INTRODUCTION
Starting and running a business has always been my dream but the how without ready cash at hand had been a belittling problem. I hear the same question everywhere about capital to start and I’ve been tempted to also believe that the problem is start up capital.
Experience has taught me that the problem is not the absence of “financial capital” rather the absence of “mental capital”. The bank won’t give credit to a business with no proof of mental capability to deliver on a dream.
I intend to take you through the different stages I went through to being able to have my banks confidence and how I believe I can repeat the same scenario over and over again any where in the world.
You too can achieve your dreams with the little you have from where you are.
In these pages lies experience not just empty stories. If you have paid for this material, then be guaranteed to get your moneys worth. Remember that great books don’t make great people rather it is great decisions tat makes great people. Happy reading.
Micheal joseph(ACE)
President(moneycom)
Chapter 1
popularity is prosperity(using OPM)
People will part with their money to you if you position your self in a position of advantage. The first time I read that popularity is money I determined to create a compelling personality that will cause the cash to keep flowing. I don’t want to tell you too many stories so I will go straight to the point on how I made it happen.
OPM
I really do wonder if it is ever possible to create wealth without a little bit if not a lot of OPM. You must have heard of Other Peoples Money. In a world like ours, a world of scarcity to some and a world of excessive cash for others, the bank will have respect for someone who can pull in the cash steadily.
The question now is HOW do you make people part with their hard earned cash without fear and still trust you even if things should ever go wrong. The answer is for you to have a product that will sell any where in the world to every class if individuals.
The poorer your location the more this product will generate it’s own market.
I HAVE CHOOSEN RATHER TO COACH YOU ONE ON ONE FOR YOUR OPTIMIUM BENEFIT AND RESULT. SO MAKE PAYMENT OF THE SUM OF 10,000 NAIRA ONLY INTO ACCOUNT NO: 2140686375513 BANK: AFRIK BANK
ACCOUNT NAME: MONEYCOM SAVINGS AND CREDIT MPCS LIMITED. AFTER MAKING PAYMENT CALL +2347036688283 AND SEND A MAIL TO moneycom101@gmail.com OR MAKE PAYMENT OF 50 DOLLARS INTO LIBERTY RESERVE ACCOUNT NO: U5678152
Thursday, February 4, 2010
Monday, February 1, 2010
How to Apply for a Small Business Loan Steps a Small Business Must Take in Order to Apply for a Loan
In order for a small business to get off the ground, or to keep operating, it must have financing which is often in the form of a business loan. One form of small business financing is debt financing. Small businesses can apply to banks or other financial institutions, like credit unions, for commercial loans. Usually, banks do not make loans to start-ups, but they do make loans to ongoing businesses. These are the major steps you should follow through the loan application process.
1. Reason for and Amount of the Business Loan
It seems to be obvious that a small business owner would know the reason for and amount of the business loan they need. If the business is a start-up, this is not necessarily true. Owners of start-ups may only be in the process of determining the amount of funds they need and why. Business owners, whether the firms are start-ups or existing firms, need to take some time and be able to clearly articulate why they need a business loan and how much they need. Often, businesses may not be able to address the question of how much they need until they prepare their financial statements as part of their business plan.
* How to Prepare to Apply for a Business Loan
* Four Reasons to Take Out a Business Loan
* How to Get a Loan for a Startup Business
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2. Visit Your Local SCORE and SBDC Offices
Especially if your business is a start-up, you may want to get some advice and help from experienced executives. If you have a chapter of SCORE in your area, they are a wonderful and free source of advice and help. SCORE is a non-profit, volunteer group of retired business executives. If you don't have a local chapter, you can get online advice and online counseling. You may also have a local chapter of the Small Business Development Center (SBDC), particularly if you have a nearby university. The SBDC is part of the Small Business Administration (SBA) and exists to help existing and new small businesses. It will help small business owners with the application process for a small business loan.
* Small Business Investment Companies
3. Review Your Credit History and Credit Score
If your business is a start-up or less than three years old, your personal credit history will be evaluated as well as your business credit history. Before you apply for a small business loan, take some time to get your personal credit history in order. Request your credit report from each of the major credit reporting agencies. Review these credit reports. If you see any errors on your credit reports, write the agency a letter and detail the error and ask for it to be fixed. If there is an error that the agency will not fix, file a credit dispute report. Check on your credit score. A credit score about 700 is very good and significantly increases your chance of being approved for a loan.
* Demonstrating Your Creditworthiness to a Bank
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4. Start Reviewing Your Borrowing Options
Look at the commercial banks available to you. Don't just go to the large, national commercial banks. You may have a better chance for a loan at the smaller regional commercial banks.Other non-bank institutions might be options for you such as credit unions. If you are a member of a local credit union, talk to the loan officer there about your need for a small business loan. If they make such loans, pick up a loan application there as well. There are other options such as microfinance loans that make loans to startups. If one lender turns you down, another may say yes to the same loan application so keep trying.
* Choose a Bank for Your Business
5. Prepare Your Business Plan
This may be your most important step. In order to get a small business loan from just about any lender, you have to prepare a good business plan. In fact, until you have a good business plan, chances are you won't even know how much money you need or how fast you can repay it. The business plan is in addition to the loan application required by the financial institution. Business plans consist of many parts. A good business plan will have several years of past and project financial statements for your business. It will include a statement of collateral or the type and value of assets you will use to secure the loan. You will need to include an analysis of the market your business will serve as well as a statement of your own experience.
6. Plan a Presentation and Make the Appointment
In order for the loan officer at your financial institution to give your application for a small business loan a second look, you have to make it compelling. Prepare a presentation of your business plan and application for your loan officer. Put together a professional package to hand to your loan officer with a narrative plus any financial statements, spreadsheets, charts, and graphs necessary. Be sure and include an Executive Summary. Many loan officers read the Executive Summary first and decide whether they are interested based on that. Make an appointment with your loan officer and request enough time to do a short presentation, with visual aids, based on your business plan. Be concise, succinct, and organized.
RECOMENDED READING
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Commercial Bank Term Loans
In reality, bank term loans are often short-term, but because they are renewed over and over, they become longer term loans. Bankers prefer self-liquidating loans where the use of the loan money ensures an automatic repayment scheme. Most term loans are in amounts of $25,000 or more. Many have fixed interest rates and a set maturity date. Payment schedules vary. Term loans may be paid monthly, quarterly, or annually. Some may have a balloon payment at the end of the term of the loan.
Types of Term Loans
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The American Bankers Association generally recognizes two types of term loans. The first is the intermediate term loan which usually has a maturity of one to three years. It is often used to finance working capital needs. Working capital refers to the daily operating funds that small business owners need to run their businesses.
Intermediate term loans can also be used to finance assets such as machinery that have a life of around one to three years, such as computer equipment or other small machinery or equipment. Repayment of the intermediate term loan is usually tied to the life of the equipment or the time for which you need the working capital.
Intermediate term loan agreements often have restrictive covenants put in place by the bank. Restrictive covenants restrict management operations during the life of the loan. They ensure that management will repay the loan before paying bonuses, dividends, and other optional payments.
Long-term bank loans
Banks seldom provide long-term financing to small businesses. When they do, it is usually for the purchase of real estate or a large business facility. The bank will only lend 65% - 80% of the value of the asset the business is buying and the asset serves as collateral for the loan.
Other factors that small businesses have to deal with in bank loan agreements are interest rates, creditworthiness, affirmative and negative covenants, collateral, fees, and prepayment rights.
RECOMENDED READING
http://moneycom102.blogspot.com
Types of Term Loans
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The American Bankers Association generally recognizes two types of term loans. The first is the intermediate term loan which usually has a maturity of one to three years. It is often used to finance working capital needs. Working capital refers to the daily operating funds that small business owners need to run their businesses.
Intermediate term loans can also be used to finance assets such as machinery that have a life of around one to three years, such as computer equipment or other small machinery or equipment. Repayment of the intermediate term loan is usually tied to the life of the equipment or the time for which you need the working capital.
Intermediate term loan agreements often have restrictive covenants put in place by the bank. Restrictive covenants restrict management operations during the life of the loan. They ensure that management will repay the loan before paying bonuses, dividends, and other optional payments.
Long-term bank loans
Banks seldom provide long-term financing to small businesses. When they do, it is usually for the purchase of real estate or a large business facility. The bank will only lend 65% - 80% of the value of the asset the business is buying and the asset serves as collateral for the loan.
Other factors that small businesses have to deal with in bank loan agreements are interest rates, creditworthiness, affirmative and negative covenants, collateral, fees, and prepayment rights.
RECOMENDED READING
http://moneycom102.blogspot.com
Need a SBA ARC Loan? Here's a List of Bank's That are Making Them!
re The Small Business Administration's ARC Loan Program is off to a slow start. Basically, the problem is that banks don't want to add to their already troubled loan portfolio by lending to yet another troubled business, even though the SBA is guaranteeing the loans. Troubled businesses are exactly who ARC Loans target. As a result, bank response to the program has been slow.
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Very few of the large banks have jumped on the bandwagon. Most banks that have made ARC loans are small to medium-sized local or regional community banks. If you are seeking an ARC loan, check out this list of lenders in each state. These banks have already made ARC loans. This list is updated weekly.
Banking for small businesses is all about relationships. If your bank is not supporting the ARC program, it is not supporting your business. Change banks! Change to one of these banks willing to support small business -- the backbone of our economy! Move your business account and apply for an ARC loan if you need one. Banks are very competitive with each other these days. Chances are, your new bank will serve you as well or better than the one who won't give you the ARC loan in the first place! Good luck!
RECOMMENDED READING
http://moneycom102.blogspot.com
http://treasurebrooks.blogspot.com
Very few of the large banks have jumped on the bandwagon. Most banks that have made ARC loans are small to medium-sized local or regional community banks. If you are seeking an ARC loan, check out this list of lenders in each state. These banks have already made ARC loans. This list is updated weekly.
Banking for small businesses is all about relationships. If your bank is not supporting the ARC program, it is not supporting your business. Change banks! Change to one of these banks willing to support small business -- the backbone of our economy! Move your business account and apply for an ARC loan if you need one. Banks are very competitive with each other these days. Chances are, your new bank will serve you as well or better than the one who won't give you the ARC loan in the first place! Good luck!
RECOMMENDED READING
http://moneycom102.blogspot.com
Before You Take out a Bank Loan, Learn to Calculate Your Interest Rate
Before you take out a bank loan, you need to know how your interest rate is calculated. There are many methods banks use to calculate interest rates and each method will change the amount of interest you pay. If you know how to calculate interest rates, you will better understand your loan contract with your bank. You are also in a better position to negotiate your interest rate with your bank. Banks will quote you the effective rate of interest. The effective rate of interest is also known as the annual percentage rate (APR). The APR or effective rate of interest is different than the stated rate of interest.
Effective Interest Rate on a one Year Loan
If you borrow $1000 from a bank for one year and have to pay $60 in interest for that year, your stated interest rate is 6%. Here is the calculation:
Effective Rate on a Simple Interest Loan = Interest/Principal = $60/$1000 = 6%
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Your annual percentage rate or APR is the same as the stated rate in this example because there is no compound interest to consider. This is a simple interest loan.
Effective Interest Rate on a Loan With a Term of Less Than one Year
If you borrow $1000 from a bank for 120 days and the interest rate is 6%, what is the effective interest rate?
Effective rate = Interest/Principal X Days in the Year (360)/Days Loan is Outstanding
Effective rate on a Loan with a Term of Less Than one Year=$60/$1000 X 360/120 = 18%
The effective rate of interest is 18% since you only have use of the funds for 120 days instead of 360 days.
Effective Interest Rate on a Discounted Loan
Some banks offer discounted loans. Discounted loans are loans that have the interest payment subtracted from the principal before the loan is disbursed.
Effective rate on a discounted loan = Interest/Principal - Interest X Days in the Year (360)/Days Loan is Outstanding
Effective rate on a discounted loan=$60/$1,000 - $60 X 360/360 = 6.38%
As you can see, the effective rate of interest is higher on a discounted loan than on a simple interest loan.
Effective Interest Rate with Compensating Balances
Some banks require that the small business firm applying for a business bank loan hold a balance, called a compensating balance, with their bank before they will approve a loan. This requirement makes the effective rate of interest higher.
Effective rate with compensating balances (c) = Interest/(1-c)
Effective rate compensating balance= 6%/(1 - 0.2) = 7.5% (if c is a 20% compensating balance)
Effective Interest Rate on Installment Loans
One of the most confusing interest rates that you will hear quoted on a bank loan is that on an installment loan. Installment loan interest rates are generally the highest interest rates you will encounter. Using the example from above:
Effective rate on installment loan = 2 X Annual # of payments X Interest/(Total no. of payments + 1) X Principal
Effective rate/installment loan=2 X 12 X $60/13 X $1,000 = 11.08%
The interest rate on this installment loan is 11.08% as compared to 7.5% on the loan with compensating balances.
Effective Interest Rate on a one Year Loan
If you borrow $1000 from a bank for one year and have to pay $60 in interest for that year, your stated interest rate is 6%. Here is the calculation:
Effective Rate on a Simple Interest Loan = Interest/Principal = $60/$1000 = 6%
http://treasurebrooks.blogspot.com
Your annual percentage rate or APR is the same as the stated rate in this example because there is no compound interest to consider. This is a simple interest loan.
Effective Interest Rate on a Loan With a Term of Less Than one Year
If you borrow $1000 from a bank for 120 days and the interest rate is 6%, what is the effective interest rate?
Effective rate = Interest/Principal X Days in the Year (360)/Days Loan is Outstanding
Effective rate on a Loan with a Term of Less Than one Year=$60/$1000 X 360/120 = 18%
The effective rate of interest is 18% since you only have use of the funds for 120 days instead of 360 days.
Effective Interest Rate on a Discounted Loan
Some banks offer discounted loans. Discounted loans are loans that have the interest payment subtracted from the principal before the loan is disbursed.
Effective rate on a discounted loan = Interest/Principal - Interest X Days in the Year (360)/Days Loan is Outstanding
Effective rate on a discounted loan=$60/$1,000 - $60 X 360/360 = 6.38%
As you can see, the effective rate of interest is higher on a discounted loan than on a simple interest loan.
Effective Interest Rate with Compensating Balances
Some banks require that the small business firm applying for a business bank loan hold a balance, called a compensating balance, with their bank before they will approve a loan. This requirement makes the effective rate of interest higher.
Effective rate with compensating balances (c) = Interest/(1-c)
Effective rate compensating balance= 6%/(1 - 0.2) = 7.5% (if c is a 20% compensating balance)
Effective Interest Rate on Installment Loans
One of the most confusing interest rates that you will hear quoted on a bank loan is that on an installment loan. Installment loan interest rates are generally the highest interest rates you will encounter. Using the example from above:
Effective rate on installment loan = 2 X Annual # of payments X Interest/(Total no. of payments + 1) X Principal
Effective rate/installment loan=2 X 12 X $60/13 X $1,000 = 11.08%
The interest rate on this installment loan is 11.08% as compared to 7.5% on the loan with compensating balances.
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