Small Business Working Capital Loan
The role of small business in the strategic development of the economy of a country to make the government and the various other parties put more attention to the existence or development.
It has been proven that small business is able to absorb the manpower and hardiness to the crisis experienced by the countries in the world a few years ago.
As one indication that small business has gotten a lot of attention from both the government as well as private parties, we can now see the existence of various types of loans or capital assistance devoted to small business and medium.
Sources of capital can be shaped working capital investment, as well as other types of capital assistance as working capital credit.
Small business Capital Loan based on usability
Credit-based on usability
Based on its usefulness, credit or capital resources for small business can be classified into two types, namely: working capital credit and investment.
1.1 the working capital credit
Working capital is a source of capital or credit used to augment or become the initial capital in the business. For this type of capital usually, have a period of 1 year and can be extended.
To get capital from scratch even though now can be obtained through loans from banks or leasing. Even some banks have a special program in providing an opportunity for micro, small and medium enterprises to obtain capital relief.
1.2 investment credit
The second type of credit i.e. Small business is an investment. This facility is usually used for syndicated loans in which the debtor wants to develop its business.
A special credit of this type usually reserved for entrepreneurs who have been running for several years. For a period of time credit is also more flexible and can be adjusted according to the number of funds that wanted to invest. Usually, the debtor has a period of a maximum of 5 years.
a small business Capital Loan based on a guarantee
Based on the credit guarantees
There are 2 types of credit that you can claim to be based on collateral. Let’s check out his review to find out the advantages and disadvantages of each type.
2.1 credit with collateral
With credit guarantee credit is conditional to the existence of guarantees in the form of assets that can be pledged as vehicles, homes, land and so on. With credit, guarantees have advantages against the interest you pay.
Usually, for loans with a guarantee of having a relatively low-interest rate, have a longer period of time and you can borrow a nominal were usually larger.
As for the lack of loans with collateral is usually the process of disbursement of funds is a bit longer, because the bank will conduct a survey and more. Other flaws are just as the name suggests, you need to have a guarantee to get the loan.
What is the reason the bank requires guarantees? Of course, the bank wants to ensure that the proposed credit can be repaid in accordance with the agreement. Who is a good fit for this type of credit? This credit is suitable for those who want to make loans in large numbers.
2.2 credit without collateral
Credit without collateral is the opposite of the loans with a guarantee. For this type of bank requires no collateral of the debtor’s assets. Nevertheless, don’t misunderstand that the bank could not foreclose on the assets you have though is not warranted. The bank will traverse the path of law when proved you can’t pay off the loan.
If you want to open a business but stuck to the issue of funding, you can ask the credit without grace. However, it is strongly recommended to apply for credit without the grace only if you don’t need the capital not so great because the rates at which credit without grace is relatively higher.
The excess credit without grace there is also in the process of disbursement is relatively faster. As for the lack of credit without the grace period is shorter and the nominal loans is relatively smaller.
Don’t ask venture capital loans, before you read this description
The reality the economic conditions now are forcing many people to rely on venture capital loans. Actually the legitimate use of the loan to increase the capital stock, but have you considered ripe-ripe? You should not ask venture capital loans before you read the following explanations:
Business capital loans: yes vs. No
When you want to start a business, surely you need to do simple research to compare the alternatives capital business.
If you already have sufficient capital, then you can proceed to the next stage, namely planning and feasibility analysis.
But what about the majority of businessmen who lack the funds to start a business? The most common answer direct venture capital loan was unthinkable.
Don’t ask venture capital loans, before you read this description
But many are also asking the loan without consideration to mature earlier, and ultimately become regrets. A loan requires a large commitment, especially if the length tenor.
You can’t stop in the middle of it because the whole terms of the loan are already regulated under applicable law.
Therefore, it is important to ask ourselves about the needs and readiness of your loan to get through it. Through this article, you will see some things you need to consider before filing a business capital loans.
#1 check your qualifications against the loan terms
When wanting to ask a credit, you need to know the qualifications and conditions become conditions of the filing. For example, you want to ask a credit without grace, first, note the terms given before submitting it.
If you’ve felt from the beginning do not qualify, do not impose to apply for these loans. Why?
According to David Gass business consultants, while the CEO of Anderson business advisors:
“if the submission of your loan is denied, it will be difficult for you to borrow again at a later date. Once you get rejected, then it would seem that your customer is risky for other loan providers. ”
Therefore, it is wise to always check the terms and conditions as well as view your financial capabilities before submitting a loan.
#2 know the loan amount required
Before submitting a loan, calculate exactly how much money you need. The easiest way to calculate it is to create a cash flow projection intervals. Thus it will look how to lack the funds needed.
You can just specify the amount roughly needs funds, but it will look ridiculous when the bank asked for the cash flow projection and it turns out you need an amount far differ from filing.
Adam Hoeksema, co-founder of Muncie, ind.-based projection hub suggests that “you have to understand how much the fund’s needs and what the purpose of loaning funds before visiting the bank.”
#3 check the equivalence of loan and collateral
In addition to credit without collateral, there are other types of credit i.e. Multi-purpose credit or loans with collateral. Why choose loans with collateral if credit can file without grace? The answer is a greater number of loans with lower interest rates.
For those of you who need a big capital and has a valuable asset that can be used as collateral, the multi-purpose credit is an alternative that is much more interesting than the credit without grace.
But because the flowers are smaller tribes, requires a bank guarantee for the anticipated bad debts, that is by guaranteeing a valuable asset. Well, now try it you think in your heart, whether or not reasonable if someone submits the form of guarantee for home $500,000 for a loan amounting to $1 billion? Certainly for the layman that makes no sense whatsoever.
The bank will always be checked against a valuable asset that any warranty, perform estimation value, the bank can determine the loan amount allowed.
So, what can be put forth valuable assets worth $1 billion to $1 billion loans? Not really, because banks generally determine the quantity of loans reaching only the twenty percent (generally 60% to 70%) of the value of the collateral.
The bottom line, always considers whether the amount of the loan is already worth the valuable assets that would be warranted.
#4 check the ability to pay in installments
When you submit a loan, the bank will check your financial capabilities. Usually by doing the checking to check credit history, and also do some checking debt ratio.
If you meet the requirement, then the bank will ask for the projection of business feasibility will be carried out.
For example, if in the projections, the value of roi or payback period-its not worth it, then you’re just going to cover possible loan approval. A decent business projection and feasible with a small error rate increase the likelihood of approval of your loan.
#5 borrow to return
If you ask a venture capital loan but use it to pay for the repair of machines, then you make a big mistake.
His name is a loan, it must be returned. Therefore, you need to allocate loans to the businesses that produce. In other words, use the loan in the section can be improved, so that it was able to increase revenue.
In this point, David Gass also adds,
The goal is to grow the business. If i could change 1 dollars to 5 dollars with these loans, worth it.
#6 check your business credit history
As has been previously disclosed, the bank always checked against your credit history before deciding to give loans.
Many business people who know her personal credit history, but forget the business credit history. Whereas it is important to know why your business credit history.
If it turns out your business credit history is bad, then try to fix it with some of the following ways:
Reduce your business credit card balances
Make sure your vendors are reporting your payment
Lastly, make sure you avoid late or pay a debt to vendors. Because even though your credit history is good, if the vendor did not experience much good against you, it will be difficult to get a loan.
#7 has a good personal financial management
Useless you have a successful business and great if your personal finances in shambles. Some banks often made personal credit history as benchmarks of approval of the loan. For example, your home mortgage repayments and the cost of education will be checked.
In addition, the use of personal credit cards. For what the heck actually this personal checking? The bank measures the feasibility you in running a business, to see whether there are any potential bad debts.
Hoeksema lays out:
“if a lot of your installment has not been paid off, and very few valuable assets which can be used as a guarantee, then you tagged as a candidate who does well in filings credit. If so, look for someone who is willing to be used as guardians in filing credits. ”
#8 check the completeness of the documents to apply for a loan
Rohit Arora, CEO, and co-founder of biz2credit, a new york city company that manages credit for small businesses,
“a study proving that 4 of 5 loans are not approved in terms of its business not because of misfortune, but because of weakness on the part of the documentation.”
Indeed, in the submission of the required documents that do not credit a little bit. Arora added,
“if you come to the bank and apply for a loan with a document that is not complete or has already expired, you will look very unprofessional.”
Thus, always prepare the completeness of the required data. If you submit any other type of loan, make sure you have prepared the documents complete and up-to-date it needs.
#9 checks the existence of the accelerated repayment of fines
For you as a party to the borrower (debtor) surely there is a desire to be able to pay off the loan quickly. But don’t be reckless, you need to read each of the terms and conditions of your credit contract before determining when to pay off the loan.
In the early filing loans indeed should select time tenor feasibly, but no one knows whether your business suddenly streaked success isn’t it?
If you then want to pay off credit before maturity, be sure to the first penalty to the lender. What are the fees and fines payment of accelerated? How much is it worth? If the commensurate with paying off more quickly, then why not?
Unfortunately, most lenders give fine as well as accelerated repayment administration fee. So consider returns and calculate carefully before you pay off the debt prior to maturity.
#10 checks the existence of credit life insurance in
The question that is rarely considered by the debtor is,
“if I die, who will continue the effort and pay the mortgage venture capital?”
Surely you do not want to burden family members or relatives if you died. Unfortunately, if you died, credit should still be repaid, unless: you buy life insurance to cover such cases.
Indeed the death is unpredictable, but that does not mean you do not prepare measures of anticipation. Try to ask your insurance agent related this and do the upgrade policy if needed. Do not let your family took a huge load after you no.
Now you’re ready to take a decision
10 the above mandatory consideration are ripe before you take a decision will submit the loan or not. Keep in mind that a high commitment required to owe. Do not let you take a decision and regret it later on.
So the kinds of capital or credit small business you can make use of to start a business or to expand an effort already underway. For those of you who want to start running their own business, do not hesitate to do so because the current various types of loans you can take advantage of as a form of start-up capital to build your business.