These loans are meant for those who are starting a new business or want to extend their existing business or just need what is called an operating loan to help them deal with daily and weekly cash flow issues. The rate of interest is usually very low due to collateral provided by the business and competition. The online application process saves a lot of time and effort for everyone. These business loans can be used to satisfy many types of business requirements such as operating loans, capital improvement loans, equipment loans, raw material loans and stock loans to name a few.
Operating Business Loans
Business income can vary a great deal during the week, the month or the season depending on the type of business. For example, ski resorts generate most of their income in the fall through membership renewals, with the remainder over the winter. Summer and fall can be pretty barren as far as revenue is concerned unless they have other sport related activity that can continue the revenue income stream during the summer.
It is not uncommon for ski resorts to draw on their business operating loan during the summer when they need to perform a lot of maintenance on equipment, upgrade rental equipment and pay staff to make changes to the hills to enhance skiing in the winter. They will draw down their savings and then dig into their operating business loan until the winter roles around and they begin generating income once again.
Other businesses purchase much of their product in the summer with the intention of selling it through the fall and into the holiday season. Business stock loans are often used to buy everything they are going to need and then these business loans are repaid at the end of the season after they have managed to sell their product over the holiday seasons.
Business operating loans are probably the most common type of loan. They are used for general operating funds to deal with peaks and valleys in cash flow needs. Employees and taxes must be paid regardless of whether you have cash in the accounts.
They will not wait until next week when a customer makes his next scheduled payment for products or services. A business operating loan can bridge the gap and help the business owner keep everything running smoothly.
Capital Equipment Business Loans
Another type of loan is when a business must replace or update a piece of equipment that is used in the day to day business operations. Without this piece of equipment, they would be unable to generate their products and their income. Many will schedule replacement during slower periods of the season and if possible keep the older equipment running while the new equipment is installed.
If your business happens to be a landscaping company for example a new truck or a new tractor might be another example of equipment purchase that could be to replace an existing unit or perhaps you business is expanding. During extremely busy times, a decision might be to add another crew which means that new equipment must be purchased for that new crew to use. For a landscaping company this could include many different items such as rakes, lawn mowers, etc plus a truck and trailer to carry everything from one work site to another work site.
New Business Start Ups
Most new businesses need some capital to help them get started. From materials, to paying staff to renting an office or a warehouse, they need cash to help them get started until enough income can be generated to sustain them. A new business startup can be tricky since, they often do not have a solid business case that is based on a track record.
Many business owners who are trying to get a new business off the ground will have to use much of their own money to get started and also rely on business loans when they can arrange them. They will need a business case, a cash flow statement and a market assessment to help them sell the business to lenders who are considering a business loan to them. Arranging for a business loan for a start up company is much more difficult than say a capital equipment replacement loan or an operating business loan for example.
Why is it So Hard to Get a Business Loan
Business leaders can apply for any of these types of loans online and submit all of the required paperwork electronically. Typically a business will be scrutinized in much more detail than an individual when they are applying for a business loan of some kind. There are a number of reasons for this.
The lender must first of all satisfy themselves that the business is in fact a viable business with real revenue, real customers and reasonable expenses associated with the level of the revenue that is being generated. If the business is a startup, they still need to answer all of these questions, however there is no track record to relay on so a lot more attention is paid to forecasts etc in the assessment of the loan application. This requirement can be met in a number of ways.
For a business that has been in operation for some time, a copy of the income and expense statement may be requested, along with copies of bank accounts, sales levels, products sold but not yet delivered etc. This is a lot of information, however the lender really is trying to make sure that there is a reasonable level of risk and that the loan will actually be repaid as agreed.
New business owners have a more difficult time of it. They do not have existing customers, existing revenue streams etc. They must be prepared to provide a detailed business plan to substantiate how the business will operate, how it will make money and to forecast the cash flow of the company. The lenders will assess this business plan and may or may not approve a loan based on the information required. New businesses are considered to be high risk and have a tougher time being approved for a business loan. In fact lenders may do their own sensitivity analysis and apply a cut to revenue and an increase to expenses to see what impact this would have on the viability of the business. Potential business owners would be well advised to do their own sensitivity analysis on their cash flow analysis and income statements to assess the viability of their business. This is a standard procedure for many lenders as well as business owners who are trying to make a success of their business.