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How to Borrow Money, Part 2
Debt Financing
Debt financing means borrowing money that must be paid back over a period of time, usually with interest. It can be a short-term: less than a year and a long-term more that a year. You do not relinquish any ownership rights by taking a loan and limited by obligation of paying a loan back with interest. This is why loan for new businesses usually secured by one or more of the following: owners personal guarantee, real estate, company assets, etc.
The disadvantage comparing to the equity financing is that you must make scheduled payments regardless of your companys financial situation.
Debt sources can be divided into two groups: non-professional such us relatives, friends, and employees, etc. and professional such as banks, credit unions, etc.
Financial Institutions, by themselves, traditionally provide short term financing for small and mid size businesses: line of credit, equipment loan, etc. Long term loans in many cases guaranteed by the Small Business Administration loan program that helps leverage out risk for financial institutions.
There are some pros and cons in both Equity and Debt Financing. The best capital structure will depend on many different factors. For more sophisticated cases I suggest to hire a seasoned Financial Consultant.
Points the borrower usually evaluates before you giving the money:
1. How good is your credit history
2. Do you a solid collateral
3. Will you be able to repay the loan
4. Does your management team have enough management experience
Your personal financial situation while starting a business
It is always a good idea to build your personal credit history. In the beginning your business does not have any credit history and lender will use your personal data to evaluate a loan terms. Order you personal report to see where you stand and check it for any unexpected errors.
Work with your personal budget. You need to understand that usually you will not be able to take any cash from new business for a while. Make sure that you have enough money to start you business venture and enough money to pay you bills until business will become cash producing.
Put together projections and classify your future business expenses. Some of the expenses will be one-time costs such as the fee for incorporating your business; some will be ongoing such as inventory, insurance, etc.
There are two types of expenses: variable such as inventory, sales commission, etc. and fixed such as rent, utilities, etc. If you feel that you do not have enough expertise to do budgeting and forecasting it might be a good idea to hire a professional to do that.
Yury Iofe, MBA
Universal Business Structured Solution
More educational resources by Yury Iofe:
www.ubssolution.com
Secured Personal Loans Yield Immediate Cash
When you need cash now to make purchases or pay debts, you might want to consider taking out an online secured personal loan. A secured personal loan is a loan that is secured with property that you own, and can easily obtained in amounts up to $100,000 or more.
Most secured personal loans are backed up by using your home as collateral. That is the reason why some lending institutions refer to these loans as homeowner loans. Collateral need not be in the form of your home, however; you can easily use other real property, such as your car, boat, RV, or other pieces of land or real estate to stand good for your secured personal loan.
Additionally, if other lenders have placed liens against your property to secure your mortgage, you can still use it for collateral.
Secured Personal Loans For All Borrowers
Secured personal loans are very popular among those who might have been turned down for an unsecured loan. You can use your secured personal loan for whatever needs you have, whether you are looking to buy a new automobile, finance home improvements, add an addition to your home such as a fourth bedroom, or perhaps even take a dream vacation.
There are many benefits of a secured personal loan over an unsecured personal loan. Secured personal loans typically carry lower monthly payments that are spread out over many years. Secured loans are also very attractive to buyers without perfect credit, even those with low FICO scores, which makes the secured loan available to nearly all types of borrowers, regardless of past history.
By getting your secured personal loan online, you are ensured of getting the lowest interest rate possible across the industry. Your interest rate is typically calculated by taking into account the amount of the loan, the term of the loan, and your credit history.
Protect Your Future
A good idea when taking out a secured personal loan is to purchase the optional disability and life insurance that most lending institutions offer on these loans. Your disability or life insurance policy for your new secured personal loan will be very beneficial to you if you were to lose your job or become unable to work due to illness, when your benefits would be activated that make payments on your behalf during the incident. Additionally, if you were to pass away, the policy would ensure that your survivors can keep your home.
Apply Securely Online
Applying for your secured personal loan online is simple, convenient, and hassle-free. Online lenders have set up websites that feature applications that are user-friendly, and allow you to submit your information electronically. Any documentation that is required to complete the processing of your loan can also be submitted by sending a scanned email copy of the required item or by faxing a copy. Items that might be required are recent paystubs, bank statements, and identification documents.
Once approved, you will receive an offer from the lender. You are not obligated to accept the offer. If you review and accept the offer from your lender, the proceeds from your new online secured personal loan can be deposited into your bank account almost immediately.