Prove You Are Worthy of a Business Loan

You know that you have a great idea for a business. You have the enthusiasm and drive to start it but what if you don’t have enough money for your capital?  How can you get a business loan when you are just starting your business? If you don’t have an existing business and you’re just starting, a business loan may be one of the things that you will find hard to get. At this point, you have no documents to show any profitability and you can show no proof of means of repayment of the loan. The bank has no personal history about you to determine your ability and willingness to pay. To improve your chances of being approved for a startup loan, follow these tips:

Prepare a feasibility study or an in depth analysis of the market.

You must be prepared to show the bank that you have  full knowledge of the business you are entering and that you understand the market and the industry in the particular business field that you are about to enter. Include a detailed analysis of the market and the customer base as well. Give the bank an idea of how much market share you think your business can get and how that translates into money. Even though the business is not yet existing, develop income, expense and cash flow projections for your company. This will give the bank an idea of how your business can do in the future and it will also tell them that since you know what you are doing, then they are investing their money on the right person.

Tell the bank exactly where you are going to use the business loan.

Make estimates as exact as possible of how much money you need to and for exactly what purchases you are going to make. A lot of new business owners greatly over-estimate how much money they need. If you apply for a loan and do not justify how and where you are going to spend the money, there is a big possibility that your application will be rejected. For example, if you are going to make a $50,000 loan, then you should specify what amount goes to the equipment, what amount goes to renting a building, so on and so forth.

Share your experience with the bank.

If you want to put let’s say a metal fabrication company, then you should show the bank that you worked in that industry for a few years. It is worth the while to let your bank know that even your associates have experience and knowledge in the same industry. This way, the bank will have more confidence that you know what you’re getting into and will be able to handle financial challenges, including repayment of the loan even when times are hard on the business.

Use your personal wealth as a collateral.

You can use your home, a piece of unused land, vehicles as well for a collateral. Lenders will still expect you to put  up your own money as capital for the business. If you show confidence in your business by injecting your own money into it, the bank will see that you have no doubt in mind that it will work out for you and that you will do your best to make it work.

How Payday Loans Become a Vicious Cycle

Payday loans can be deceptive. You are forced to turn over a post-dated check for a loan and in addition, there is a possibility that you will be harassed and threatened because of some collection practices. The high rates of payday loans make it difficult for so many borrowers to repay the loan simply because they are already in a financial crisis.

When we are short of cash, Payday Loans or Check Advance Loans may seem like an easy way out of a temporary cash shortage but for many people, this can be the beginning of a vicious and expensive cycle where you will find difficulty getting out of in the long run.

An example of this situation would be about Carlie. Carlie was short of money to pay for her monthly bill and so she went to a payday lender and borrowed money to make up for the shortage and she was charged $50 for up to 15 days or 2 weeks. She needed to repay her loan when she receives her next paycheck in the next 15 days. When she got her check, she realized she didn’t have enough money to pay off the amount she borrowed with the $50 interest fee, so she paid the additional $50 to the lender and rolled her payday loan for another 2 weeks.This cycle went on for about 6 months and in the end, she had paid a total of $600 in fees and still owed the principal amount of $200. She had already paid 3 times more than what she borrowed and that puts her in a much deeper financial debt than she was in before she made the first loan.

The interest rates on a personal loan from a bank tend to be 10 times lower than even the lowest rate payday loans. Even a high-interest rate credit card has a much lower rate than a payday loan. The interest rates of payday loans rate from a whopping 300%  which may go up to to 1,000%.

A payday loan is requested for a short period of time, usually one to two weeks. You will be required to provide proof of employment and some identification and to secure the loan, you will also be required to write a post-dated check for the principal and interest fees of the loan.  A $100 loan can cost you $15 of interest for 2 weeks. This may seem reasonable enough  for an emergency situation,however, did you know that the annual interest rate on that loan can amount to 360%? If it becomes a vicious cycle, you will end up more badly in debt than you were in when you first borrowed money from the payday lender.

If the money you need is not for an extreme emergency, you may want to try these other alternatives for less expensive loans:

• Ask your employer for a pay or cash advance.
• Consider asking your friends and family for a loan first.
• Consider a credit card advance.
• Contact a local credit union for a small loan.
• Request additional time to pay the bill from your creditors.
• Try credit counseling.
• Prevent financial emergencies.

To prevent financial emergencies, take time to look at your income and expenses. Write it all down. Try to save a little money each time you get your paycheck. No matter how little, this still will add up and it’s still better to have some when you need it.

Paying Credit Card Debts Off With A Personal Loan

Is it a good idea to pay off credit card debts using a personal loan?

With this article, we are going to look at the good and bad side of taking out a personal loan to pay off all your credit card debts. It may or may not be a good idea but we are going to look deeper so you have a better understanding and you will be able to decide if this is a good option for you.

First of all, do you really think it’s worth taking out a personal loan just to pay off your credit cards if  let’s say you owe less than $10,000 on them? If you owe more than $10,000 though and you’ve recently been missing payments, then paying off all your cards would seem like a good idea in order to avoid any penalties or late payment charges or even worse, paying more interest on the interest itself.

You need to check a few things to help you make the right choice . First, you need to know how much you’re paying for the interest on your cards and how much the penalty is if you’ve missed because you will need to compare this with the interest that the bank where you are getting your personal loan from is offering you. The amount of interest that is charged for personal loans vary and they will depend on your present FICO or credit score.

If you have a not so good credit rating, there is a high possibility that the interest on the personal loan will be higher than it is on your credit cards, but do you also know that behind your credit card payments, the penalties also build up fast over time? The compounded interest also grows with every missed payment.

Interest on personal loans do not compound and you have the option to arrange for a different repayment schedule when you sign up for the loan. What’s more is that you don’t have to pay for multiple cards or loans. By getting a personal loan to pay off all yoru credit cards, you make only one payment each month.That saves you a lot of trouble.

Try to check out three or more  loan companies before finally deciding where to take out the loan. The final and most important thing to remember before signing on a dotted line is if your monthly payments will go lower or higher. The ultimate goal of getting the loan is to improve your situation and not worsen it. If you get your loan, be sure to make your monthly payments on time. A personal loan paid on time will certainly look better on your credit report than missed credit card payments.

Getting A Personal Loan to Fund a Business? Here Are Some Tips.

Getting a personal loan to for a business can be difficult especially if the business you want to enter is in a high-failure rate category such as a restaurant. If you don’t have your own capital or are looking to add more investment for your business, the best place to look for money or a loan is with banks. 

First of all, you need to create a business plan. The feasibility of  a business plan is highly important for the banks to determine how you will be able to pay them and how much they should loan you. The research and information uncovered in the feasibility study will support the detailed planning and reduce the verification time that the banks will do for you. This exactly defiines what a business project is and issues needed to assess its likelihood of succeeding.

Other than the business plan, you also have to consider these documents for your initial visit to the bank.

Personal Financial Statement

A company’s or a person’s financial statement is the most important business document that the bank will require. This is a snapshot of a person’s financial state. It shows whether you are capable of paying back any loan or if you could support a business with your own resources other than what you are trying to loan from the bank.

If you already have a business running and just need an additional investment, this is higly important because it shows the flow of money in and out of your company. It shows how wealthy or indebted you are to the bank.

Credit Report

The bank does not need to require a credit report from you because they could obtain it on their own once credit investigation has begun. It is incredibly important that you familiarize yourself with the information on the report. If you have a low score, then you should be prepared to give the credit reporting company a call if you need to dispute something otherwise be ready to explain to the bank and give detailed explanation for any discrepancies.

Tax Returns

This shows that you have a documented income and that you are a stable individual who can stay in a job for a long time. It usually gives the banks an impression that you can also be responsible in paying for the bank loan. Banks usually require 3 years of personal tax returns.

Any Criminal Records

Banks also look into your character before they agree to loan out money for your business. They usually take a look at your residence and how long you’ve stayed in a place. They also look at your employment history. If you did commit a crime in the past, you must be ready to explain this as well to the bank.

If you have business partners, then they should also provide copies of these documents and be ready as well for the bank interview and make sure all your documents are ready when you go to the bank.