Opportunities for expansion, renovation, purchasing new equipment, or unplanned situations require additional working capital that you may not have today. Requesting a business financing without adequate preparation sends a clear message to the lender: High Risk! Therefore, it pays to be prepared and organized in your approach for business financing.
Put your best foot forward by allowing us to prepare a winning business financing proposal for you. Our proposals have a high likelihood of success because they’re created from the lender’s perspective. You get the money you need because we know exactly what banks want to see. Even more importantly, we know how to prove to them that you’ll be able to pay them back.
Our winning business financing proposals come complete with:
- Executive Summary: Where we concisely state the purpose of the loan, the exact amount of money required, an explanation of what the loan will be used for, what assets to be purchased, and who the suppliers are for these purchases.
- Pro-forma Cash Budgets and Financial Statements: We will include historical financials and a complete set of projected financial statements: profit and loss, cash flow and a balance sheet. We use your data and underlying assumptions to prepare information that your banker can easily read and buy in to.
- Income Tax Returns: We make copies of the last 3 years of personal and business income tax returns for the bank.
- Owners Personal Financial Statements: We will prepare personal financial statements for the last 3 years.
- Collateral: Identify the collateral being pledged as security for the loan and preparing collateral document that describes cost/value of personal or business property to secure the loan.
- Bank Statements: We make copies of one year of personal and business bank statements.
- Legal Documents: Identifying legal documents needed in the application, such as business licenses and registrations, articles of incorporation, contracts you have with any third parties, franchise agreements, commercial leases.
- Representation: We help substantiate your financial needs/position to your banker in person.
Business Financing Options
- Bank Loan: The first of business financing options that most business owners look to is a bank loan. Lender approval will be based on the businesses credit history and rating, type of business, number of years in operation and assets. Most lenders require businesses to place an asset as security on a bank loan. If the business defaults on repayment the lender can seize the asset and sell it to cover the cost of the loan. Lender requirements for a bank loan include: Personal and Business Background Check, Business Plan, Personal and Business Credit Report, Income Tax Returns, Financial and Bank Statements, Legal Documents.
- Lease Financing: Today, eight out of ten American companies rely on leasing to acquire their assets. They recognize the value of their equipment comes from using it, not owning it. Leasing equipment allows your company to keep cash flow for other financial needs. Leasing requires a much lower down payment than that of a loan or purchasing the equipment outright. Equipment such as cars, computers, technology items, communication systems, network equipment, P.O.S. systems, machinery can be leased for a short period of time or longer if needed. There are two types of well-known leases:
- Capital Lease ($1 Buy-out): Capital lease allows you to buy the equipment at the end of the lease term for a nominal amount, say $1. For most companies that intend to keep the equipment at the end of the lease, this is the best option. In essence, you are building “equity” in the equipment, so you can also sell the equipment at the end of the lease or trade it in for the latest technology. You can take tax depreciation and deduct interest expense each year.
- Operating Lease (Fair Market Value Buy-out): This structure provides you with the option to purchase the equipment at the end of the lease for its then Fair Market Value, continue leasing the equipment based on its Fair Market Value, or return the equipment. The payment during the term is lower than on a capital lease, but the cost at the end of the lease is higher. The IRS does not consider an operating lease to be a purchase, but rather a tax-deductive rent expense. Therefore, you can deduct the lease payments each year. Also, because an operating lease is not considered a long-term liability, it does not appear as debt on your financial statement, thus making you more attractive to traditional lenders when you need them.
- Supplier Credit: Supplier credit is the easiest way for businesses to get financing. Suppliers (creditors) will offer businesses with an average of one week to six months to pay for goods received from them. Many businesses choose to use supplier credit because it is much easier than obtaining a loan and meets the businesses needs quickly. With a fair length of time to repay the supplier this makes for a cost effective financing option for your business.
- Factoring: Businesses are able to factor their accounts receivable invoices, receiving up to 80% of the total from the factoring company. This is an advance on the companies account receivables that will be repaid when clients pay their invoice. Main requirement for factoring business debts is having high accounts receivables. Businesses with client invoices in collection, awaiting payment, are eligible to receive factoring of their business debts. This will get them the capital they need without waiting until clients make payment.
- Merchant Cash Advance: Businesses with a minimum of $5,000 in monthly credit card sales are able to receive a loan up to $250,000 with a merchant cash advance. Repayment of the loan is made out of the monthly credit card sales until the loan is repaid in full. Merchant cash advance lenders only focus loan approval on the company’s monthly credit card sale history.
- Secured Working Capital Loan: This type of loan involves the business putting its assets as collateral in order to obtain working capital. The business is basically exchanging its assets for cash. If the business defaults on the loan the lender can seize the assets and sell them to cover the cost of the loan. Secured working capital loans are easier to obtain than an unsecured loan because the business has assets to place as collateral. This can get the business a lower interest rate and more flexible repayment schedule.
- Unsecured Working Capital Loan: Unsecured working capital loans require no assets to obtain the loan. However the borrowing business must have a high credit rating and profile to receive approval.
- Revolving Credit Facility: While loans are great for long-term purposes like financing new equipment or facilities, they lack the flexibility of revolving lines of credit. If you are a small business owner who needs short-term help to meet your business’s cash requirements, then a revolving credit may be the way to go. It helps raise working capital in order to ease your cash flow, cushion between customer and vendor payments, cover additional seasonal expenditure or inventory and supplies purchases. Financing charges are based off the amount of credit used each month.
- Debt Financing: Debt financing is provided by banks and other traditional lenders. The loan receive is typically limited to the businesses assets. The capital received is used to pay off debts. Debt financing is a great way to consolidate a business’s debts into one low monthly payment.
- Business Acquisition Loans: A business acquisition loan is used to purchase an established or existing business. Borrowing business owners are able to receive up to 90% of the cost of the business they wish to purchase. This is a great option for existing businesses to buy out other businesses or an new entrepreneur to get started. Lenders are more willing to offer a business acquisition loan because they have a thriving business that they are financing, it is looked at as low risk.
If you’d like to learn more about how you can obtain the money you need to grow your business please complete the form below.
Business Financing Service Request