How to Woo Banks Into Giving Loans
When people think of starting a small business of their own, one of the first things to strategize for is how to get a loan from the bank. Getting business loans from banks are far different from getting an instant payday loan from a trusted financial lender. Owners of small businesses attest that when their business is taking off, a business bank loan is what keeps things moving, and this means covering greater ground and making it grow. With that, small business owners should know how to get the best business bank loan and it depends on what kind of business they have.
For example, owners of food business like food carts and even small dining places should have these three things working for them: good marketing, good pricing, and personalized customer service. Food business owners are likely to be hands-on in the operations. They have to make sure that the customers are served well and that the business is running well, too. Even when starting small, starting entrepreneurs and business owners must offer the best things they can to their customers. If they have these three things in place in their business, they would definitely attract a good number of clientele.
The same is true with applying for bank loans. Business owners and entrepreneurs must have a good credit history to give banks a solid picture of their being responsible with their money-whether in business or personal finances. The owners' credit history is pertinent to the small business loan, particularly if the small business is starting out and does not have a long operating history. Banks would look into their financial portfolio and see if everything is in order. They also have to be responsible enough to monitor their credit and this means having the proper documentation for transactions made. When applying for a business bank loan, it is important to bring the financial statements of the business in order to show its financial standing. Banks would need to know how much the business is worth and how much money the owners are moving. Lastly, small business owners and entrepreneurs should have an updated and detailed business plan when they go over to the bank. It is more likely for banks to grant business loans to those that have everything spelled out and planned.
However, if owners and entrepreneurs have a hard time applying for a small business loan, maybe it is time to look for alternative sources. Again, depending on the nature of the business, a good suggestion would be to get online payday loans which could range from $300 to $1500. These loans have quick processing times and the requirements are easy to get and submit.
Pros and Cons of a Small Business Credit Card
One of the major concerns of small businesses is cash flow and credit cards seem to be the ready answer to this problem. Try looking for one and you will be swamped by choices: both Visa and Mastercard offer four credit card choices for small businesses and credit card giant American Express has eight. There are also hundreds of partner banks to choose from.
Small businesses do not really need credit cards to operate smoothly, but these plastics can come in handy. With so many business credit cards to choose from, the decision really depends on one thing: actual need. Here, I examine why small business credit cards are a blessing from creditor heaven and why you probably will not need them.
A credit card should not be your only source of capital, but it can be a sensible means with which to purchase materials, goods and services during periods when cash is a little tight. And I really know a lot of small businesses go through some cash-flow squeeze.
Small business credit cards are also a practical means to make large purchases, provided your credit limit can accommodate the amount. They can also offer an effective financial transaction tracking system. Many credit cards are being offered with software that can record purchases and deals, even those made by your employees.
Another reason why you might want to use a small business credit card is that many creditors offer rewards for usage such as discounts, prizes and cash-back schemes on top of the usual flyer miles.
But your small business credit card will be signed by you and if ever you defaulted on your business credit card payments, the creditors or banks will not be coming after your business, they will be homing in on you. This is usually the case for small businesses just starting out, when the professional and personal finances of the owners are considered the same.
On that note, whatever record you have on your small business credit card will be included in your credit report. If you miss some payments in your business credit card, it might reflect badly on your personal credit history, making your finances look more unstable than it truly is.
For the first few years when your personal and professional finances are not yet treated as separate entities, your business credit card will not be enjoying the same protection for consumers that are provided with a personal credit card. An example, billing errors on your personal credit card may be disputed within a certain period so you cannot be labeled as a delinquent consumer. With your business credit card, that is not the case.
Also, personal credit card companies will assist you during instances when you purchase bad merchandise through credit. Many small business credit card companies will not.
Should you pack a plastic or not? If you are disciplined enough and willing to take on an added responsibility, then maybe small business credit cards are for you. Just be sure to choose and use them wisely because they can and will affect your credit record if you are not careful. Also, you should be able to pay off your balance as quickly as you can. This will score you a lot of points with your personal and professional creditors and it will also help you renegotiate your terms more convincingly later on.
Retirement at Risk
Every passing day brings us one step closer to retirement. When economic conditions or personal finances are unclear, the road to retirement seems much longer, and the road on retirement seems to be a rocky and perilous one. Don’t panic, it’s time to plan.
Begin with the Serenity Prayer
“God, grant me the serenity to accept the things that I cannot change, the courage to change the things that I can, and the wisdom to know the difference.”
Regardless of personal faith or religious affiliation, nearly everyone can relate to that simple prayer. The wisdom is particularly relevant during challenging economic times. Headlines broadcast rising concerns regarding the price of gasoline, airlines eliminating routes and raising prices, and the HP lay-off 24,600 employees. The financial world is rocked by announcements regarding AIG, Merrill Lynch, and Lehman Brothers. Stocks, housing prices, and consumer confidence have tumbled faster than a Cirque du Soleil troupe on a double shot of espresso. With so many financial pillars falling, it is difficult, if not impossible, to avoid reeling from the pressures of the collateral damage. A person does not need to lose a job to feel the pinch when others do, and the number of people looking for new opportunities is steadily rising.
You may have some power over your travel arrangements, but limited personal power over the price of fuel. You may have power over the stock or retirement funds that you have selected, but limited personal power over Wall Street. You have some power over the decision to buy or sell your home, but limited personal power over the housing market values. You have some power over the money that you spend, but may have limited personal power to quickly impact the amount of money that you owe. Do you have the courage to change what you can, the serenity to accept what you cannot change, and the wisdom to remind yourself of the difference?
Don’t waste your time to panic over the things that you cannot change. Rather, spend your time to evaluate and adjust your plans for those areas that you can impact.
Stocks
Did you invest in stocks when the market was rising? Did you enjoy watching your money grow while you casually read the morning paper and sipped on a cup of coffee? Did you pat yourself on the back for having the wisdom to select the right stocks, and to have the patience to watch them grow and increase in value? If so, what active role did you play in contributing to the continuous growth of those stocks? More than likely, you watched them grow, and you watched them decline. If you do not immediately need the liquid assets for some other emergency, then please return to your coffee and morning paper to await the passing of this season. As with nature, autumn and winter are a necessary preparation for spring and summer. If you missed cashing out your investments at the peak, then it may be in your best interest to wait for thaw of the financial market, and look forward to watching the renewed growth.
In the meantime, keep an eye on any stocks with high risk, just to make sure that you do not experience the frost bite and icy cold finger of fate that touched such giants as AIG and Merrill Lynch. It is unwise to move stocks to get away from an investment, but a very wise move to transfer in the direction of a good investment. In other words, do not run hastily from a dangerous position, but rather move intelligently to a good one.
Mutual Funds
Hold on for the recovery. If you move when things are down, then you experienced the decline without giving yourself the chance to experience the rebound. As always, if you are not a professional financial advisor, then find one that you can trust to give you the guidance that you need. You would not even think about doing brain surgery on yourself, so why would you perform surgery on your own financial future?
Bonds
Treasury Bonds and Government Bonds do not offer fast moving overnight success or excitement. Treasury Bonds, unlike James Bond, are not sexy, and do not provide the exhilarating adrenaline rush of extreme risk with potential for flashy rewards. What you do have is a little more safety, a little more security, and a little more confidence that your investment will not be traded, bought out, or suddenly bankrupt. There are times that the tortoise may not keep pace with the hare, but when it comes to your retirement, you really do have the option to place your bets on both the tortoise and the hare. Put some of your money on the tortoise to finish, and the hare to place, and you have more than doubled your odds of winning.
Real Estate
If you can pay your mortgage and are happy in your home, then why are you worried if the housing prices decline? If you lived in your abode and experienced the unruly and exorbitant increases of housing prices for the last decade, did it really change your standard of living? If you did not already sell your home, was your lifestyle raised at the same rate and pace of the housing market? If the rising prices in housing did not improve your lifestyle, then the adjusted balancing of the market is not going to harm you either, so chill out.
On the other hand, if you accidentally bought into the housing market when it was at the peak, then you may have to wait a little while for the rebound to come back and exceed the levels of a year ago. Reassure yourself that real estate can sometimes be a long term investment. Land is the one thing that nobody can make any more of, so there will eventually be demand for it.
Mortgage
If your lender fails, you still need to pay your mortgage to the company that takes over ownership of the mortgage. If you receive an unexpected notice that your mortgage has been transferred, be cautious and investigate to confirm the transfer of ownership. Don’t let a scam artist take advantage of you during a period of uncertainty, but always make sure that you know where your money is going.
If your financial situation appears unstable or threatening due to the terms of your loan, then this is a very good time to address your concerns and evaluate your mortgage with the lender. While some banks and financial institutions allowed greater risk in recent years, the current concerns have placed a mutual concentrated commitment to secure profitable loans on good credit, and assure that mortgages can be paid. If you are concerned, then schedule a meeting to discuss options with your lender and express your interest in refinancing at lower rates. The lender wants your money, not your home, so you are already starting your conversation with common objectives.
Retirement Accounts
Retirement plan assets are protected, even if the plan sponsor fails. The good news is that your plan is probably not going away, although it is possible that the value of your plan may be doing a disappearing act. This disappearing act is far from magic, and not nearly as entertaining. The risk and reward of many 401K accounts is intertwined with stock market performance, so you may be in for a bumpy ride. Furthermore, like social security, there are peaks and valleys of generations contributing to funds and withdrawing funds. Your crystal ball has as much chance of being correct as the magic eight ball. Don’t put all of your eggs in one basket, because although the basket may not go anywhere, there is no guarantee as to how many eggs will be left in it. Keep a few of your eggs in other safe places, just in case.
Savings Accounts
If your savings account is in an FDIC insured bank, your funds are protected up to $100,000. If the fund that insures the accounts fails, the government covers the balance up to $100,000. If you have more than the maximum insured amount in your savings, perhaps you should consider keeping funds in several different FDIC insured banks. It may be a good idea to use more than one bank or credit union to hold enough funds to pay the bills for a short period of time, in the unlikely and unfortunate event that your primary bank temporarily suspends access to funds for some reason. FDIC protection does not cover money market mutual funds.
Insurance
AIG received much attention and immediate government intervention when it made headline news. In the event that an insurer does go bankrupt, the state regulator takes over to make sure that policies are honored. In fact, the consumer insurance subsidiary of AIG was never in trouble, so consumer insurance plans were not as risk.
Credit Cards
Now this is an area that you should really pay attention to, and plan accordingly. Banks will issue more credit cards in an effort to increase profits. These credit cards are targeted at people with good credit records, but they will come with much higher penalties and increased fees. In a weaker economy, as personal finances are impacted by job transitions, reduced access to loans, or if your profession relies on transactions (sales, real estate, construction, entertainment, etc), it may become increasingly difficult to pay down credit card debt due to reduced income.
Review your bills each month to determine if there are some monthly recurring charges to your credit card that can be cancelled or reduced. If you are carrying a balance forward, make a plan for the amount you will reduce your balance each month. Set a date to pay off your credit card completely, and hold yourself accountable to that date. Start paying with cash, when appropriate, and make a journal of your transactions. Reduce your reliance on the convenience of credit cards for personal use until the economic storm has passed.
Remember that your Credit Card payments impact your overall credit score. As the economy tightens, it is incumbent upon lenders to act responsibly and to limit the access for loans and mortgages to individuals with good credit scores. Lower scores mean higher down payment or rates. Don’t let a lack of attention to Credit Cards become a costly impediment to other important purchases or transitions that you make want or have to make in the future. Moving, selling, or buying a home may be in your future, so don’t let the Credit Cards slip beyond your control now. Even if your Credit Card Company fails, your history and debt remain, and are transferred to another company.
Borrowing Money
To put it simply, this is not a good time to borrow money. Banks will be eager to lend, but only if the bank believes that you have good credit and that the bank has the ability to profit from your loan. If the bank is assured of making profit, it is money coming from your loan, and out of your pocket. If you are considering borrowing money as a way to get out of a hole, like paying off credit cards, then have a plan on how to get out of the hole that is created when you take out a loan. Digging a hole to use the dirt to fill another hole is only a temporary solution, and may have unpleasant strings attached.
Recession
The threat of recession is the constant beating of a drum. Although we may not always see it, we hear it all around us. There are many contributing factors to this economic illness, so there is no single medicine to cure it. As an individual, it is not something that you can change, so it takes serenity to accept it. Be prepared for the ways that it can impact you personally and professionally. Professions that rely on transactions may slow as liquid assets dry up. Real Estate, construction, travel, and entertainment have already been visibly affected, and this trend will continue at least into the first half year of 2009. Professionals that rely on these transactions will have to adjust, and so will all of the businesses that rely on these individuals as consumers. You cannot change that either. However, you can make personal decisions and plans that will impact your immediate financial security, and your long term investments.
Conversely, during times of recession and economic turmoil, individuals often turn to low cost alternatives to boost morale and self-esteem. While housing sales are in a slump and investors are rattling sabers on Wall Street, the lesser luxury items are in higher demand. Make-up, lipstick, diet foods, and small personal luxury items sales are still strong. Cell phones, iPods, and low cost consumer electronics help us forget about the incessant beating of the recession drums, at least for a little while. There is nothing wrong with feeling good about yourself as the world around you screams of panic. You can be serene, because you know what is within your control, and you are making plans for it.
It is highly recommended to seek the recommendations of licensed financial advisors. Do not make decisions based on haste, remorse, or fear. Make your decisions based on an educated balance of immediate needs and long term security. Like the seasons, real estate, the stock market, and the economy will return and flourish in due time. Your goal is to weather the winter storm and be ready for the next summer.
This article is not intended to render legal or financial advice. If you require legal advice, you should seek the services of an attorney. If you require financial advice, you should seek the services of an accountant or licensed financial advisor.
Words of Wisdom
“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
- Warren Buffet
“We have seen a significant increase in demand from senior executives across the USA and in Europe who wish to leave the corporate world and become independent small business owners, franchise owners or equity partners. While stockholders are pushing hard for corporate re-engineering, executives are facing a job market where it takes on average 1-year to find a new executive job that may last at best, for only 2-years.”
- Richard P. Driscoll, Jr. Chairman & CEO, The Executive Connection LLC
“While the Internet is becoming cluttered with volumes of meaningless data, it has become essential to deliver clear crisp communications in a matter of seconds.With the objective of presenting the alternative of independent business ownership to corporate senior executives who are considering a career change, we have worked diligently to both educate and inform.”
- Warren Denby, Chief Marketing Officer, The Executive Connection LLC
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
- Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin, 1802
- John Mehrmann, Author of The Trusted Advocate: Accelerate Success with Authenticity and Integrity