Radically Important Business Basics
Radically Important Business Basics - Part 1
Lenders and creditors have very specific requirements of what they want to see to approve you for credit and financing.
Here’s what they’re really looking for:
Your Business Name - If you are just choosing a name, try to choose as basic and loose of a name that you can that doesn’t peg you into one industry. There are a lot of industries that fall on "restricted" lists.
General consulting type names work best as nobody will deny you then, any other industry specific name very well might restrict your ability to get money with some lending sources and credit issuers.
You need a BUSINESS phone - don’t use a personal home phone or cell phone. YES, lenders WILL know!!! So don’t even try applying for money without a real business phone. Voice Over IP numbers are okay.
You should have a toll free number, unless you only deal with local business such as a pizza shop. You should have a fax number. Your number MUST be listed with 411. Try listing yourself for 411 listing.
Being a home owner increases your chances of being approved. It shows a greater level of maturity and responsibility. Plus, it shows you can manage a higher monthly payment. And your home might even be used as collateral for some financing such as SBA loans.
Lenders love assets because they love collateral so when you are asked on an application about the assets you have, what the lender is really looking for is what you can use as collateral for the debt.
The more collateral you have, the better chances you have of being approved with many types of financing. SBA loans REQUIRE the lender to take ALL assets you have in your business as collateral and if still not enough they will take personal assets such as your home.
Some lenders, such as advance lenders, don’t need collateral. It still helps them feel more secure in lending you money if you do have assets to show. Many things can work as collateral such as 401k and stocks, real estate, inventory and equipment, purchase orders and receivables, and other items that are easy for a lender to sell and get their money back in case of default.
Click Here to learn more about getting financing for your business.
Radically Important Business Basics - Part 2
Lenders and creditors have very specific requirements of what they want to see to approve you for credit and financing.
Here’s what they’re really looking for:
The longer you’re in business the better your chances of getting approved for almost all types of financing. This is because EXTENSIVE statistics on this show that the majority of businesses fail in early years, three years or less of being open.
The longer a business is open the more their chances of failing decline. So longer standing businesses have a much less risk of going out of business than shorter standing ones do.
Being open less than one year makes it tough to get financing and you can get unsecured personal and business cards with no issues. But advances are tougher and loans are nearly impossible to secure.
Some business credit vendors, stores, and cash credit sources also might not approve you if you have been open one year or less. Three years or more is what most sources prefer and this is part of the reason that SBA loans require 2-3 years of financials.
Having good stable revenue can be one of the main reasons you get approved for some funding products, such as merchant or revenue advances. Just in having consistent revenue alone can get you approved. But almost all sources do require that you have revenues coming in for approval.
Some sources such as personal and business cards won’t require verification. Other sources such as lenders to lend advances will verify your cash flow with your bank statements.
Most lenders issuing loans and credit lines will require tax returns on top of P&L statements and bank statements to verify your income. Your tax returns must show good profits, the amount you show will determine the amount of money you are approved for.
You must show increasing profits from year-to-year, not declining profits. Declining profits are a sign of trouble, and most lenders will RUN away from any deal where the applicant has revenues or profits declining from year-to-year.
There are many "high risk" industries lenders don’t prefer. The list of high risk industries is different for each lender and funding type. Some lenders have been burned by one type of industry and "black list" it, while other lenders offering similar products are okay with that industry. Some industries are almost always seen as high risk no matter what lender you apply through.
"Vices" are almost always seen as high risk such as gambling and porn. Other industries such as "financial services" are restricted with many lending sources, but not all.
Financial services can include credit repair, lenders, accountants, insurance agents, mortgage brokers, realtors, and anyone else dealing with any type of financial transaction. Always ask upfront if the lender views your industry as "high risk".
Click Here to learn more about getting financing for your business.