quickly make a large equipment purchase to run or expand your small business? Unless you have great credit, a solid, long-term sales history, and you are operating in a “low risk” industry, trying to finance this purchase with a traditional bank loan can be a frustrating process that ultimately leads to nowhere.
Now you can get funding from a select group of non bank lenders who offer some of the best equipment financing rates in the industry. We’ve helped thousands of small businesses successfully get the capital they needed to buy expensive machinery, equipment, electronics, and vehicles. If your business is eligible, you can be approved for an equipment loan within 24 hours and can receive financing in as little as 3 to 4 business days.
Who Can Apply?
- Businesses located in the U.S. or Puerto Rico.
- Businesses that have been generating revenue for at least 1 year, and typically have $100,000 + in annual revenue.
- More than 350 industries qualify, including retailers, service providers, contractors, and restaurants.
- We place more weight on cash flow and business health rather than personal credit scores. The threshold for funding is a credit score of at least 500.
- Typical small business applicants are those with a steady base of clients and credit card transactions or checks for services. They include: restaurants, plumbers, contractors, auto repair, beauty salons, grocery stores, retail shops, veterinarians and hotels.
Get Approved Quickly and Easily!
To be considered for a equipment financing, just fill out our quick one page application and send us 4 months of bank statements and merchant credit card statements (if your business accepts credit card payments). If you want to include an annual Profit & Loss statement or additional bank statements (if your business is seasonal, for instance), you certainly can. It’s that easy! Apply Today! Simply complete our 1 page online application and send in the requested
(3): Merchant Cash Advance Loans
Are you in need of quick capital to run and grow your business, but have been struggling with bad credit? Have you spent time researching cash advance providers, only to be dismayed by the sky high rates, hidden fees, and companies that don’t seem to have your best interests in mind?
Now you can work with a select group of merchant cash advance lenders who offer some of the best rates in the industry. Moreover, they are committed to making sure that you fully understand the terms, conditions, and costs associated with your cash advance.
Merchant cash advances are great tools that allow business owners to leverage their future cash flow in order to quickly get capital for their business. This is capital that can be used to cover a sudden cash shortfall, buy inventory in bulk, or purchase equipment and supplies. When they are used properly, merchant cash advances can also give a business the stability needed to qualify for other, often cheaper forms of financing later on.
Who is Eligible?
- Businesses located in the U.S. or Puerto Rico.
- Businesses that have been generating revenue for at least 1 year, and typically have
$100,000 + in annual revenue. - More than 350 industries qualify, including retailers, service providers, contractors, and restaurants.
- We place more weight on cash flow and business health rather than personal credit scores. The threshold for funding is a credit score of at least 500.
- Typical small business applicants are those with a steady base of clients and credit card transactions or checks for services. They include: restaurants, plumbers, contractors, auto repair, beauty salons, grocery stores, retail shops, veterinarians and hotels.
The Approval Process is Fast and Easy!
To be considered for a cash advance just fill out our quick one page application and send us 4 months of bank statements and merchant credit card statements (if your business accepts credit card payments). If you want to include an annual Profit & Loss statement or additional bank statements (if your business is seasonal, for instance), you certainly can. It’s that easy! Approvals are typically made within 24 hours, and you can receive financing in as little as 3 to 4 business days.
(4): Invoice Factoring
If your business manages customer invoices, handling extended customer billing cycles with slow to pay and non paying customers can be a big drain on your resources, not to mention your available working capital. You may be expecting big payments from several invoices in the coming weeks or months, but what if you need the money now to pay your employees and suppliers?
Turn your outstanding invoices into instant cash.
With accounts receivables factoring, your business can get quick, unsecured financing even if you have poor credit. We only work with a select group of factoring companies who offer some of the best rates in the industry. You’ll be able to quickly and affordably free up your working capital and use it to keep your business running smoothly.
How Invoice Factoring Works
With invoice factoring, the factor company buys your accounts receivable, then assumes responsibility for collecting on the outstanding invoice. Your business would receive 70-90% of the total value of the outstanding receivable upfront. This upfront rate is generally dependent on the age of the account and the credibility of your customer. Upon full receipt of the payment from the customer, the factor company will return the remaining balance, minus a small processing fee.
Who is Eligible?
Because accounts receivables financing depends on the credit worthiness of your customers and the details of your invoices, qualifying for financing is easy. If your business is located in the U.S. or Puerto Rico, and you have been generating revenue for at least 1 year, then you could qualify.
The Approval Process is Fast and Easy!
To be considered for invoice factoring just fill out our quick one page application and send us 4 months of bank statements. It’s that easy! Approvals are typically made within 24 hours, and you can receive financing in as little as 3 to 4 business days.
(5): Purchase Order Financing
Did your business suddenly land a big order, but you don’t have the capital needed to fulfill it? Even if you have been in operation for a few years and you have a steady cash flow, your bank may be unwilling to extend the necessary credit.
Now you can get help your business quickly get the financing it needs to pay your suppliers and fulfill your order.
You can work with a hand-picked group of purchase order lenders that offer some of the best rates in the industry. You’ll be able to quickly and affordably access the working capital you need to keep your business running smoothly.
What is Purchase Order Financing?
With purchase order financing, also known as inventory financing or PO funding, your business receives a short-term line of credit to pay your vendors upfront for products or inventory so you don’t have to drain your available working capital. The products or inventory then serve as collateral for the financing.
Purchase order financing is particularly suited to businesses that receive a sudden large order, or those that need to pay their vendors within a short payment cycle. PO financing can also be used to help seasonal businesses smooth out their cash flow and take advantage of the savings associated with bulk inventory purchases. Typical business types include: producers, distributors, and wholesalers of manufactured goods.
Who is Eligible?
Purchase order financing is targeted to growing businesses that are in need of working capital. For this reason, we place more weight on your business’ health and the credit worthiness of your customers than on your credit score and cash flow. If your business is located in the U.S. or Puerto Rico, and you have been generating revenue for at least 1 year, then you could qualify.
The Approval Process is Fast and Easy!
To be considered for purchase order financing just fill out our quick one page application and send us 4 months of bank statements. It’s that easy! Approvals are typically made within 24 hours, and you can receive financing in as little as 3 to 4 business days.
Consider a Free PBI Business and Loan Coaching Session.
If you need help with your business growth or funding please get back to me for a Free coaching session that can add from $10,000 to $1 million in additional sales and profits almost overnight. Click on URL: www.prosperitybreakthroughs4u.com to learn more.
We sincerely hope you enjoyed reading today’s message.
To your higher profit and business success,
Michael Kissinger
The Business Doctor
Business Development Director
Profit Builders Inc.
1st Degree Tae Kwon Do Black Belt (Kukkiwon)
Former 10th Special Forces Member
Phone: 415-678-9965
Email: mjkissinger@yahoo.com or profitbuilders@ymail.com
URL: http://www.linkedin.com/pub/michael-kissinger/4/b21/a66
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