Category: Tips

Calculate Your Working Capital the Right Way

Working Capital | LoanOne

Many small business owners have a difficult time understanding different financial concepts – not the least of which is working capital. What’s tricky is that it can have different meanings depending on the person you ask. You have read or heard that calculating your working capital only requires subtracting your current liabilities from your current assets.

However, more often that not, things prove more complex than that. You need to have a full understanding of working capital and the different factors that influence it if you want to get to the right number.

Experts suggest using the operating cycle as a tool for calculating your working capital. The operating cycle involves analysing the accounts receivable, accounts payable, and inventory in terms of days.

Simply put, the analysis of accounts receivable is done using the average number of days required to collect an account.

Inventory needs to be analysed by the average number of days needed to turn over product sales, from the moment your products come in your door to the moment they turn into cash. Accounts payable must be analysed based on the average number of days needed to pay your suppliers.

In most cases, businesses cannot use accounts payable alone to finance their operating cycle. This means that finance is required to boost your working capital requirements. Most businesses cover this gap by internally generated profits, externally borrowed money, or a combination of both.

You will find that at one point or another your business requires short-term working capital. A prime example is when retailers need working capital to purchase seasonal inventory between the months of September through November in preparation for the holiday sales.

However, even if your business isn’t engaged with seasonal products, you may notice that some months see higher sales than others, meaning you need to maintain your inventory. The build up in inventory and accounts receivable needs to be covered by coming up with enough working capital.

Some small business owners prepare for this event by increasing their cash reserves. For a new business, however, this can prove very challenging. If you have a small business that needs short-term working capital, you should know that you can get funding from several sources.

What’s important is that you know how to plan well ahead of time. Failing to do so means missing out on sales opportunities, especially huge orders that could provide your business with enough money to get over the hump.

Funding Sources

The following are five short-term working capital funding sources you should consider:

Equity

If you have a new business that hasn’t reached profitability yet, then you should look into equity funds for your short-term working capital needs. This proves the most accessible option for small businesses owners because it can come from your personal resources or those from family members, friends, or third-party investors.

Trade Creditors

Establishing a good working relationship with trade creditors should be a priority for all business owners as it comes in handy when trying to source funds for working capital requirements. If you have shown responsibility and punctuality in paying in the past, there’s a good chance that a trade creditor will accommodate extended terms so you can complete a big order. If the supplier provides 30-day terms, then you may ask to extend it to 60 days if you have a huge order coming up which you can fulfill within this period. Usually, the trade creditor asks for proof of the order and may even consider filing a lien, but this shouldn’t be a problem if it will enable you to proceed with the transaction.

Factoring

This is something not many small business owners know about. A factoring company can help with your working capital needs by buying your accounts receivable and handling the collection after you fill an order. Some business owners shy away from this method because it’s more expensive compared to traditional financing options from banks, but it can be just what you need to ensure there are no halts in your operations.

Line of Credit

Banks don’t normally give credit lines to new businesses. However, with enough capitalisation through equity or security in the form of a collateral, your business might just get approved for one. What’s great about a credit line is that it enables you to borrow money to cover your short-term needs anytime they arise. After collecting the accounts receivable, you must pay the funds. To make sure that the funds are only used for short-term needs, credit lines do not usually last longer than one year and need to be paid for 30 to 60 consecutive days.

Short-term Loans

If you haven’t had any luck with credit lines from the bank, try asking for a short-term loan to get enough funding for your working capital needs. This is where your relationship with a bank manager comes into play. The manager might agree to give you a one-time short-term loan to cover your seasonal inventory or accounts receivable buildup.

Other than calculating the average number of days required to make a product and collect an account vs the average number of days needed to finance your accounts payable, analysing the operating cycle provides another important analysis.

It’s high time that you have a thorough understanding of the impact of working capital on the cash flow of your business. You may not realise it right away, but it can spell the difference between a successful business and one that’s bound to fail before it even begins.

 

 

How To Put Debt To Work For Your Business

Put Debt To Work For Your Business

When debt is used wisely, it can be a great addition for your books. Debt is a real four-letter word for numerous small businesses – although lately, it hasn’t really mattered since lenders have been big scrooges when it comes to extending any sort of credit.

However, recently the purse strings appear to be loosening. Some experts say that going into debt sometimes can be a smart decision for numerous business, as long as it is done in the right situations. There are a number indicators that show that small-business credit appears to be on the rise. The lending capacities of banks are expanding at a higher rate than has been seen in quite some time. This creates a lot of opportunity to obtain finance when it was once quite tough.

Get a good deal on debt

good deal on debt

Cost is one of the obvious attractive features with taking on debt. Interest rates have reached rock bottom, which makes the expense of borrowing money more affordable for both small businesses borrowing for the first time as well as those who are wanting to get their existing debt restructured.

Given the fact that interest rates are currently at an all-time low, in real terms, that is making debt less expensive. The bottom line of a majority of businesses can be impacted very quickly through refinancing existing obligations at lower costs.

However, low interest rates alone shouldn’t cause a business to rush to the bank for a business loan. Businesses still need to be weary of taking debt on in the hope of righting a struggling business. Although a cash infusion might provide a short-term boost to a business, the revenue that follows might end up being insufficient to make all repayment obligations. The right conditions for taking on debt typically should include having a healthy business that still appeals to a bank’s view of taking on prudent risk, the prospect of continued growth is good, and there are positive trailing trends.

Banks are also not turning a blind eye when it comes to small businesses seek debt in order to stabilize their volatile finances. Lenders might be more generous these days than they were in the recent past, but the most attractive candidates for financing are still those businesses that have plans for growth and a solid finances history rather than companies looking to patch their financial leaks.

Craig Calafati, Celtic Bank’s national sales vice president, says that banks are searching for a business that is well managed with proof of this through adapting to the evolving business trends and challenges. That means that they supervise their expenditures closely, have been able to maintain necessary liquidity, and have taken other measures that show they understand the current business climate that they are operating in.

Is it a good time right now to get in debt?

In contrast to recent years, for small businesses right now it is a buyer’s market when it comes to debt. Make sure you take the time to aggressively shop for and compare interest rates, loan costs, and other terms. Small business should begin their search with community-based local banks. They may have especially attractive loan terms, and the the lenders are more likely to have an interest in backing locally based small businesses.

However, don’t get too overzealous. Minimize your debt, shop around to find the deal that is most affordable and be sure that any debt you take on is going to be manageable for your business.

 

 

More Articles:

Tips For Using Your Business To Finance Business Expansion

How To Get A Business Loan Fast

 

 

Case For Borrowing Money Instead

Giving up Equity | LoanOne

Almost everyone has heard the saying that any amount of debt is unacceptable. People view debt as one of the worst things they could be saddled with. You hear horror stories all the time; homeowners can’t make ends meet, the national deficit is simply growing larger, credit card spending is out of control, and university students are drowning in student loans and may never be able to recover financially.

When it comes to businesses, the facts are a little more straight forward. Borrowing can actually be a good thing. Many business owners do not have a background in finance, which is why the following four points are important to conceptualise. It is vital to understand that debt does not have to be a burden.

1. Giving Up Equity Costs More

This is probably the most important point to understand. If you are trying to secure money to run your business, giving up equity is going to cost you more than if you accepted some level of debt. When you give up equity, you give up some of your business permanently.

Consider the following information. When you begin your business, you have to pay employees, purchase inventory and get the equipment that you need to be successful. Investors will give you capital, but any money you make going forward is earmarked for them. If you take on debt, you do have to pay interest. However, there is a certain rate that you must pay and it doesn’t last forever. Once the business loan is repaid, you still have all your equity.

It is almost a certainty that you will not save money by giving up equity. That is why, in most cases, assuming debt is arguably the better choice.

Debt Responsibility

2. Opportunity Cost May Be Higher Than Debt

Maybe you have just started your business and you want to make your first sale. However, it’s nearly impossible to do because you don’t have the money to purchase inventory. Suppose you can purchase the inventory for $5,000 and are able to turn around and sell it for $15,000. Does it make sense to borrow $5,000 at a cost of $1,000 to complete the order? If you factor in the APR, you would realise that you’d have a 20% APR over the course of the one year loan. If it were a two-week loan, the APR would be 520%.

While that sounds like a ridiculously high APR, it is still a better deal as long as nothing else is out there for you to take advantage of. This is because your return on investment is excellent. You’d make a huge profit, which makes it worth it. There’s absolutely no reason that you shouldn’t do it, even if math isn’t your strong suit.

Depending on the situation, debt can be your best option. You can make money and have opportunities that you didn’t have before. You just need to ask yourself if you are getting a high return on your investment and if that return is more than the debt. If the return is higher, it makes sense to strongly consider this option.

3. There Is Less Tax Burden When You Pay Interest

One reason that borrowing can be advantageous is that paying interest cuts down on your taxable profit. As a result, you don’t have to pay as much in taxes.

Capital costs less as a result, and it is important to consider that when thinking about what type of return you’ll get from assuming a debt. There have been companies that have been able to do very well for themselves by taking advantage of this tactic. It is something that small businesses should look at as well.

Borrowing, therefore, is starting to look better and better. Selling equity really shouldn’t be the first thing you turn to if you want to improve your business. You can lower your taxes through debt, which is a huge advantage.

4. Debt And Responsibility Go Hand In Hand

Small businesses usually don’t think about it from this point of view, but when you have debt, you think more about your finances and what the best decisions are for your company. As a result of this careful planning, you can do a lot of good for your business over time.

Obviously, this isn’t the only reason that you would assume debt. However, it is an advantage to factor in.

Why is that the case? When you have money, you aren’t as worried about money. When you don’t have money, you have to fight to stay afloat. When you have money, you may spend it on things that you don’t really need. When you don’t have money, you aren’t as frivolous and must really think about where your money is going.

That means that you will be more careful with your budget. As a result, you may earn more simply because you are not willing to indulge in things that you don’t really need.

You shouldn’t go into debt if you don’t have to. Still, if you are smart about the process, you don’t need to worry about debt. Instead, look at it as a way to help your business get bigger and better. Ultimately, it may cost you less than your other options as well. It’s not easy to run a business in today’s world. You have to do everything in your power to be successful. If you want your business to be around for a long time to come, making the right financial decisions is crucial.

 

How To Get A Business Loan Fast

Fast Business Loans | LoanOne

The process of applying for a business loan and having it approved requires lots of patience and perseverance. For many people, having such a loan approved in less than a month is next to impossible. This however doesn’t necessarily mean you cannot have your business loan approved quickly. All you need to do is identify business loans that are processed/approved within the shortest time frame possible. This article looks into the most common business loans and the processing time for the same.

A. Traditional Business Loans (Up To 3 Months)

This type of loan can take up to 3 months to be approved hence is at the bottom of the list for fast business loans. Traditional business loans are very common in the Australian market and commonly offered by the four largest banks in the country (Commonwealth Bank, ANZ, Westpac, and NAB). If the processing period takes longer than normal, this is related to the vast sums that one can borrow which is usually not less than $50,000. These loans are specially designed for persons/businesses looking for substantial amounts of money. The repayment period of the same extends to up to 10 years. This type of loan is ideal if you’re looking to purchase assets, business acquisition, or real estate.

Advantages of Traditional Business Loans

1. Low-interest rates which average 8% – the interest rate, however, depends on the collateral used to secure the loan.
2. More extended repayment periods of up to 30 years.
3. Flexibility to choose between variable and fixed rates. Some banks offer both.
4. Highly flexible repayments. The repayment plans can be monthly, quarterly, half yearly, or even annually.

The Cons

1. Only established companies and businesses with years of proven track record qualify for this type of loan.
2. Strict scrutiny and substantial paperwork during the application process.
3. Loans can take up to 3 months to be processed/approved.
4. Relatively high minimum lending amounts putting it out of reach for entrepreneurs and small businesses.

B. Hire Purchase (Takes One or Two Weeks)

Commonly offered by traditional bank lenders, it can take up to 2 weeks for a hire purchase loan to be approved. This type of loan is specially designed for the purchase of machinery, vehicles and heavy equipment. The repayment periods for the same range between 1 and 5 years. If buying a car or truck for your business, you are then required to make monthly payments of the agreed amount for a set period. It is after you have cleared the payments that the bank can transfer the title to you. In most instances, the bank requires you (the company) to make a balloon payment, which is considerably higher than the monthly payments. The main idea here is to help keep the remaining monthly payments lower and manageable.

Advantages of Hire Purchase

1. Ability to select payment terms suiting your cash flow and life of the asset.
2. You may be able to claim input tax credits for payable interest and fees included in the principle.
3. You get the asset’s title once all payments are done. You can then decide on whether to continue using it or sell it off.

The Cons

1. The bank holds the asset title until each payment is made.
2. Higher interest rates compared to traditional bank loan plans.
3. It is not the fastest available business loan out there.

C. Personal Loan (5 to 7 Days)

Yes, you can use a personal loan to fund your business. One of the advantages of a personal loan is that it is much easier to get when compared to business loans. In addition to this, there are no restrictions involved with personal loans – you can buy anything with the money. Personal loans, however, take about a week to be processed or approved, hence not the fastest way to get money out there. Personal loans, however, have a limit of $50,000 with a repayment period of 1 to 7 years.

Benefits of a Personal Loan

1. It is easier to obtain
2. Can be secured or unsecured. Interest rates are either fixed or variable.
3. Installment repayment plans make it easier to spread payments especially when looking to buy a substantial business asset.

The cons

1. Higher interest rates compared to business loans. Interest rates range between 8% and 20%.
2. The maximum amount you can borrow is determined by your credit rating, as well as the approval of the same.
3. Personal assets are at risk should you be unable to service the loan.

D. Business Credit Card (2 to 7 business days)

A business credit card falls under the fast business loans category, with approvals of less than 7 days. One of the benefits of a business credit card is the fact that it isn’t restricted. You can use the card to buy anything you want to boost your business. It also comes with flexible repayment plans for as long as you can pay the minimum required amount each month.

Advantages of a Business Credit Card

1. Flexible and very easy to use
2. Some business credit card companies offer an interest-free period (55 days) on purchases. This makes it an excellent way to make purchases for as long as you can repay within the given period.
3. You accumulate points, travel insurance, etc. from using the card (offered by specific companies)

The Disadvantages

1. Relatively high interest rates, up to 24%
2. Annual fees for the credit card
3. The business credit card may be linked to personal assets – this puts your assets at risk should you fail to make repayments.

Business Loan Application

E. Bank Overdrafts (1 or 2 days)

Bank overdrafts generally enable one to run on a negative balance on their regular business transaction accounts. Your business should however, have been in operation for several years to be able to get this line of credit. The best thing with bank overdrafts is it takes far less time to be processed as compared to business loans. If looking for a fast way to get a business loan, this should be on the top of your options.

Business Overdraft Pros

1. A quick way to get money if your business has a proven track record
2. Highly flexible. You only pay for what you need plus the interest.
3. Only the overdraft amount is chargeable.
4. It can either be unsecured or secured

The Cons

1. Interest rates are considerably high (8 – 12 %)
2. You can be called upon to make immediate repayment for the same amount of the loan.
3. Requires establishment and ongoing fees.

F. Online-Unsecured Business Loans (One-Day Loans)

Approved in 24 hours or less, this is considered the fastest business loan you can get. Companies offering these loans use the advances in IT technology to make applications smooth and easy. No paperwork is required with an online-unsecured business loan as everything is done online. You only need to provide required information online via a secure portal. Loan processing begins immediately. Thanks to technology, the lender can easily work out if you qualify for the loan, thanks to being able to access your accounting and bank details. Lenders will, however, have to review your credit report before approving the loan request.

Advantages of Online Unsecured Business Loans

1. The application process is fast and easy
2. Instant access to funds once approved.
3. Higher eligibility rate even for businesses that aren’t eligible for bank loans.

The Cons

1. High-interest rates when compared to traditional bank loans.
2. A personal guarantee may be required (this depends on the structure of your business).

While unsecured business loans may be alluring, you should take some time to read the company’s terms and conditions (fine print) before going ahead with the loan application. This is because some companies may include additional fees that you may not be aware of unless you have read their terms.

 

 

 

More Articles:

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Tips For Using Your Business To Finance Business Expansion

 

 

 

Tips For Financing A Franchise

Tips For Financing A Franchise | LoanOne

You have carefully read the information, done all of your due diligence, weighed up your chances for success, and have decided that a franchise is the route you want to take to start a business.

However, before you sign anything, you first need to answer this question: Where are you going to obtain the money for financing your franchise, working capital, inventory, and royalty fees?

Before you approach a lender the first thing that you should do is determine your net worth. In order to do that a personal balance sheet is used to list your assets (the things you own) as well as your liabilities (how much you owe). On the assets side, add up all of your holdings – checking accounts, cash on hand, saving accounts, securities, bonds, vehicles (whether or not they are paid off), cash values on insurance, and another other assets that you own – and then total them together.

Liabilities are the other part of a balance sheet. Follow the exact same steps that you used for determining your assets. List all of your current bills, your home mortgage, credit cards, finance company loans, auto loans, personal loans, and so forth. Then take the total of your liabilities and subtract them from your assets. After you have your balance sheet complete, check your credit rating. All potential lenders look at three common factors when checking a credit rating: track record, income, and stability.

Most lenders want to know how long you have lived in the same place or been at a specific job, and whether or not you have a track record of completing things that you start. You need to be prepared with a good explanation if your history doesn’t show a record of stability. The amount that you earn is very important but being able to live within your means is also key. There are some individuals who earn $100,000 per year that still are unable to pay their debts, but other people are able to stay within their budget on $20,000 per year.

There is a very good reason why a majority of lending institutions review your income and how you live within your income. If you are unable to manage personal finances, there is a good chance you won’t be able to successfully manage your business finances either.

Your track record is the third thing that lenders look at – which is how successful you have been able to pay your past obligations off. If you have a track record of repossessions, delinquent payments, and so forth, you will want to get those cleared up before you try to get a loan.

A majority of lenders contact credit bureaus to check your credit file. We recommend that you do the same exact thing before attempting to borrow any money. Credit bureaus under the law are required to provide you with all of the information that they have on file that is associated with your credit history. After you have this information, make sure to get any errors corrected or at the very least be sure to get your version of the story on your credit report. For example, a 90-day delinquency will look bad, However, if the cause of your 90-day delinquency was due to illness or being laid off, then that should be considered.

Business Plan

Once you have determined what your credit rating and net worth is, the last step that you take before you approach lenders is to put your business plan together.

Having a carefully-thought-out business plan is something that can make a significant difference between your loan application being rejected or accepted. A comprehensive plan always should include a close technical study of whatever business you are planning to go into; accurate cost analyses, projections, and pro forms, working capital estimates; a demonstration of your “people skills”; and an appropriate marketing plan. Your business plan should also include several credit references and certified statements on your net worth.

If you aren’t familiar with creating a business plan, get professional help or review business plan preparation software like BizPlan Builder Interactive or Business Plan Pro.

Franchise

Franchisor Financing

The first place that franchisees traditionally have turned to for financing are their franchisors. Nearly all U.S franchisors only provide debt financing. Some carry either a fraction or an entire loan via their own finance company. There are fractions ranging from 15 percent to 20 and 25 percent and up to 75 percent of the overall debt burden.

The loans that the franchisor makes can be structured in several different ways. There are some that offer loans that are based just on simple interest with no principal, and then in five or 10 years, there is a balloon payment due. There are others offering loans where there are no payments due during the first year.

Rather than financing the whole start-up cost, some franchisors might offer financing for part of the total cost. They might have financing plans for operational costs, the franchise fee, the equipment or any combination of these.

Along with start-up costs being partially financed by the franchisor, they also normally work with leasing companies to arrange for the franchisee to lease the equipment that they need for running their franchises. That can end up being a significant part of the overall financing, given that equipment frequently runs from 25 to 75 percent of the total start-up costs for a franchise.

If you are considering a franchise that doesn’t provide equipment leasing, check with non-bank, non-franchise companies specialising in providing franchises with equipment leasing. These kinds of financing companies frequently offer asset-based lending for financing the franchisee’s fixtures, signs, equipment, and furniture, and also allow the franchisee to buy the equipment once the lease has ended. Remember that under current law you might lose some tax advantages when leasing equipment.

Keep in mind that there are two main reasons why a business is franchised: to raise capital and for expanding the business. Therefore, if your credit record is reasonably good and you meet all of the financial requirements, a majority of franchisors will do everything they can to get you on board to join their team. The assistance that is provided by franchisors will usually help you get financing that includes help with business plan preparation and introducing you to various lending sources. Many times, franchisors will act as guarantors of the loans that you get.

Other Financing Sources

Once you have determined what financing is being offered by your franchisor, your next step is to make a list of all other sources of capital that are available. The following contacts are used by most sharp business people: finance companies, SBA (Small Business Administration) loans, bank loans, veterans’ loans, home mortgages, and loans from relatives and friends.

Banks are frequently not willing to work with certain individuals based on their financial profile. However, when there is an SBA loan guarantee they can become more amenable. The SBA guarantees those loans up to 90 percent. All a small business needs to do is submit their loan application to their lender for it to receive an initial review, and then if the loan application is found to be acceptable by the lender, its credit analysis and the application will be forwarded to the closest SBA office. Once SBA approves it, the loan is closed by the lender and the funds are disbursed. The borrower will then pay back the lender by making loan payments.

Some franchisors have reported that financial brokers have approached them – whereas historically it was only the big deals that they were most interested in. They do this to put large pools of money together using private funds and the SBA. Those funds are then available to franchisees via the franchisors similar to a trust fund. The fund would be contributed to from groups of small banks that have funds to invest from all across the country.

Other potential options include taking out a second mortgage on your house or getting a home-equity line of credit. However, you need to be careful when using this kind of financing. Keep in mind that a second mortgage and home-equity line of credit are both secured by your house. If you are unable to repay the amount you are financing from this source, the you could be risk for losing your house.

Tips For Your Consideration

There are numerous financing sources that are available to help you with launching your dream franchise. However, it can be disastrous running a franchise without having any reserves and being blind to unexpected business problems that can arise. A good rule to keep in mind: You should never invest over 75 percent of your total cash reserves. So don’t invest any more than $7,500 if you have a total of $10,000. Invest $18,750 if you have a total of $25,000.

Most important of all, keep in mind that a franchise’s price isn’t always a reflection of the real cost of the actual business. There can also be additional costs that may also include payments on signs, fixtures, equipment, building and land, and may cover administrative costs, opening promotional costs, training, leasehold improvements, inventory, and sales commissions at times.

Make sure you have a good understanding of your cash investment requirements. You are going to need to have a cushion of working capital in order to guide your business properly through all of the ups and down. However, if you do thorough research, and keep in mind that the most important sale that you will ever make is financing a business, then you will be well ahead of your competitors.

15 Quick Franchise Financing Tips

1. Speak to your franchisor before you search for outside financing; get pre-qualified or approved.

2. Family and friends are the most common start-up capital source. Make use of this.

3. Look for lenders who understand franchising in addition to small businesses.

4. Be completely upfront and honest with lenders. Don’t hide anything. Be prepared to explain anything and everything.

5. It is important to be neat. Fill out your loan and credit applications out clear. It is best to type them.

6. Don’t weigh your application down by having a lot of documents attached.

7. Don’t use up all of your liquidity by paying outstanding debts off before you file your loan application. Lenders like you to have some available capital.

8. If you are lacking in liquidity, find a partner who has money.

9. To improve your balance sheet and conserve start-up capital, consider equipment leasing.

10. Minimize your expenses and debts. Many business owners end up taking too much debt on and forget that they need cash flow in order to pay their debt.

11. Consider purchasing used vehicles, furniture, equipment, etc.

12. Before you waste time, gas, energy, and phone calls, use the internet first. There is so much useful information that is available. There are even websites that let you file your loan applications online.

13. Don’t forget about venture capitalists and angel investors.

14. Avoid taking out money from your children’s college funds or your retirement money. There is risk involved in all startups – including franchises.

15. Never give up.

 

 

More Articles:

How To Get A Business Loan Fast

How To Put Debt To Work For Your Business

 

 

Tips For Using Your Business To Finance Business Expansion

Business Expansion | LoanOne

When you first launched your business, there is a good chance that there weren’t a lot of options available to you for borrowing money. Usually, it takes time to get your credit score built up and lenders don’t like taking big risks on brand new companies.

This often results in many new business owners factoring in their receivables whenever they need some extra money.

However, if you have been in business for at least a couple of years, it might be possible for you to upgrade your finances. There is a natural progression at that point to add asset-based loans along with factoring.

Factoring Limitations

Factoring involves selling some of your customer invoices off to a financing company, which is called a factor. You will then be paid upfront for the amount of the invoices by the financing company, less their fee, and they then collect payments from your customers.

Although factoring is convenient, it also is limiting. You only are able to borrow based on the sales and account receivable collections that your business is making. If the only way to increase your revenue is through borrowing money for expansion, factoring can leave you stuck. You are at the point where you aren’t making the necessary sales to borrow additional funds but without additional financing, you can’t make the extra sales.

Advantages to taking out an Asset-Based Loan (ABL).

One way that you may be able to get out of this tough situation is to take out an asset-based loan. An ABL involves borrowing money and then paying it back with interest, just like you do with a traditional bank loan. The main difference is the loan is secure with valuable business assets – such as certain machinery or your inventory. When they are first getting started a majority of businesses don’t own those assets yet, but after a couple of years it is more likely that they will have the necessary resources for taking an ABL out.

The main advantage to taking an ABL out is that more financing will be accessible to you. Your financing will not be limited to the amount of your unpaid receivables. That can significantly free more money up that can then be used for growing your business. In certain situations, an ABL might have lower borrowing costs than factoring does. However, that isn’t always true, so you need to compare the numbers for both of the scenarios.

Using Your Business To Finance Business Expansion

Things to consider before you take an ABL out.

Before you get an ABL, there are some drawbacks that you need to consider first. If you are going to borrow money using this type of loan, you need to make sure you will be able to handle making your loan payments. If you are unable to keep up with your loan payments, eventually your lender could end up seizing your asset. Losing machinery or inventory when your business is struggling already would worsen the situation even more.

You will also have to pay interest on the money that you borrow. It can add up and become a significant cost over time and has the potential for hurting your bottom line. If your company is going to borrow money, be sure you have a plan for spending it productively and in such a way that it will put your business in a much better financial position.

When an ABL is used properly, it can be a very valuable financing strategy to use. When ABL is combined with factoring, it should give you access to all of the money that you need for taking your business up to the next level.

Advantages of Online Loans

business loan online

Online loans have become more and more popular, and there is a reason why. There are many benefits you can expect to get from online loans. Many people today do their shopping online, invest money online, and even book an appointment online. The same case applies to loans. Here are some advantages of online cash loans.

 

Convenience

When applying for an online loan, you don’t have to leave your home, you can do it from the comfort of your home without moving an inch. As long as you have your budget to hand, then you will find that the application forms are easy to fill in. It will not take you much time to apply for the loan, although you need to take some time in considering whether you need the loan.

 

Privacy

There is no need of worrying that your friends and family will see you applying for the loan. People usually want their financial matters to be kept private. If you are one of them, then you will find it easier applying from the privacy of your home. You won’t be seen getting into a loan shop or waiting in line at a loan shop or bank.

 

24/7 Applications

There are no worries with time because you can apply any day and any time you want. You can even send the application on a bank holiday. This is because websites do not have an opening and closing hours, making it a great option. You should keep in mind that the applications might not be immediately processed. Check the processing times of the lender before you apply.

 

Extra security

The online loan application will provide you with security. You can know whether the lender is approved. There are some doorstep lenders who turn out to be loan sharks. Loan sharks are looking for ways to prey on the desperate and vulnerable. You will also have not to worry online because the data is securely stored.

 

Comparison options

When you go to a bank or loan shop, you will just be asking money from one lender. Doing online will give you the freedom to choose from different lenders and products. There are payday loan comparison sites you can use. You can also compare the loan types. Another option you can get online is peer to peer lending.

 

Latest technologies

You will be able to take full advantage of the latest technological developments when you are applying for online loans. There are some online lenders who will link to your online banking, which makes it much easier for you. You can manage to avoid extra fees and charges when you link to your online banking. The lenders will be provided with read-only access so they can check your statement without changing anything.

business startup loan

 

Personalized lending decisions

Complex computer algorithms can use your details to make decisions, and this makes the decisions more personalized. If the application is approved, then it will have passed the assessments. If the application is declined, then there will be a good reason for it. Numbers and figures will be used to make the decision when you apply for a loan in person. There are many factors that are considered when you apply for the loan online.

 

Speed

When applying for a loan in person, you might find yourself having to book an appointment and waiting in a queue. There is also having to go to the bank or loan shop. Online applications are faster because you just need to go online. You can expect to get your money in the shortest time possible when you apply for an online loan.

 

Unsecured debt

Online loans are normally unsecured debt. You don’t have to put up your belongings as collateral. Other lenders might ask you for to provide a collateral such as your car or property for them to give you the loan. Your possessions will not be at risk when you choose online loans.

 

Easy to keep track

You will be able to track your online borrowing more easily. You will be able to see how much debt you have and the payment dates. You can also get an SMS or email to remind you so that you don’t miss on repaying the debt on time.

Online loans will prove to be a great option the next time you need some money.

The Types of Loans Fall Under the NCCP Act

NCCP Act

What is the NCCP Act?

The National Consumer Credit, or NCCP, is a legislation that is designed to protect consumers and ensures both ethical and professional standards in the finance industry, through the National Credit Code (NCC).

The NCCP is regulated and enforced by The Australian Securities & Investments Commission (ASIC) in accordance with the NCC.

The NCCP states that both lenders and mortgage brokers must hold a credit licence or must be registered as an authorised credit representative and must adhere to the rules that are set out in the NCCP Act.

What loan types are regulated?

Generally, almost all home loans and applications are regulated under the NCCP Act.

Although the rules that are associated with this are complicated, a loan should meet the following conditions:

  • The borrower is a natural person
  • A charge has been made for providing the credit
  • The provider of credit provides the credit through the course of a business
  • The credit is provided completely or largely;

These conditions signify that most standard home loans are regulated in accordance with the NCCP Act.

What loan types are unregulated:

There are some exceptions to loan types that are not regulated under the NCCP Act. Unregulated home loans include:

  • Loans that are in the name of a company; not a natural person
  • Loans that are predominantly used to invest in commercial property, shares or a business.
  • Unsecured loans where the applicant for the loan is a corporate entity and the purpose of the loan correlates to commercial or business purposes.

The process of applying for a home loan:

Upon applying for a loan with a lender or mortgage broker, they must follow the specific processes that have been set out in the NCCP Act.

  1. Enquires: Your chosen mortgage broker must make enquiries to your current financial position, requirements and any objectives that you may have.
  2. Verification: The mortgage broker must take the necessary steps to verify your financial position.
  3. Preliminary assessment: After all of the relevant information has been gathered from the previous steps. The broker must conduct a preliminary assessment of the loans that are best suited to you before recommending them to you.

What does ‘not unsuitable’ mean?

In accordance with the NCCP Act, the mortgage broker or lender must provide you with a loan that is not unsuitable.

A loan is deemed as not unsuitable by the ASIC if:

  • The loan meets your specific requirements and objectives
  • You have the ability to repay the loan without enduring considerable financial hardship

The term ‘not unsuitable’ was selected as it places the responsibility on the applicant of the loan to prove that the loan was unsuitable, rather that be the responsibility of the lender to prove that the loan was suitable.

Can’t I just be told which lender and options are best?

Often, many applicants of loans will want to know the lender that they should apply with, along with the interest rate that they will receive, before they have undergone the first steps properly.

It is not possible to recommend a lender, or be given an interest rate, without understanding an applicant entire situation and the supporting documents as it is against the NCCP Act. Without this information, the applicant cannot be given accurate information.

What about low doc loans?

In accordance with the NCCP Act, both lenders and mortgage brokers are required to take the necessary and reasonable steps to verify a loan applicants financial position, however, this is contrary to the concept of a low doc loan, where the applicant does not need to provide evidence of their income.

In order for lenders to work around this issue, they have created an ‘alternative verification’ method.

By an applicant only providing some documents as supporting evidence to their income, the lenders are able to fulfill their obligation in accordance with the NCCP Act without the requirements of tax returns or financial statements.

The documents that lenders most commonly ask for are:

  • BAS Statement: The lender may request a 12-month Business Activity Statement (BAS) to estimate the applicant’s income.
  • Trading Statements: The lender may request for bank statements from the previous 6 months from the business to estimate the applicant’s income.
  • Accountants letter: The lender may have an accountant letter template where they require the applicant’s accountant to sign that will confirm their income.

How to Get Your Small Business Loan Approved

business loan online

Getting approved for a business loan is a large hurdle that many small businesses have to face and this is mainly due to the rigorous lending guidelines that big banks stick to. However, obtaining finance from an alternative lender is often an essential and attractive means for small businesses to start, begin to grow and expand or simply for a small business to cover their daily management expenses.

So, what should you include in your small business loan application?

When gathering information to incorporate into your loan application, you should aim to answer the following questions:

  • What is the purpose of the small business loan? Lenders will want to know what the loan will be used for, and that you have the management skills and cash flow to pay it back.
  • How much you intend to borrow and over what term? This will help both you and the lender to determine what options are available to you, along with how the loan will match up to your cash flow.
  • How soon will you need the money? If you will require the money in a singular lump sum or in numerous payments?
  • How long will it take you to pay back the loan? This will assist in determining whether your small business has the necessary cash flow to actually pay the loan back, but it will also determine the terms and conditions of the loan repayments.

When composing your small business loan application, you will have to work to boost your odds by standing out from the crowd and displaying that your small business has greater value and potential than other small businesses. A good loan application must convince the lender that the money that you will receive will support your small business in either becoming more profitable, or that this money is essential to its continued operation, along with the information to demonstrate that you will have enough revenue and cash flow to pay the lender back.

5 Things To Do Before You Apply For a Small Business Loan

Despite the fact that applying and securing approval for small business loans can be difficult and stressful at times, the more prepared you are, the better your chances are of getting approved.
Here are our best tips to improve your chances of securing your small business loan.

1. Determine why you need a small business loan:

determine if you need a loan

Many lenders will ask you why your small business needs a loan and your answer will most likely fall into one of these categories.

  • To begin and establish your business.
  • To manage your daily expenses.
  • To grow and expand your business.
  • As a safety cushion.

2. Decide the type of loan that is right for your small business:

Your reason for applying for a loan will dictate the type of loan that your small business will get.

For small businesses that are only just starting up, it is generally nearly impossible to obtain a loan within a company’s first year. Many lenders will require cash flow, along with supporting documents, in order to support the repayment of the loan, which is why so many startups are immediately disqualified from receiving financing.

However, for small businesses with a minimum of a year of cash flow history and revenue evidence, they will have a wider range of options.

3. Decide on the best small business lender:

Small businesses can acquire loans from several lenders including big banks and alternative online lenders.

When looking for the right small business loan lender, approach the selection process just as you would if you were shopping for a car. Seek out lenders that offer the type of loan you are looking for and once you have determined the lenders that are right for your small business, you should compare two or three options that offer similar annual percentage rates, along with their terms.

4. Determine if you qualify for a small business loan:

  • One of the most substantial factors that will determine whether you will qualify for a small business loan is your credit score rating and history.
  • Along with your credit score, most lenders will consider other factors such as the amount of time your business has been in operation.
    Evading payments of loans, having an unresolved debt and the lack of consistent income are all factors that will work against you when applying for a small business loan.
  • If you are currently in the midst of any of these issues, then it is in your best interest to address and resolve as many of these as possible before you begin to apply and take out a loan as it can significantly improve your chances of being approved.
  • Most online and banking lenders will require a minimum annual revenue, and depending on the lender, this amount can range anywhere from $50,000 to $150,000. It is advised that you know yours, along with the minimum a lender requires, before you apply for your small business loan.
  • Examine your business’s financials carefully and thoroughly, especially your cash flow, to evaluate the amount you can sensibly afford to apply towards your loan repayments each month. In order for you to easily and comfortably repay your loan, your small business’s income should be at least 1.25 times the businesses total expenses, ensuring that you include the new loan repayment amount to this total.

5. Gather necessary documents:

Once you have compared your lending options, it is now time to apply for specific loans that fit your small businesses financing needs and that your small business qualifies for.
You are able to apply for multiple small business loans from various lenders within a short time frame, typically within 2 weeks, without inflicting a negative outcome on your credit score and rating.

Depending on your chosen lender, you will be required to present a combination of relevant documents along with your application. These documents may include, but are not limited to:

  • Both the businesses and your personal tax returns.
  • Business and personal bank statements.
  • The business’s financial statements.
  • Relevant business legal documents such as the commercial lease or franchise agreement.

Whether you are applying for a small business loan, big or small, these tips will make the job easier and more successful.

Why LoanOne?

LoanOne knows how Australian small businesses work and provides small business owners with easy, fast funding solutions that will help your small business grow.

The business loans from LoanOne are different to other, traditional business loans as our loans are flexible, paper-free and unnecessary extensive supporting documents are not required. We aim to help businesses who need loans fast!

LoanOne offers businesses:

  • A fast and easy online application and a timely loan approval.
  • The most secure technology that will ensure that any information that you submit online remains strictly confidential.
  • A friendly customer service experience via phone or email.
  • No hidden fees! We have competitive fees that are consistent with financial industry standards and are completely transparent.

With LoanOne, get fast, simple and safe loans! Fill in their 5-minute online application today!

Fast Cash Loans: Tips for Getting Quick Easy Loans Online

fast cash loans

If you have found yourself strapped for cash and are in the midst of a financial emergency, it is in your best interest to start looking into short term fast cash loans.

Not only you are able to apply for easy loans online without even having to ever leave the comfort of your own home, but the approval for the loan can be given on the same day, as long as you have a steady job, a not too bad credit history and a bank account.

Although taking out an easy loans may seem simple enough to obtain, contrary to popular belief, there is a little more than meets the eye that you should consider when deciding to take out a loan.

To avoid getting burned and ensure that you have chosen the right lender, it is important to consider a few key factors that can make or break your easy cash loan experience.

 

Best Tips for Getting Short Term Loans Australia

Here are our best tips for getting the best short term fast cash loans.

    • If you are concerned about your credit rating and how it can affect your loan, you should seek out lenders that have bad credit considerations for their fast and easy online loans. With LoanOne, applicants with low credit records are still considered for easy loans online. The approval of the loan is based on a combination of various factors including an individual’s income and security.
    • When seeking the right fast cash lender, it is in your best interest to stick to the internet. Even though your local area may have loan vendor options that are openly available to you, it is most likely that they will pale in comparison to the plethora of loan vendors that are available online.
    • Be sure to consider numerous lenders – do not just settle for the first one that you happen to stumble across. There is a common misconception that all fast cash loan lenders are the same, however, in reality, this is not the case. Ensure that you take some time to look through reviews of the lender and customer experiences of a handful of lenders. This is one of the best ways to examine just how different lenders can be; it doesn’t take long and can save you a lot of trouble in the long run.
    • With so many fast cash lenders that are desperate to attract potential customers, it can mean that you will be offered a lot of discounts in terms of your interest rates and applicable fees. With this in mind, it is important to remember to not rush the selection process. Do your research and ensure that you have found a lender that has a good track record and decent interest rates.
    • Be sure to check if the loan that has been taken out will automatically be renewed if a payment is not made on the loan. If the answer is yes, ensure that you find out the interest rate, and if any fees will incur with the loan renewal.
    • Read the loan contract carefully and meticulously.
    • When applying for a easy loans, it is extremely important that you have an understanding of every factor and piece of information possible, including all fees, interest rates and the terms of payment.

Many fast cash loan lenders have various payment options that are available for the length of your loan and the type of payments. Selecting the right short-term loan means that you must also choose the payment option that is best suited to you. Most of the loans that are offered from reputable lenders are usually quick and easy, however, it is important that you consider the long term and select the type of loan that is right for you personally.

looking for fash cash loans online
 

The factors that you should consider are:

1. How long will it be before you receive money next?
2. What payment option is the best suited to you and your circumstances?
3. What is the most cost-effective loan option?

To avoid regretting your decision in the future it is essential that you take the time to consider these factors. It is best to find a lender that has dynamic lending terms to ensure that you are only paying for the money that you actually use.

    • It is essential that you do not stretch yourself when applying for short term loan. Only borrow what you absolutely need. Often, the more money that you borrow, the higher the interest rates that are associated with the loan and we understand that there is nothing worse than having to borrow money that you do not require which can ultimately mean paying almost double the amount of interest.
    • It is essential that you hold up your end of the contract and pay the money back when it is due. If, for some reason or special circumstances occur and you cannot make repayments on time, you should transparently explain your situation to the lender and request an extension. Many lenders will be more than happy to oblige the request and offer you an extension.
    • The personal information and especially your banking information that you share online is more vulnerable than ever. It is so important to be smart about your data security. One of the best ways to ensure that your information is not being stolen is to look into the lender’s reputation. Although this is a great way to start gathering information about an online lender, it is important to note that reviews can easily be faked. Another is to ensure that any websites where you input any personal information are SSL encrypted. This essentially means that the website address begins with ‘https’ rather than just ‘http’. Think smart and make wise decisions about your personal information and security.

 

Why LoanOne?

LoanOne is one of Australia’s most responsible finance providers, offering fast cash advances to Australians. The solutions that we offer everyday Australians do not require a mountain of paperwork, long delays, hidden fees or those damaging fine prints. At LoanOne, we have transformed the way Australians access fast cash advances online!

With LoanOne, get fast, simple and safe loans!

Fill in our 5 minute online application today!