small businesses

4 Things to Know When Taking Out a Loan for Your Small Business

Small businesses often need external financing to help them make large purchases or get through slower business periods when cash flow is low. A small business loan is one way that business owners can address their short and long-term financing needs. Before you start the process of taking out a loan for your small business, you should consider these four tips to help you prepare for the process.

Know Your Credit Score

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Image via Flickr by GotCredit

Check your personal credit scores for all three reporting agencies. To do this, you can request a free credit report at AnnualCreditReport.com. Check for errors and resolve these immediately, if possible, before beginning the loan application process. If you have payments that you’ve fallen behind on, try to bring your accounts to date to help your chances of being approved and receiving a favorable interest rate.

Your chances of being approved are greater with a credit score above 600. However, there are options for individuals with lower credit scores which offer financing at higher interest rates.

Analyze Your Financing Needs

Clearly establish what you need extra financing for. Is it for a long-term investment like real estate or equipment that will last 10 years or more, or do you need short-term financing to buy more inventory or meet regular expenses? This will direct you to the options that you’ll need to evaluate to meet your business’s needs.

Evaluate Your Loan Options

If you need a short-term loan, inventory financing and loans to increase working capital are available from traditional lenders like banks and credit unions. There are also alternative financing options like merchant cash advances, which help businesses get short-term loans in as little as 24 hours to quickly resolve cash-on-hand shortages. To obtain a merchant cash advance, a business leverages its future revenue. These loans typically carry a higher interest rate and fees. For business owners with low credit scores or serious funding time constraints, online lenders like Bad Credit Business Loans can represent a viable option for their business needs.

To invest in areas like real estate, make large equipment purchases, or undergo considerable expansion, you will most likely need to seek out a long-term loan. There are also special small business loan programs available from the Small Business Administration, many of which are specially designed to help you grow your business and often offer more favorable interest rates and repayment terms.

Prepare Yourself for the Process

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Image via Flickr by thetaxhaven

Go over your financial statements to make sure everything is up-to-date and in order. These documents show your business’s profitability, as well as the assets available as collateral for your loan. If you’re planning to expand, you’ll need to have a well-crafted business plan and marketing strategy. This will prove to a potential lender that you’ve prepared well for a successful expansion. If you need to, enlist the services of a professional consultant to help you with these documents.

Use small business loans responsibly, and do not take on more debt than you can handle. Small business loans are helpful tools that allow businesses to grow and contribute more to the local economy by hiring additional employees and offering better services to their customers.


Getting a Business Loan for Your Small Business

Small businesses have been badly affected by the recent recession and are now being slowly shut out of getting a bank loan. They have lost several customers due to this and have also reduced the sales of their products. They have also had to lay off some of their employees due to their lack of ability to pay them.

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Before the recession took place, many small businesses could easily get business loans and had an excellent relationship with their banks. The recession however changed all of this when it dried up almost all the lines of credit for small businesses. This left small businesses with the only option of going in for alternative sources of funding. A small business has to go in for an alternative business loan in such cases.

Merchant Cash Advances

When you receive a merchant cash advance, you would need to purchase and sell your future credit card income. You do not need to make regular fixed payments in return for the merchant cash advance. The person giving the merchant cash advance only takes a percentage of the income that comes in the form of credit card sales to the company. Taking a merchant cash advance can however be expensive, even though the rate of interest is not fixed. They can still keep a small business afloat.

Peer to Peer Financing

In case of peer to peer financing, you decide how you would return the money. All you need to do is to enter the details of how much cash you want, how you intend to repay it and how much rate of interest you are ready to pay on the peer to peer financing company’s website. Then, prospective lenders will make a bid on your loan. You however need to have a good credit score in order to avail peer to peer financing.

Crowdfunding

When you are looking to finance your small business and do not have much of a choice, then you need to find your strength in numbers. You can get crowdfunding from some websites by asking people to pool in small investments to help you finance your small business. Before selecting a crowdfunding platform, make sure that you have gone through their fine print and conditions, so that you are on the safe side. When you take advantage of crowdfunding, you need not worry about giving up an equity stake in your business. Very few crowdfunding sites require that you give up your equity stake in your business in order to get money to finance your small business.

Micro loans

Micro loans are loans that are smaller in value than most loans. These loans are generally issued to small businesses that are based in developing countries. Examples of micro loans are loans given to either basket weavers, street vendors or those that raise poultry. If your industry is a small business too, you can get a micro loan. The interest rate charged on an average against this loan is usually 35 percent. Even if this sounds high, it is definitely lower than the rates of interest charged by the other lenders. Since the processing of micro loans is an intensive process, it requires that such high rates of interest be charged. Micro loans are a great option for businessmen or entrepreneurs, who have no credit histories or who have a low credit score. Since small businesses need equipment for running their business, they can buy it using a micro loan. These loans are typically in the range of $6,000 to $23,000. Today, there are also websites that offer micro loans to small business owners.

Venture Capitalists

Venture capitalists offer loans to small businesses that have reached a phase well beyond the start up phase. Companies that grow fast and that have an exit strategy can make millions of dollars and help their company grow, when they borrow money from a venture capitalist. Most venture capitalists tend to concentrate on financing businesses that are already well off. So, they can even offer you advice on whether or not your business would prosper.

Family and Friends

If you have a family member or friends, who have got some cash to spare, then you have yet another way to finance your small business. While borrowing from a bank would require you to have a high credit score, borrowing from friends and family do not require you to have a high credit score at all. However, you need to be as careful with them as you would be with a bank or a lender. If there is some misunderstanding regarding money or if you have not repaid them on time, then it can lead to a sour relationship. Make sure you prepare a written agreement with a promissory note that you would repay them their money in full. You can get many sample promissory notes on the internet, which you can use to prepare one. Make sure you add the terms and conditions of your repayment, how you plan to repay them, by when and why you need the money in the written agreement. You would also need to frequently communicate with them with regards to the repayment of your loan in order to avoid any misunderstandings and in order to prevent any arguments from taking place. Make sure you repay their money in full at the end of the loan period.

Angel Investors

They can be your angels in disguise, when you want some money to finance your small business and have been denied business loans by your bank. Google and Yahoo are examples of entrepreneurs, who have taken help from angel investors and today, both of them are companies worth billions of dollars each. When the company is in its early stages of growth, angel investors put in some money with the expectation of getting back at least twenty to thirty percent of their investment. When you take a loan from an angel investor, you can enjoy working with people in a friendly atmosphere and this will help you with your business.


How Financial Advice Specialists Can Help Small Businesses Get Off the Ground

Working yourself up from within an established company to a position that allows a level of creative control can take time. Because of this, many entrepreneurs look to starting their own businesses as a way to quickly bring their product or service to the market. While some individuals revel with the responsibility this brings, deciding to take full control can lead to rushed or misguided decisions. The time it demands of you can also seriously affect your personal life. A lot of the issues many small businesses suffer from could be solved by seeking third-party support, such as a financial advisor or a bookkeeper.

images (8)What Do SME Struggle with the Most?

In a survey conducted by Gibson and Hewitt, enquiring about the biggest challenges they faced running their own business, 1,000 SME owners named managing employees (32%), accounting and tracking finances (25%), and keeping on top of admin (22%). As a result of this, many business owners found it difficult to effectively manage their work schedule with their personal life. Almost half admitted to missing a personal occasion, such as an anniversary, wedding, or even that they’d missed picking up their children from school. A similar study in the US noted that out of every ten business owners, only four have consulted with a financial advisor and fewer than one-third have a formal financial plan for managing their income and expenses during retirement.

How Seeking Financial Advice Can Help

One of the ways to combat these issues is to seek out the appropriate third-party expertise. This will allow you take advantage of images (7)the benefits starting your own business while balancing your social life and improving the chances of your businesses’ future success. It is critical that a business plans not just for its initial survival, but also for long-term success. However, with the pressures of keeping on top of the day-to-day running of the company, key issues can sometimes be left unresolved. A financial advisor can offer you the regular strategic advice you need and help you identify any problems earlier. It’s estimated that around half of UK start-ups fail within the first couple of years of operation so this level of expertise can be critical the survival of a new business.

Consider corporate financial advisors an investment for the future. The knowledge you acquire will allow you to appropriately budget how you and your family will live after you no longer need to work, or if you are no longer able to.They will offer expertise and, perhaps most crucially, a level of discipline that you haven’t had a chance to develop yet as a young entrepreneur. You will benefit from insight into fund raising, management advice, as well as acquisitions and disposals to advise you on how to develop your business over the time.

Perhaps the key reason to consider financial advice is the time you save will allow you to focus your efforts on the areas of the business that match your own skills. In business, knowledge and timing is everything. If you want to run a successful company, it will pay off in the end to gather as much information as you can as early as possible.


Bookkeeping Tips for Small Businesses

While bookkeeping probably isn’t the most exciting part of your day, it’s a crucial component of running your business and it simply can’t be ignored. At the end of the day, every business wants to be successful – but success is impossible without being able to manage accounts. Whether you hire someone else to handle the books or are taking on the task yourself, here’s some tips that can help you understand the intricacies of bookkeeping for small businesses.

Organization is Essential

If your bookkeeping system is easy-to-follow and organized from day one, it’ll be easier to maintain and adjust as your business expands.  While organization is crucial, so is planning ahead for major expenses and mini “disasters.” If your office equipment is currently on its last leg, plan ahead for new desks and chairs. If your staff is small and overwhelmed, plan ahead for new employees or members of the team. By making sure you’ve financially planned ahead for staffing costs or office upgrades, you’ll avoid having to use credit cards or take out loans.

images (4)Track Expenses

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Expenses can be hard to track. Luckily, there are plenty of tools available – such as Sage One’s online accounting products. Online bookkeeping systems typically offer pre-designed templates and auto-fill forms. By tracking your business expenses, you may uncover tax write-offs you may have otherwise missed out on. Business credit cards are exceptionally handy when it comes to keeping track of your expenses – many have even adopted new services that categorize your bill into types of expenses, meaning you’ll have one less thing to do on your end.

Keep an Eye on Your Invoices

Late and unpaid bills can hurt your cash flow. If you don’t want to track billing yourself, assign someone in the company with the task of keeping an eye on invoices and payments. Then, put a process in place if a bill goes unpaid. Additionally, reconciling bank statements on a monthly basis is important – it might seem like a waste of time but, at the end of the day, it can help keep your business afloat. Even if you regularly review your cash flow statement, they should still be double-checked and reconciled.

Set Aside Money for Taxes

Systematically put a portion of money aside throughout the year for taxes, as payroll taxes that go unpaid can be especially problematic for small business owners. If you’d like to avoid dealing with penalties and interest from the CRA, make sure you have money available when you need it. By putting aside money each month, it’ll come as less of a sting when taxes are due. We all know when taxes are due, so it should come as no surprise – plan ahead and you won’t even feel the impact of paying taxes.


5 High-ROI Ways to Connect With Clients in 2014

What’s the first thing you do after just meeting someone for the first time? You probably ask them to be your friend on Facebook or begin to follow them on Twitter or Instagram. If you don’t do any of those things, you are a part of an increasingly small group of individuals.

Today everyone is on at least one social media site. In January of 2014, Facebook reported more than 1.2 billion users and the amount of time people spent on Facebook each month was 700 billion minutes. This makes different mediums of social media imperative when small businesses are looking for new and better ways to connect with clients.

Leverage Social Media Platforms

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Image via Flickr by Rosaura Ochoa

Connecting with your customers is all about expanding your reach in unique and more personal ways. Social media allows businesses to do this through ease of accessibility. It is highly likely that a major percentage of your business’s customers are using platforms like Facebook and Twitter.

Therefore, if your business has created a Facebook page, it would help communication to be more immediate and direct. Many people go to a business’s Facebook page to post complaints or to praise that business. Facebook makes it easy to share this sort of activity as well which helps to expose your business to potential customers. The same holds true for Twitter, Pinterest, Linkedin, and even Instagram.

Engage in Online Listening

Online listening tools make it easy for you to hear when negative or positive things are being spread about your business on the web. This tool is fairly new, seeing that only 22 percent of marketers used it in 2013, and only 24 percent plan to use it in 2014.

The online listening tool looks out for keywords specific to your business and your company’s name by using Google alerts or other websites like Hootsuite and Tweetdeck. This tool makes you more aware of the conversations going on about your business allowing you to react in a resourceful way and benefit your customers.

Elevate Your Game with Data-Based Marketing

With the social listening tools listed above, data-based marketing would not be possible. Most of you have probably noticed that sometimes things you have recently searched for will appear in the sidebar while you are on your Facebook page and sometimes it will even pop up in your news feed.

This is due to algorithms that are collecting information from the search engine and using it to better benefit the consumers. This makes it easier for customers because solutions to their most frequent wants and needs are appearing right before their eyes.

Make the Most of CRM Software

The most important part of a business is its relationship with its customers. A CRM (Customer Relationship Management) platform helps to manage this relationship by keeping tracking of marketing efforts. It lets the business know what is being more successful concerning customers and what is not. With a better idea of what emails, mail, and social posts create better results for your business, you will have a greater chance of pleasing more customers.

Develop More Personal Connections

With all of this social media, we think it makes it harder to connect on a personal level with customers when really it’s making it easier. Customers are gaining more and more access to forms of instant communication with businesses.

Customers want to feel unique and individual among the thousands of other clients. Social media allows businesses to keep in contact with customers anytime anywhere making it easy to foster a relationship and keep the customer satisfied.

So how well do these techniques work? Depending on your specific base of consumers, it can be hard to tell. With a master of science in analytics (or some similar degree), you’ll have the tools to help you figure out how well these various methods of connecting to clients are working, allowing you to adjust at any time.

Now it’s time to have your say. Have you used any of these techniques? What results did you experience?


Small Business Financing Options

If you are ready to start your small business, one thing that you might be worried about is coming up with the money that you need. Starting a business can be costly, but there are quite a few great financing options out there for you to consider. You can use one or several of them to get your initial capital, and the sky is the limit from there.

Bank Loan

Bank loans can be great options for people who have good credit and are searching for financing for their small businesses. It is essential for you to have a good credit rating in most cases, but if you do, you can often negotiate a reasonable payment plan and interest rate.

SBA Loan

The Small Business Administration offers several different loan options for people who want to start their own small businesses. It is important for you to have a good business plan to qualify, but you don’t have to worry as much about your credit score. Many people find that SBA loans are great options for opening up their businesses, but it is important to understand that it can sometimes be difficult to get approved due to strict requirements and limited funds.

Alternative Loans

Fortunately, bank and SBA loans aren’t the only loan options for people who want to open their own businesses. There are a lot of companies out there that specialize in providing people with small business financing, and some of these options don’t require a high credit score at all. It is important to do a lot of searching if you want to find out about all of the other small business loan options that are available; with some research, you might be able to find the one that is just right for you and your business plan.

Investments and Help with Funding

If getting a loan doesn’t seem like an option for you, you shouldn’t give up on opening your business just yet. There are entire websites that are dedicated to helping people to get the donations that they need to start their businesses, and you can use one of these websites as a way of drumming up funds.

You can also pitch your business idea to potential investors as a way of getting cash to get started. This will involve a few meetings and a nice presentation about your business plan, but you might be surprised by the number of people who will believe in you and your idea and who will be willing to help you get started. In this situation, however, you will have to offer them some of your profits once you make them, but it might be worthwhile because it will give you a way of starting a business without having to take out a loan.

Lastly, you can try the traditional methods of saving and gathering up money to start a business. Socking away as much money as you can for a few months can yield a surprising amount of savings, and you won’t have to worry about paying anyone back. You can also talk to family members and friends who have the financial means to help you; in this case, even though you are borrowing money, you often won’t have to pay any interest, and you also don’t have to worry about your credit score.

These are just a few of the many options to consider if you are in need of money to start a small business. Even though coming up with these funds might not be easy, it will all be worth it when you have a business that is successful and all yours.

Featured images:
  •  License: Royalty Free or iStock source: iStock

Joseph Irvine is a small business owner who recently had to get a small business loan. It was difficult and he recommends checking out iCapital for your loan alternative needs.


The Five Most Common Tax Deductibles for Small Businesses and the Self-Employed

In the wake of the credit crunch and many years of erosion of the old job-for life culture, more and more people are coming to the conclusion that there are no longer any advantages to be had working their guts out for someone else. Instead, self employment and setting-up your own business are becoming increasingly popular, as are freelance and contracting working styles, both for the freedom they bring and for the possibility of greater financial rewards.

However, despite working extremely hard to make every penny count and to get their businesses off the ground, many new small businesses, contractors and freelancers neglect to take full advantage of the entitlements of their new work style and the tax deductibles that can help them take home even more money. Once you are self-employed you should immediately find yourself a top-notch accountant. They will assist you in finding the crucial tax deductibles for the self – employed and for your particular industry. Meanwhile, this article will consider some of the most common areas of tax deduction that contracting and freelance sector workers should consider.

Firstly, there are a great many deductions to be had if you work from home. If you are working either in your house or in a home / office premises then there will be various different things you can make a claim on. First, begin by working out what percentage of your home could be categorised as a home office and dedicated purely to your business. This percentage can then be deducted either from your rental payments or your mortgage payments. Next, make sure you don’t throw away any business expense records related to the home office premises. These include building costs and maintenance costs as well as any business equipment such as printers and computers, phones and stationery. Similarly, the business share of utilities bills such as broadband, phone and electricity is also tax deductible.

Secondly, make a note of all travel expenses, no matter how small, as they are all tax deductible if the journey has anything to do with the day to day running of your business. Journeys can normally be split into those made for business only and those made for both business and pleasure. Your available tax deductions will depend on the manner of each journey. Many self-employed workers and small business owners keep a log-book with the car to record all business journeys.

Thirdly, any professional training courses that are useful for your business and for building your skills and making you more attractive to clients are also tax deductible, particularly if they lead to some kind of professional accreditation.
Fourthly, remember that if you need to hire any one yourself to help with the running of your business, or alternatively to help out at home while you concentrate on your business, you will be able to claim for the cost of hiring these people. So, if you are working freelance and need to hire a nanny or a baby-sitter, or need to put children in day care, then this will be deductible. Similarly, if you hire legal professionals or financial professionals, or even someone who designs the logo for your company, all of these costs can be deducted.

Lastly, remember to keep up to date with the latest information on tax relief and tax credits on offer from the government. Talk with an accountant about all the tax credits available to you and your business.

Greg Dickson is a journalist and copywriter. He currently writes a weekly blog for the Bedouin Group on finance and the contracting sector, covering everything from taxation to umbrella companies


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