3 Things Not to Do When Applying For Business Loans

Small business owners are some of the most hard working and knowledgeable people on this planet. They have big dreams and nothing can get in their way. One fall back for such a driven and motivated person is that often times, certain operational functions are not carried out correctly. Because small business owners want to move swiftly, certain details can often be overlooked, causing the business to not run as smoothly as we all want it to.

Applying for business loans is one of those operational functions that small business owners just can not seem to get their arms around. Here are a few tips on some of the things you should not do when applying for business loans.

Number 1 – Banks and lending institutions have no interest in taking on any kind of risk whatsoever. The recession has spooked lenders to not lend out money to anyone, or any business that does not have exactly what they are looking for. In knowing this, it is important to understand what the banks’ underwriting guidelines are. Do not be intimidated by the bank or its loan officers. Once you understand how their processes and guidelines work, it is easy to entertain those processes and guidelines. Ask the bank what it will take to be approved for the particular business loan you are looking for. Do they want a certain personal credit score? Do they require a good business credit score? Do they require you to be in business for so many years? Once you have found out what those guidelines are, you can go back and work on falling within those guidelines. Do not walk into a bank and apply for a business loan without first knowing what their underwriting guidelines are.

Number 2 – Your credit score is one of the biggest factors determining whether or not you are going to be approved for business financing. Many banks are going to require that you have a decent personal credit score along with a good business credit score. Yes, the two scores are different. Before applying for financing, you need to check both your personal credit score along with your business credit score to make sure they are what you think they are. Applying for a business loan without knowing what those scores are is a big risk. There is nothing worse than applying for a business loan and being turned down because you thought you had a 700 credit score and you really had a 620. This will also affect your future chances of being approved for a business loan with any other bank or lender. Once you have been denied by three banks, you are most likely going to be denied by all other banks because your credit score has been checked too many times in such a short period. Do yourself and your business a favor and know your own numbers before anyone else does.

Number 3 – There are two facts that many small business owners fail to see in our current economy. Number one is that nearly every small business owner in this country is starving for money, which means there are thousands of small business loan applications sitting on loan officers’ desks. Number two, loan officers are paid on commission, which means they are only paid when a loan has been closed. If we know these two facts to be true, then it is vitally important to have a very well assembled loan package. If you give the loan officer any excuse whatsoever to have to find more information on your business, your loan application is going right in the trash. Loan officers want to be paid, which we know only happens when a loan is closed. In this economy, loan officers are only going to spend their precious time on loan applications that they know are easy to close. Your loan application has to be prepared with everything the bank wants to see when applying for a business loan. This includes a well written business plan, professional looking financial documents, articles of incorporation, and good personal and business credit scores. If you have these documents, do not put them all in a shoe box and walk into the bank. Organize them neatly and professionally so the banks perception of your business is a positive one. Do not think you are going to be approved for a bank loan or line of credit without being prepared.

In conclusion, think about the banks money as your own hard earned money. Would you lend out money to a business owner that does not have what is required to own and operate a low risk, positive cash flowing business? No, probably not. Put yourself in the banks’ shoes and think about what you would want to see. The more prepared you are when applying for business financing, the better your chances of getting approved for business financing.

Why Get a Business Coach With Grant Writer Experience

Hiring a coach or consultant should be the first step you take in starting your business. The capital you use to start should include the services of a business coach or consultant. Using a business coach or consultant when starting your business can save you thousands of dollars on expenses you may not need to incur during your startup. Every year a lot of businesses start, but finish early. The reason is due to lack of profitability. Hire a business coach to help you determine what you need to do to stay in business successfully.

If you already have a business, when sales are slow and business is starting to take a downturn, hiring an experienced coach or consultant can help you in many ways. An experience business coach or consultant can help you identify the reasons for the business revenue downturn, offer solutions, and help you implement those solutions within a certain timeframe.

Even small startups should consider hiring a business consultant with an emphasis on teaching and coaching. There is a saying, “You don’t know what you don’t know.” -Anonymous. There are certain “tricks of the trade” that you have to be aware of to navigate through the process of starting a business. Anyone can open a company, but only a small percentage of people can successfully run a business. A business coach or consultant will be able to teach you how the top sellers and successful entrepreneurs do it. Once you know these tricks of the trade, you too can have and run a profitable and successful business.

Even if your company is cosmetic sales, sales of dishes, real estate, lawn care, car service, beauty, clothing sales, and many, many, other businesses, hiring your own private business coach or consultant is imperative. If you are starting your business, hiring a business coach or consultant is even more imperative.

Some companies like distributors of cosmetics companies or real estate companies, offer education on how to sell their product or service. However, the majority of people in those businesses are not able to sustain themselves full-time on the income that they make. Only a few people do succeed and they are considered the “top producers”. Those top producers are the successful people who do something differently from everyone else in order to succeed. What is it? A good business coach or consultant will teach you the difference and help you implement systems to be in top and remain on top.

If you haven’t explored applying for a grant, you are missing out on vast opportunities to fund your business, help it succeed, and keep your business running through tough economic times. There are grants available for just about any business! The business coach or consultant you hire should be knowledgeable and demonstrate proven experience in the area of grant writing in order to provide optimal service to you.

The Heartbreaking Exit Strategy For Business

Some research by the Commonwealth Bank in Australia showed that only 47% of small business owners have an exit strategy such as selling their business. Of those with an exit strategy, 22% intended to just close their doors and walk away. The report also said that 60% of business owners planning to close shop are still actively re-investing profits back into their business.

Not only that, the same survey report also reflected that half of these business owners are working over 50 hours every week.

Another article that showed some statistics came from smartcompany.com.au, an online business publication which published a research conducted by Pitcher Partners, an accounting firm, also based in Australia.

Pitcher Partners found that the average age of small business owners is 55 years and 81% of them plan to retire in the next ten years. However, 75% of them had no business exit strategy.

In another survey, the Cameron Research Group showed than only 10% of small business owners had a documented succession plan. Another 44% had thought about succession but had no plan and nearly half or 46% had not given any thought to succession. Only 15% of small business owners intending to exit their business in the next five years had a documented succession plan.

At one level, this is a tragedy waiting to happen. In a few years time, there will be a lot of unhappy business owners.

Sadly, it’s a tragedy already. This is a ‘problem’. There are so many people running their businesses without exit strategies laid out – and they will want to get out of it at some point, but, sadly, they don’t have a plan on how to do this.

In fact, these statistics are not only relevant to Australia. John Warrillow, author of “Built to Sell” quoted that there are approximately 23 million businesses in the United States and only a few hundred thousand are able to sell their company each year.

That means, for every small business owner who creates a business that someone will buy, there are about a hundred businesses that don’t sell.

And, this is the same business scenario for New Zealand, United Kingdom and Canada.

The way I see it, there is huge potential for a lot of sadness amongst business owners all across the world who sooner or later will want to sell their business – but may not be able to – or won’t get much for their business when they do come to sell it.

Not having an exit strategy, working more than 50 hours every week, reinvesting profits back into a business you may end up walking away from… Life on the business owner’s treadmill is not always fun, despite how it may look to others, including your employees.

Thinking that the only way out is to walk away at the end without having something as much as a salable asset… That’s extremely heartbreaking.

So, when’s the right time – or the best time – to start working on your exit strategy? If you don’t “begin with the end in mind”, at least start planning for it about two years before you want to exit.

The difference between a good business exit and a heart-breaking business exit is your choice. Your business freedom is your choice. In fact, it’s all about creating better options for better choices. But don’t leave it until it’s too late.