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    10 Replies Latest reply on Mar 21, 2013 1:10 PM by phanio

    What are the best type of loans for a business?

    Jennifer Adventurer

      I would like to know more about Factor Loans. Is it a good option?>

        • Re: What are the best type of loans for a business?
          Manuel Ramirez Adventurer

          For setting up a business, the best type of loan you can get is from a bank. Most of the banks offer small and long term loans. I think you must approach a bank for getting a loan.

            • Re: What are the best type of loans for a business?
              buzzword333 Wayfarer

              Bank loans are obviously the best scenario -  but they have a 85% decline rate l . That means you have a 15% chance of having a traditional financial institution  Liam you any money . The SBA is only an option at the over 350k point .

                 I disagree with others  on the forum I feel you should loom at your business' profitability that. Should assist in your decision,  if you own a pasta restaurant your mark up can support a higher rate than a business that has a 3 or. 4 % profit margin .

                 The great thing about factoring us most institutions will take on the risk  most or all others require a  pg and can certainly work in a small spectrum  of finance

            • Re: What are the best type of loans for a business?
              Guide

              Hi Jennifer,

               

              Welcome to the forum!

               

              There are many, many things to consider when considering a loan. First, do you have a start up business or can you show a profit of many years? Have you had a discussion with your accountant about your needs? Second, what kind of business do you have? Can you perhaps be eligible for a grant? What would you like to do with the money? How much money are you looking to borrow and for how long? And my last questions, do you have credit? Have you even tried applying for a loan?

               

              Perhaps we maybe able share more of our knowledge with you if we knew a little bit more about your needs.

               

              Melinda

              • Re: What are the best type of loans for a business?
                deltacredit2013 Adventurer

                Whenever we get a new small business that we are coaching, we always advise them to "Grow Better- not Bigger".  Factoring is the WORST kind of lending you can get.  It is a last resort because it stifles growth.  The most appropriate uses of factoring come to play when you have a large reputable merchant that is slow to pay and you don't have a choice in the matter (Like a government contract or Wal-Mart). 

                Small businesses are always quick to want a loan, but you should only borrow money to immediately MAKE money.  To use it for operational costs is a bad idea.  If you max out your lending opportunities to keep the doors open, you won't be able to get it when you get that "big break" in or around year 3.

                 

                Factoring is borrowing against accounts receivables- that means limited income- limited growth.  Without knowing more about your business, it is hard to advise you otherwise- but I would definitely think twice about opening that box of Pandora's. 

                  • Re: What are the best type of loans for a business?
                    Ranger

                    Thanks for adding to the discussion , Michael .  I found it a compelling argument against Factoring .

                     

                    Joleen

                      • Re: What are the best type of loans for a business?
                        buzzword333 Wayfarer

                        I think that factoring is expensive, but in all due respect , this is not an option to assuage that small business' can attain a business loan.

                        I am a hedge fund manager and we have 18% programs it is not a perfect scenario but if a business is profitable it certainly is perfect .

                        • Re: What are the best type of loans for a business?
                          buzzword333 Wayfarer

                          JoleK 

                            This  is in direct response to Michael & germane to your reply .

                             The chance of anyone really receiving money for their business must come into play.  The  film " to big to fail " states at the end. after some time the government gave some institutions money he states " of course they will loan the money to business " Conversely bank have not given money out , I  see  7 year old  business that the owners have 780 FICA  still being declined on a daily basis . Yes that would be a great option if on fact; it were an option . Bank are not  giving small business owners any money . Trust me I  see 2mm credit lines being pulled from business  more often in 2011 ,12 than in the decade prior .

                           

                          Thanks for reading , I apologize for monopolizing the forum

                          Matthew

                            • Re: What are the best type of loans for a business?
                              deltacredit2013 Adventurer

                              With all due respect buzzword, what you are stating simply isn’t true.  I can understand the frustration many feel about how the economy is treating them, but let’s look at what else might be at play.

                               

                              Let’s start with your business with the 780 FICO.  Business underwriting is designed to structure the potential profit the bank has to gain against the risk of exposure to predicted losses.  The credit score is only one piece of the picture.  How was the cash flow?  What is the industry?  Are they operating at loss- or a loss to household income?  Is there collateral?

                               

                              To say that “Banks (are not giving) money out” is a broad, absolute statement that simply by its structure is false.  Sure, SOME banks aren’t lending, but many are.  And kudos to them for raising their standards for lending.  Not everyone (even with a 780 FICO deserves a line of credit.

                               

                              My business is credit repair.  The one thing different about our company is that we actually hold our clients accountable. We don’t allow them to blame someone or something abstract for their discretions, or quote a documentary for absolute truths.  It’s the only real way to get out of this economic slump.  People have to start holding themselves as well as others accountable. They have to start looking at their own behavior (and others) and see what their contribution played in their fate.

                               

                              FOR ALL OF YOU WONDERING HOW TO GET A LOAN- HERE IS THE SECRET.  Understand the credit requirements BEFORE you ask for a loan.  You can get this from (a good) banker or you can visit your local SBA office.  Build your business to be able to qualify FIRST by adopting behaviors that will create the financial structure to qualify, and you will find one or two things: 1)  You get the loan and pay it back.  2) You realize you don’t need a loan after all.

                               

                              Or you can call me in a year and I can fix your credit.


                        • Re: What are the best type of loans for a business?
                          longlivemedia Tracker

                          In this case, a little bit more information would be useful in order to determine the best type of loan for your business. Is the business just starting or does it already have a steady, reliable stream of income? How big is the business? What would you be using the loan for? Questions like these would play a huge role in the decision of what kind of loan to take.

                           

                           

                          Melanie

                          www.sbtelegram.com

                          • Re: What are the best type of loans for a business?
                            phanio Pioneer

                            The best type of loan is the one that you can get.  Money is money after all and it  does not care where it comes from and neither should you.  What matters is what you can do with it.

                            Example: You go to your bank and get a loan approved for $50,000 at 5%.  Is that good or bad?  Well, if you can take that loan and earn back more then the $50,000 and the 5% interest - then that loan is good. If you earn back less then it costs - then that is bad.

                            Factoring can relate to many things.  The basic principal is that you have a financial asset that you are waiting to get paid for.  But, while you wait, you need money today to continue your operations.  Thus, you can factor that financial asset for money today.

                            The most widely used factoring is accounts receivable factoring.  Here you have completed a job for a customer and then invoiced them for payment.  But, your invoice allows them 30, 60 or more days to pay.  In the mean time, you need that payment to pay your employees or start your next job.  Thus, you factor that invoice for cash today and then when you actually collect from your customer - you repay the advance less any fees.

                            Another example is Purchase Order Financing.  Here, you have a order in hand but don't have the money to start and complete the job.  Thus, you can factor that order to get the needed cash today - complete the job and when you get paid, repay the advance.

                             

                            Know that all factoring is about working capital - not like a traditional business loan bu working capital only.  Working capital is about moving your business through it operating cycle to ensure that your customers continue to get what they want and that you get paid for it.  It is not about buying equipment, starting new marketing campaigns or just spending without thought - that is how factoring can get you and your business in trouble.

                             

                            Hope that helps

                             

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