6 Factors That Keep You from Getting a Small Business Loan, getting a business
6 Factors That Keep You from Getting a Small Business Loan
For many entrepreneurs, a small business loan is an essential way to finance a new business or expand existing operations. However, obtaining funding for your business is no easy task. Here are six barriers that can prevent you from getting the small business loan you need and a few tips on how to avoid these roadblocks.
1. Poor credit history
Credit reports are one tool lenders use to determine a borrower s credibility. If your credit report shows a lack of past diligence in paying back debts, you might be rejected when applying for a loan.
Paul Steck, former president and CEO of the international franchise restaurant Saladworks, has worked with hundreds of small business franchisees, many of whom have bad personal credit as a result of illness, divorce or other extenuating circumstances.
Sometimes, very good people, for reasons beyond their control, have credit issues, Steck said. And, unfortunately, that s a real barrier to entry in the world of small business.
People with bad credit should consider nontraditional financing options which tend to place less emphasis on credit scores before giving up on getting a loan.
Editor s Note: Looking for information on business loans? Fill in the questionnaire below, and you will be contacted by alternative lenders ready to discuss your loan needs.
2. Limited cash flow
Cash flow a measure of how much cash you have on hand to pay back a loan is usually the first thing lenders look at when gauging the health of your business. Insufficient cash flow is a flaw that most lenders can t afford to overlook. Therefore, it s the first thing business owners should consider when determining if they can afford a loan.
Really thinking through that cash-flow equation is like preventative medicine for your business, said Jay DesMarteau, head of regional commercial specialty segments for TD Bank. You can either wait until [your business] gets sick, or you can do things to prevent it from getting sick.
One of the preventative measures DesMarteau recommends is to calculate cash flow at least quarterly. If business owners take that step, they may be able to optimize their cash flow before approaching potential lenders.
3. Lacking a plan for the future
Having a plan and sticking to it is much more attractive than spontaneity in the finance world.
Banks require that business owners have an organized, detailed and quantitative business plan in order to move forward with the loan process, said David Goldin, CEO, president and founder of Capify, an alternative small business lender.
However, Goldin noted that it s common for very small businesses to not have a formal business plan or any plan at all, for that matter. In these situations, he recommends that business owners at least forecast their future earnings before applying for a loan, so lenders will have an idea of your profitability.
You should also be prepared to explain your plan for the money you want to borrow.
Lenders . biggest single complaint is that small business owners aren t able to articulate very well how they re going to use the capital that they re looking for, how they re going to make repayment and what impact they think [the loan] is going to have, said Ty Kiisel, who writes about small business for online lender OnDeck.
According to Kiisel, your pitch to lenders doesn t need to be eloquent, but it must be straightforward. At the bare minimum, loan applicants should be prepared to explain why the want a loan and how they plan to repay it.
When it comes to approaching potential lenders, business owners should have their act together. That means having all the paperwork you ll need for your loan application on hand.
One of the things that can be a problem when applying for a loan is if [business owners] don t have the documentation that the bank will require [such as] back tax returns, Steck said.
There are plenty of resources that business owners can refer to when putting together their loan applications. The Small Business Administration, for example, provides a highly detailed loan application checklist for borrowers. Using these resources can decrease your likelihood of coming across as disorganized or unprepared. [See Related Story: Applying for a Small Business Loan? Here s What You ll Need]
5. Failing to seek expert advice
When it comes to making financial decisions for your business, lenders want to see that you ve sought guidance from knowledgeable advisers.
Accountants can be an important source of advice for small business owners. That s why Bizfi has partnered with the National Directory of Certified Public Accountants, says Stephen Sheinbaum, CEO of alternative lender Bizfi. But there are many other places to find good people to talk to, such as the Service Corps of Retired Executives (SCORE), a free mentoring service that is supported by the Small Business Administration.
According to Sheinbaum, SCORE connects you with retired businesspeople with experience in your market.
This is important because they will know about the kind of capital that is most important to people within your industry, said Sheinbaum.
He also recommends that business owners get financial advice from business networking groups and conduct research on the websites of the leading alternative funders, since many have detailed resource sections for small businesses about the many kinds of available capital and the best ways to prepare for funding.
Too many business owners approach lenders with an apathetic attitude, Steck said. In other words, they simply don t demonstrate why they, rather than someone else, are a good candidate for a loan.
You have to exude a passion, said Steck. I m going to do this, and I m going to be the best in the whole wide world. You have to go into it with that sort of mentality, and a lot of [potential borrowers] don t do that.
Editor s Note: Looking for information on business loans? Fill in the questionnaire below, and you will be contacted by alternative lenders ready to discuss your loan needs.
Additional reporting by Elizabeth Peterson. Some source interviews were conducted for a previous version of this article.
Paula is a New Jersey-based writer with a Bachelor s degree in English and a Master s degree in Education. She spent nearly a decade working in education, primarily as the director of a college s service-learning and community outreach center. Her prior experience includes stints in corporate communications, publishing, and public relations for non-profits. Reach her by email.
Business Loan: Small business finance, Westpac, apply for a business loan.#Apply #for #a #business
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Choose a fixed or variable rate Business Loan.
- Make extra payments, which could reduce interest paid over the life of the loan
- Option to swap between interest only or principal and interest repayments
- Redraw allows you to make extra payments and access these funds later.
- Provides certainty in knowing what you’re up for with each repayment
- Protects you from potential future interest rate movements.
Make tax time less taxing
Keep track of your Business Loan balance and financials online (and at tax time, export details of interest paid to your accounting software).
Terms and loan security
The term of your Business Loan will vary depending on security offered (you may swap if your situation changes):
- Loan term up to 30 years when residential property used as security
- Loan term up to 25 years when commercial or rural property used as security.
- Loan term up to 5 years when unsecured (guarantee may be required)
- Establishment fee
- Monthly loan maintenance fee
- Other fees apply.
Here are some important points to consider before applying for a business loan:
- Security – depending on your circumstances, business loans can be unsecured or require security in the form of residential, commercial or rural property. A guarantee will also be required by company directors for corporate borrowers
- Credit history – all borrowers, owners, directors and guarantors must have clear credit records. All statutory payments and ATO liabilities need to be up to date and not under arrangement
- Banking and borrowing history – existing bank accounts and lending products must be within their approved limits
- Domicile – your business must be registered in Australia
Looking to borrow less than $50,000?
Consider our range of business credit cards. Terms and Conditions apply.
Vehicle equipment finance
When you don’t want to use cash flow to purchase new assets.
- Business vehicle finance: Buy, hire or lease the latest model without tying up your cash
- Business equipment finance: Buy, hire or lease – the choice is yours when it comes to financing plant and equipment.
Provides cash flow relief with funds to cover business expenses, such as invoices and wages until you’re paid.
- Unsecured Business Overdraft: Up to $50k. No asset security taken. Director’s Guarantee required for Corporate borrowers
Great for purchasing an existing business or franchise, or investing to grow.
- Westpac Business Loan: Borrow from $20,000 and choose between a fixed rate with predictable repayments or variable rate with flexible repayments
Looking for other business loans?
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Things you should know
Credit criteria, fees, charges, terms and conditions apply. Talk to your banker for product details.
Conditions, fees and charges apply. These may change or we may introduce new ones in the future. Full details are available on request. Lending criteria apply to approval of credit products. This information does not take your personal objectives, circumstances or needs into account. Consider its appropriateness to these factors before acting on it. Read the disclosure documents for your selected product or service, including the Terms and Conditions or Product Disclosure Statement, before deciding. Unless otherwise specified, the products and services described on this website are available only in Australia from Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.
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Digital Media Law Project
A trademark is a sign, mark, or indicator used by an individual, business, or organization to identify a product or service as its own and to distinguish the product or service from those of its competitors. A business name generally can be protected as a trademark under federal and state trademark law.
Trademark law is designed to avoid consumer confusion over the trademarks that businesses or other organizations use in connection with their goods and services. Stated briefly, trademark law makes it unlawful for a business to use a trademark (e.g., a slogan, a logo, a name) in connection with a good or service if that use is confusingly similar to another business’s use of a trademark. To see how this works, imagine a consumer – Sally. If Sally buys a Dell computer, she can be pretty sure that the computer was made by Dell Computer and nobody else. She can take Dell’s reputation into account without worrying that a knockoff company is making shoddy computers with the Dell logo on them because trademark law prohibits that kind of confusing commercial activity and it gives Dell the right to sue for money damages and an injunction if someone does it.
As a general rule, if someone in a similar field to yours is already using a particular business or organization name, you should not use it, nor should you use a name that would be confusingly similar. Traditionally, there was nothing to prevent someone from using a trademarked name in a completely unrelated field or industry (for instance, Delta Faucet and Delta Airlines) because there was no possibility that consumers would confuse one for the other. However, the emergence of something called anti-dilution law means that the owner of a famous trademark (it means pretty much what is sounds like) can prevent you from using it even in an unrelated industry. Therefore, it probably would not be a good idea to call a blog Kodak News or McDonald’sBlog, unless your website is actually about Kodak or McDonald’s (in which case you should read Using the Trademarks of Others section closely). Traditionally, the law also permitted multiple companies to use a given name in different geographical areas of the country, but the global nature of the Internet breaks down the importance of geographical isolation and makes it more likely that an Internet use of a name or trademark could be confusing regardless of where the brick-and-mortar businesses or organizations are physically located. Thus, you probably want to steer clear of a name that is the same or similar to a name used by someone else in your field, even if that person or organization is located far away from you.
The process of naming your business and securing trademark rights can be summarized in three basic points:
- Choose a name for your business. It should be distinctive, not generic, and should not be close to the name of anyone in a similar business. For details, please see the Naming Your Business: Choosing A Name Capable of Trademark Protection section.
Search for others using your chosen name or similar ones. You should search the Internet and federal and state trademark databases, at the very least. You should not use the name if someone in your field or a similar one is using it. You may be able to use the name if someone in an unrelated field is using it, but you should try not to use similar logos, styles, or colors. For details, please see the Naming Your Business: Searching for Trademarks of Others section. Consider registering your chosen business name as a trademark. Registering a state and/or federal trademark has advantages. It is relatively cheap and easy to register a state trademark. Federal registration is more costly, but it is worth considering because of its nationwide effect. For details, please see the Securing Trademark Rights: Ownership and Federal Registration section.
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