How to Start a Rice Dealership Business, Pinoy Bisnes Ideas, how to

How to Start a Rice Dealership Business

How to start a businessRice is an important primary staple food in many Asian countries especially in the Philippines. Indicating the high demand for this commodity, planning to put up a rice dealership business in your area is a wise choice. There is already an assurance that this business will succeed because buyers are already there. Of course, in any kind of business, conducting a feasibility study is always a crucial step to take. This will assess the economic viability of your proposed business.

Here are some important questions to consider before plunging into this kind of business.

1. Do you have enough capital or budget for your rice dealership business? With at least P60,000 to P100,000 as a starting capital.

2. Do you want to operate as sole proprietorship or corporation? Business registration guide here.

3. Do you have a big and safe storage room for the sacks of rice that will be delivered to you?

4. Do you have a good location for your rice dealership business? Research the area of your target market, the flow of traffic and their buying habits.

5. Do you have lists of rice suppliers in your area? Make sure you have a lists of several suppliers and make a good relationship with them.

6. Do you have necessary equipments like calibrated weighing scales, rice sacks etc., and a service delivery (optional).

7. What varieties of rice do you intend to sell? Make sure to have several varieties of rice, so that your customers will have several options.

8. How will you market your business? This is also an important aspect especially you are new in this kind of business. Make a good marketing strategy and make your business known to your customers. Make a good deal with restaurant owners, hotels, resorts and small carenderias in your place to be their rice supplier.

Here are Some NFA Rice Dealership FAQ

Q: Who are required to secure license from NFA?

A: All persons, natural or juridical, that are engaging or intending to engage in the rice and/or corn business whether commercial or NFA rice/corn.

A: Before the start in any of the business activity enumerated above, the proprietor or operator should first secure a license from NFA. For those already license, businessmen should renew their annual license on any day within their scheduled month allotted by the NFA

A: Application may be filed at the NFA office that has jurisdiction over the location of the principal business of the applicant.

Q: In case we have more than one (1) store/establishment for Rice/Corn business, should all be licensed?

A: Yes, owner/operator should file a license for all outlets at the NFA office where his principal place of business is located. Additional outlets are treated as branches.

A: For new applicants, follow these procedures:

secure application form from the licensing officer upon payment of application fee;

accomplish and file application with complete requirements to the licensing officer who in turn checks the documents and determines corresponding license fee;

pay license fee to the cashier and get copy of official receipt;

prepare the facilities/equipment requirements for inspection by NFA Investigators;

after inspection of establishments, present notice of inspection to licensing officer, official receipt and proof of compliance with deficiencies, if any;

licensing officer issues license if application is found to be in order;

applicants display license in their establishments.

Procedures for renewal applicants:

secure application from licensing officer upon payment of application fee;

accomplish and file application with complete requirements together with previous year s license to the licensing officer;

licensing officer checks completeness of requirements and determines license fee to be paid;

pay license fee to the cashier and present the official receipt to licensing officer;

licensing officer issues renewal sticker and stick it to appropriate portion of the license if application is found to be in order;

applicants display licensing conspicuous place in their establishments.

Q: For New Applicants, how long do we have to wait for the Approval of our License Application?

A: The establishments and facility requirements of new applicants are inspected by NFA Investigators within 20 working days after the filling of their applications. Those inspected are given inspection notices stating the date when they can return to the NFA to show compliance with any deficiency, if any. Otherwise, their notices state the date they can get their license. In all these cases, it should not exceed 20 working days after inspection.

A: Application fee is P50.00 for a single line activity and P100.00 for two activities or more. License fees depend upon capacity of the post harvest equipment used.

A: Documentary and facility requirements depend upon the business activity.

Q: Does the NFA requires only Licensing on Rice/Corn Business Activities?

A: The NFA also require the registration of the following facilities aside from the license on the activities mentioned earlier list.

motor vehicles used or intended to be used in transport/hauling of palay/ rice/corn whether for exclusive use or for hire except public utility vehicles franchised by proper government agencies not principally used for transporting rice/palay/corn;

warehouses,threshers and sellers for own produce;

mechanical dryers for owner s/operators exclusive use;

packaging machines for owner s/operators exclusive use;

institutions/establishments securing their rice/corn requirements from the NFA;

poultry and hog raisers securing byproducts from the NFA;

manufacturers/importers/dealers and distributors of rice/corn post-harvest facilities;

non-operating mills and other post-harvest facilities. In this case, registration is done only once.

Registration is done at the office of the NFA that has jurisdiction over the location of the principal business of the applicant.

Registration fees see separate from that of the license fees.

Q: In the event that I discontinue my business, what should I do with my License/Registration Certificate?

A: Surrender your license/registration certificate to the NFA office that issued it together with a written notice of discontinuance.

Otherwise, in case you reapply, you would be charged with the fees for the entire period that you have not applied for renewal.

Q: What do you mean by Bonded Activities?

A: Bonded activities mean third party stocks are deposited in your facilities, for storage, milling, threshing, corn shelling or mechanical drying. Operators/owners of facilities accepting third party stocks are required to post a bond as well as fire insurance to safeguard the stocks of the third party.



3 Ways to Finance Your Business, how to finance a business.#How #to

How to Finance Your Business

Businesses need financing for start-up costs or to fund expansions. Depending on your business, you have several options for raising the necessary capital. In addition to using your savings, the most common methods of financing are debt financing by obtaining a loan and equity financing by selling shares in your business. [1] However, there are other creative options, such as purchase order funding, crowdfunding, or using a credit card.

Steps Edit

Method One of Three:

Obtaining a Business Loan Edit

How to finance a business

How to finance a business

How to finance a business

How to finance a business

How to finance a business

How to finance a business

How to finance a business

Method Two of Three:

How to finance a business

How to finance a business

How to finance a business

How to finance a business

How to finance a business



How to get a business loan, options & requirements, Business Victoria, how

Apply for a business loan

Not what you’re looking for?

  • Choosing a loan you need
  • Improve your loan approval chances
  • Risk assessment

When applying for a business loan, it’s essential to prepare a detailed business plan and fully inform the lender about your proposed venture. This information helps the lender to provide you with the right type of finance and advice.

Deciding that your business needs a loan is only the first step. There are a number of things to consider before you approach a lender:

  • how much do you need to borrow?
  • what type of loan will you need?
  • how long will you need it for?
  • can the business afford to repay the loan, interest and any one-off or ongoing fees that come with the loan
  • what security can you offer the lender and how this affects the interest rate offered.

Online repayment calculators are a good tool in researching options but make sure you take the following into account:

Access to funds you borrow

If you need to access the funds on a semi regular basis to help with cash flow to keep the business operating while waiting for your customers to pay for goods, ‘at call’ loans such as an overdraft or line of credit are designed for this purpose. However, if you need the funds to buy a new business or equipment to expand your existing business you will need the funds ‘upfront’. This is also known as a ‘fully drawn advance’ and provides you with the entire loan amount all at once.

Loan terms

Loans provided upfront will need a portion of the loan plus interest paid back at regular intervals. The repayment amount will depend on the term or length of the loan. To determine the loan term suitable for your business you will need to calculate how much you can afford to service the loan. Be aware that the longer the loan term the more total interest you will pay. Loans that are at call have no fixed terms.

Ongoing funding

This is the average amount of an overdraft or line of credit that is used at any one time. For example, you may wish to have an overdraft limit of $20,000 to provide money for the occasional big expense, but usually you won’t use more than $5000 of that credit limit on average. So in this case $5,000 is the level of ongoing funding you need.

When applying for an overdraft limit, things to watch out for are:

  • higher the overdraft amount higher the fees
  • clauses where the lender can demand repayment of the whole loan at any time.

Fixed or variable interest rate

The choice of rate will affect the stability of repayments, overall cost of the loan and the loan features available. With a fixed rate loan the lender bears the risk of interest rate moves, while with a variable rate you will bear this risk. Ultimately, the choice of variable or fixed rates will depend upon how much free cash flow your business generates after you have paid all your expenses, including loan repayments. If your business has a low profit level, a variable rate loan repayment may rise beyond your ability to pay.

Loan security

Loans can be secured or unsecured by various types of assets, including residential, commercial, rural property or business assets. Alternatively, some loans are unsecured by any asset. Generally the less you provide for security the higher the interest rate will be. Be aware the lender has the legal right to seize any property or asset you offer as security if you can’t repay a loan on time.

There can be fees which can make a loan less attractive than it first seems. These include one-off fees such as establishment/application fees, exit/discharge fees and early termination fees or regular fees such as service fees or line/credit advance fees. The Business Loan Finder tool includes the cost of set-up and ongoing fees in the average monthly repayment to give you a better idea of the true cost of the loan.

Seek advice

The information provided here will provide you with a range of possible finance options. It is important to seek advice from your accountant or business advisers before approaching a lender for a loan.

Tip: Use our below Cashflow forecasting template to plan your cash flow and work out how much you need to lend.

Plan the business, plan the finance

Lenders will ask for a lot of in-depth information about the financial history of the business. It’s also important for you to create a convincing and detailed business plan which should include a profit and loss budget and cash flow forecast. The information you use to build your business plan may also be needed by the lender to assess your project. This includes both the past and future plans for your business, the people working in it and the market itself.

The outcome of your application is strongly influenced by how well your proposal is researched and how well it is presented.

Risk assessment

Banks and other lenders will look at your business’s risk profile when considering your loan application. Understanding what lenders look for and what they consider risky will help you present your business in a favourable manner.

As a general rule, lenders look for:

  • the level and nature of your security (what you’re offering to give them if you can’t repay the loan)
  • your ability to make regular loan repayments (cash flow risk)
  • your ability to ultimately repay the debt (business risk), including any other debts you might already have.

You need to be able to assess the level of cash flow or business risk in your specific circumstances. A projection of the cash requirements of the business is most important to a lender, as it is the actual cash left after expenses that will repay the loan, not income. It also shows you are an effective manager.

A lender’s perception of risk

The following factors can influence your lender’s perception of risk. If a number of these areas apply to you and your business you may need to consider another source of finance.

  • start up businesses incorporate financial, business and management risk
  • lack of security
  • lack of business history
  • industry sector, factors will include levels of competition, barriers to entry, profitability profile and current economic conditions
  • highly seasonal businesses, for example swimwear and agriculture. You’ll need to demonstrate how you’ll deal with cash flow pressures in the off season
  • lack of planning, market knowledge and finance skills
  • poor credit history.

Watch out! Before entering into a payment arrangement with the Tax Office, businesses should discuss this with their current or future lenders. Many businesses are unaware that entering into a payment arrangement with the Tax Office or other government agencies may adversely affect their current and future financing arrangements. For instance, a lender may not lend to a business if it is currently in a payment arrangement.

For more details visit the Guide to managing your tax debt on the ATO website.



How Do Business Loans Work, Lendio, how do business loans work.#How #do

How Do Business Loans Work?

The process will vary depending where you look for a loan, but here at Lendio, we make it easy to get a loan. Start by filling out our online application and entering some information about your business. When you re done, a personal funding manager will contact you to discuss your loan options. Then you simply choose your preferred loan and your funding manager will push through the application to the lender and finish up the final details.

It really depends on where you apply for your business loan. For example, in the last half of 2016, banks were only approving 20-25% of small business loans, where alternative lenders were approving 60-62% of similar loans. And as an online lending marketplace, we work with more than 75 lenders so there is almost always a way to find a loan that can work for you. But the only way to really know is to fill out an application and see for yourself!

The documents you’ll need to apply for a loan will vary depending on whether you apply with a bank, an online lender, or at an online lending marketplace. To fill out an application at Lendio, you’ll be required to know some basic information about your company and your personal situation. We don’t require you to send in any documents besides providing business account bank statements for the past few months.

The loan products you qualify for will likely determine the way in which, as well as how often, you’ll pay back your loans. Typically, the stronger your business and credit, the less frequently you’ll have to make loan payments and the more payment processing options you’ll have. In contrast, the lower your credit scores and business strength, the more frequent and determinate your payment options will be.

You ll be expected to bring personal background information, your resume, a highly documented business plan, signed personal financial statements, personal credit reports, your business credit reports, personal and business tax returns for the previous three years, an entire year of personal and business bank statements, documentation of collateral, and a number of legal documents. And that s before they start asking questions.

This really depends on your unique business. We offer many different specialized loan products to help fund your business efficiently. In some cases where a loan is going to be used for many different things we will offer several loans, each serving a different purpose. This helps you get the maximum amount of funding easily. Your funding manager will help you decide which option is best for your situation.

You’ll need to know some basic things about your finances and your company such as your approximate credit score and what industry your business will be in. You’ll also want to be able to show past experience in the field if you have any, and you may need up to two years of personal tax returns depending on the type of startup loan options available to you. Other than that, just apply and pray! Just kidding, you ll be fine.

A commercial mortgage is another term for a commercial mortgage. These loans work by utilizing the collateral value of real estate you own in order to get funding for your business. A commercial real estate loan is most commonly used to turn your equity into needed working capital, refinance your real estate to increase cash flow, or to purchase a new property for expansion or growth.

A VA loan is a personal loan offered by Veterans’ Affairs to most members of the military, veterans, reservists, and National Guard members. While VA loans are restricted to mortgages, refinancing, rebuilding, and expanding or extending a personal home, the SBA does offer a loan service called the “Patriot Express” which is a more traditional business loan to help veterans start their small businesses.

Some government agencies do offer small business loans or grants specifically for minority-owned businesses. They’re excellent programs and we encourage anyone who may be eligible for those offers to check them out and see if they qualify. Unfortunately, As a private business, as well as an online lending marketplace, we do not have any options that we can offer exclusively to minorities.

The most commonly accepted definition is loans of a relatively small dollar amount used to help small businesses and entrepreneurs grow or sustain their businesses. The dollar amounts, according to bank definitions, range from $500-100,000. The average micro loan in the U.S. is just $13,000, but businesses in the United States only receive a very small percentage of the micro loans around the world.

How do business loans work

How do business loans work How do business loans work How do business loans work How do business loans work



How Do Business Loans Work, Fortress Funding, how do business loans work.#How

How Do Business Loans Work?

What Options Are Available To You?

Traditionally the “Big Four” banks have all offered pretty much the same stuff. That is if you want to borrow money for a business purpose the price goes up. As well as this you need to track down a banker that can take the time to understand your business and appreciate things from your side of the desk, not just the Credit Department’s side of the desk.

There is not question, its getting harder and harder to get good service in the Small to Medium Business, (SME), sector. In fairness to the “Big Four” its hard for them as well. They want it do but they are pushing their managers, branches and infrastructure in general as hard as they can and that rarely co-exists with relationship building and great service.

Its not just pricing and access to good service or advice that makes loans for SME’s hard everything else gets harder as well.

Here s How Business Loans Can Get Harder

The loan term might be restricted putting cashflow pressure on your business

Take this example of a commercial loan of $750 0000 for the purchase of a commercial warehouse.

Commercial loan of $750,000 at 5.42% pa

How do business loans work

Latest Blogs

  • How do business loans work

The Truth About Refinance and Three Options for Immediate Action

Why would you consider refinancing your loans? 9 out of 10 clients that we review could re-arrange their loans to be either cheaper, more appropriate or both! It’s worth asking the question, isn’t it? After all we don’t know what we don’t know. When you took out your last loan did [. ]

  • How do business loans work

What Is A Second Chance Loan?

Second Chance Funding How It Can Work For You What is it? Second Chance Finance is a flexible loan offered by lenders for those with bad credit or a less than perfect credit history. It’s a way that you can get yourself back on track quickly and easily. It’s not something your bank [. ]

  • How do business loans work

How Do Business Loans Work?

How Do Business Loans Work? What Options Are Available To You? Traditionally the “Big Four” banks have all offered pretty much the same stuff. That is if you want to borrow money for a business purpose the price goes up. As well as this you need to track down a banker that can [. ]

Looking at the loan in simplistic terms you would say the cost is 5.42%pa or $40650 each year in interest. However, when you look at all the other associated costs the bank is charging an average of $44890 per year. Effectively that’s 5.96%pa. or put another way an additional $21 200 over the 5 year period.

In addition to this you have the hassle, and anguish, of having to prepare interims and hope that the bank remains happy.

Every time you provide your lender information you risk something changing that you may not have anticipated. The opposite can be true but that’s usually only because you know how to “work the system”.

When was the last time your bank manager rang you up and offered to reduce your lending costs?

When was the last time your bank manager called you?

Consider This

Firstly, let’s be clear – you do not have to move your transaction banking.

Commercial lenders love you transactional banking accounts. It gives them your funds on deposit for free, the ability to charge account keeping fees and the ability to look inside your business – without you knowing.

New ways of funding commercial loans are out there. For example set and forget commercial loans and sometimes at home loan rates. Why would you pay commercial interest rates, have a shortened loan term and prepare interim financials if the bank could use equity in your home for your commercial loan?

You can make this happen if you know which lenders to talk to and how to go about it. No disruption to your business banking accounts, your internet banking or credit cards – just cheap efficient loan accounts.

Even if you prefer to, or already have offered your commercial premises as security rather than your home, (or a mix of the two), you can have a set a forget commercial loan with no ongoing fees over 20 years. There is of course always the option to go interest Only as well.

Consider the information below, it’s for the same $750 000 that we looked at earlier.

Commercial loan of $750,000 at 4.89% pa

How do business loans work

In this example the same loan costs an average of $37 087pa. over a 5 year period. That’s effectively 4.94%pa. (compared to 5.96%pa above).

The only thing that has changed is we did it smarter!

All your day to day banking stays in place uninterrupted. The cost of making the changes, (assuming an application fee of $1000 and a valuation fee of $1060) would be recovered in a couple of months.

It s All About Who You Know

Not all lenders are the same.

The market is super competitive at the moment with fintech innovators and new banks coming into the market and in particular into the commercial market. It’s no longer the exclusive domain of the “big four”. Many of these lenders are choosing to get to their clients via brokers. Its gives them the benefit of cheaper distribution channels but more importantly reduces their costs which are then reflected in what they charge you, the borrower.

More importantly they are hungry to do business and there are many ways that we can take advantage of this. You can take advantage of it all, with a little help from someone in the know.

Understanding the lenders and their niches and combining that with finding the right people inside these lenders is always far more likely to get you a suitable and sustainable outcome that might be just right for you. Sometimes it’s a combination so lenders or lender products, sometimes it’s a “re-jig” of your loan products after come consultation with your accountant. Sometimes it’s about releasing a security property like the family home for example and sometimes it’s about separating out your liability from that of your business partner’s liability.

It s A Bit Like Goldilocks And The Three Bears

The three Big Bears are:

  1. Why do commercial loans cost so much?
  2. Why do I need to spend so much money and time simply maintaining the loan going forward?
  3. How do I find the right bank and bank manager that has the time to understand my business?

How do business loans work

Goldilocks is obviously “Just right”. That is a combination of a well priced maintenance free loan portfolio with the support of an experience broker that can ensure that your needs are understood and met by the lender on an ongoing basis.

The one thing for sure is that it’s not just a matter anymore of turning up to your local branch, filling in a form and hoping for the best!



How Amortization Works: Examples and Explanation, how do business loans work.#How #do

How Amortization Works

How do business loans work

How do business loans work

Amortization is the process of paying off a balance over time with regular, equal payments. This is most common with monthly payments on loans, but amortization is an accounting term that can apply to other types of balances.

With loans, including home loans and auto loans, each monthly payment looks the same, but the payment is made up of several parts that change over time. A portion of each payment goes towards:

  1. The interest costs (what your lender gets paid for the loan).
  2. Reducing your loan balance (also known as paying off the loan principal).

At the beginning of the loan, interest costs are at their highest. Especially with long-term loans, the majority of each periodic payment is an interest expense, and you only pay off a small portion of the balance. In other words, you don’t make much progress on debt repayment during the early years.

As time goes on, more and more of each payment goes towards your principal (and you pay less in interest each month).

Amortized loans are designed to completely pay off the loan balance over a certain amount of time. Your last loan payment will pay off the final amount remaining on your debt. For example, after exactly 30 years (or 360 monthly payments) you’ll pay off a 30-year mortgage.

Your monthly loan payments don’t change — the math simply works out so that the debt is eliminated.

Amortization in Action

Sometimes it’s helpful to see the numbers instead of reading about the process. Scroll to the bottom of this page to see an example of an auto loan being amortized. The table below is known as an amortization table (or amortization schedule), and these tables help you understand how each payment affects the loan, how much you pay in interest, and how much you owe on the loan at any given time.

Sample Amortization Table

The table below shows the amortization schedule for the beginning and end of an auto loan. This is a $20,000 five-year loan charging 5% interest (with monthly payments).

To see the full schedule or create your own table, use a loan amortization calculator.

Looking at amortization is extremely helpful if you want to understand how borrowing works.

True cost of borrowing: With a detailed picture of your loan’s components, you can clearly see how much you really pay in interest – instead of focusing on a monthly payment. Consumers often make decisions based on an “affordable” monthly payment, but interest costs are a better way to measure the real cost of what you buy. Sometimes a lower monthly payment actually means you’ll pay more in interest (if you stretch out the repayment time, for example).

Decision making: You can also decide which loan to choose when lenders offer different terms (how much could you save with a lower interest rate?). You can even calculate how much you’d save by paying off debt early – you’ll get to skip all of the remaining interest charges on most loans.

To visualize amortization, picture a chart (your loan balance is the vertical X axis and time is the horizontal Y axis) with a line going down and to the right. With shorter-term loans, the line is more or less straight. With longer-term loans, the line gets steeper as time goes on.

How to Amortize Loans: Calculations

There are several ways to get amortization tables (like the one above) for your loans:

  1. Build your own table by hand.
  2. Use an online calculator, which will create the table for you.
  3. Use spreadsheets to create amortization schedules and help you analyze loans.

Online calculators and spreadsheets are often easiest to work with, and you can often copy and paste the output of an online calculator into a spreadsheet if you prefer not to build the whole model from scratch.

The monthly payment: With an amortizing loan, figuring out the payment is just math. The payment is based on the amount of the loan, the interest rate, and how many years the loan lasts. Those three ingredients work together to affect how much you pay each month and how much total interest you’ll pay.

Lowering the interest rate can lower your payment, and it helps you save money. Stretching out the loan over a longer period of time will also lower your payment, but you’ll end up paying morein interest over the life of the loan.

To amortize a loan, use the table above as an example, and complete the following steps:

  1. Note your starting loan balance: $20,000
  2. Figure out the payment (calculation shown on this page): $377.42
  3. Figure out the interest charge for each period – usually monthly (calculation shown on this page): $83.33 in the first month
  4. Subtract the interest charge from your payment – the remainder is the amount of principal you ll pay that month: $294.09 in the first month
  5. Reduce the loan balance by the amount of principal you ve paid: you owe $19,705.91 after your first payment
  6. Start over with the following month: $19,705.91 is the loan balance in the second month

Types of Amortizing Loans

There are numerous types of loans available, and they don’t all work the same way. Any installment loan is a loan that amortizes: you pay the balance down to zero over time with level payments.

  • Auto loans are often five-year (or shorter) amortized loans that you pay down with a fixed monthly payment. In fact, some people – including buyers and auto dealers – think of buying an auto in terms of the monthly payment alone. Longer loans are available, but you risk being upside-down on your loan if you stretch things out to get a lower payment (plus you’ll spend more on interest).
  • Home loans are traditionally 15-year or 30-year fixed rate mortgages. Most people don’t keep a loan for that long – they sell the home or refinance the loan at some point – but these loans work as if you were going to keep them for the entire term.
  • Personal loans that you get from a bank, credit union, or online lender are generally amortized loans as well. They often have three-year terms, fixed interest rates, and fixed monthly payments. These loans are often used for small projects or debt consolidation.


Business – BBC News, how to finance a business.#How #to #finance #a

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Small Business Loans: How They Work and What You Should Know, how

Small Business Loans: How They Work and What You Should Know

How do business loans work

Small Businesses are increasing their payrolls, but hours worked and wages earned are down slightly. Photo: Reuters

For small business startups, knowing how loans work and getting them are absolutely crucial.

Many entrepreneurs, however, wait until the last minute to think about loans and prefer to dwell on grandiose plans, never mind that they often need loans to fund those plans.

Asking for loans is “unpleasant; it’s like asking your dad for the car keys,” said Charles H. Green, Executive Director at the Small Business Finance Institute and author of The SBA Loan Book.

Small businesses should start this “unpleasant” process early, however, partly because it could prove to be long and difficult.

One entrepreneur Green encountered secured his loan at the 60th bank he approached.

While this might be an extreme example, small business owners often need to try at more than one bank to get a small business loan.

During the process of dealing with a bank, moreover, they may be asked to provide additional documents they previously did not anticipate needing.

Green stressed that small business owners need to be patient in this entire process.

Banks Want Their Money Back

In making any small business loans, the goal of the bank is to get its money back. Even if the loan is made through the Small Business Administration (SBA), it is still a bank that ultimately risks its capital.

Banks usually get their money back from the borrower’s revenues. If that is not possible, banks can also get their money back from selling assets pledged as collateral or from the small business owners personally.

Therefore, besides documents relating to the business projections, banks may often request documents relating to the personal finances of the small business owner and whatever assets that can be pledged as collateral.

Backing up Projection Numbers

Regarding business projection numbers – that is, assessing the probability of repayment from borrower revenues – it is all about justifying those numbers, preferably with facts, said Green. For existing businesses, that may mean financial statements.

Some of the hard questions a lender may ask include:

*How many customers do you need?

*How do you find them?

*Who are satisfying these customers already?

*Why would they feel compelled to buy from you?

*What is your capacity to deliver those products?

*What is the cost to deliver those products?

Sometimes, the best efforts of small businesses to secure a loan are not good enough.

When rejections happen, Green recommended turning them into learning lessons. Often times, if the small business owner manages to remain calm and polite, he can get candid responses as to why he was rejected.

These explanations often turn into keys to successfully securing a loan from another bank in the future.

Choosing the Right Banks

Other times, though, a rejection from a bank has nothing to do with the borrower at all. That is, a lender may not have any money to lend.

Therefore, Green recommended that small businesses avoid banks under consent agreement with or issued a cease and desist order by the Federal Deposit Insurance Corporation (FDIC).

Generally speaking, smaller banks have more flexibility in their lending standards while bigger banks usually offer cheaper rates, added Green.



How Do Business Loans Work, Fortress Funding, how do business loans work.#How

How Do Business Loans Work?

What Options Are Available To You?

Traditionally the “Big Four” banks have all offered pretty much the same stuff. That is if you want to borrow money for a business purpose the price goes up. As well as this you need to track down a banker that can take the time to understand your business and appreciate things from your side of the desk, not just the Credit Department’s side of the desk.

There is not question, its getting harder and harder to get good service in the Small to Medium Business, (SME), sector. In fairness to the “Big Four” its hard for them as well. They want it do but they are pushing their managers, branches and infrastructure in general as hard as they can and that rarely co-exists with relationship building and great service.

Its not just pricing and access to good service or advice that makes loans for SME’s hard everything else gets harder as well.

Here s How Business Loans Can Get Harder

The loan term might be restricted putting cashflow pressure on your business

Take this example of a commercial loan of $750 0000 for the purchase of a commercial warehouse.

Commercial loan of $750,000 at 5.42% pa

How do business loans work

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Looking at the loan in simplistic terms you would say the cost is 5.42%pa or $40650 each year in interest. However, when you look at all the other associated costs the bank is charging an average of $44890 per year. Effectively that’s 5.96%pa. or put another way an additional $21 200 over the 5 year period.

In addition to this you have the hassle, and anguish, of having to prepare interims and hope that the bank remains happy.

Every time you provide your lender information you risk something changing that you may not have anticipated. The opposite can be true but that’s usually only because you know how to “work the system”.

When was the last time your bank manager rang you up and offered to reduce your lending costs?

When was the last time your bank manager called you?

Consider This

Firstly, let’s be clear – you do not have to move your transaction banking.

Commercial lenders love you transactional banking accounts. It gives them your funds on deposit for free, the ability to charge account keeping fees and the ability to look inside your business – without you knowing.

New ways of funding commercial loans are out there. For example set and forget commercial loans and sometimes at home loan rates. Why would you pay commercial interest rates, have a shortened loan term and prepare interim financials if the bank could use equity in your home for your commercial loan?

You can make this happen if you know which lenders to talk to and how to go about it. No disruption to your business banking accounts, your internet banking or credit cards – just cheap efficient loan accounts.

Even if you prefer to, or already have offered your commercial premises as security rather than your home, (or a mix of the two), you can have a set a forget commercial loan with no ongoing fees over 20 years. There is of course always the option to go interest Only as well.

Consider the information below, it’s for the same $750 000 that we looked at earlier.

Commercial loan of $750,000 at 4.89% pa

How do business loans work

In this example the same loan costs an average of $37 087pa. over a 5 year period. That’s effectively 4.94%pa. (compared to 5.96%pa above).

The only thing that has changed is we did it smarter!

All your day to day banking stays in place uninterrupted. The cost of making the changes, (assuming an application fee of $1000 and a valuation fee of $1060) would be recovered in a couple of months.

It s All About Who You Know

Not all lenders are the same.

The market is super competitive at the moment with fintech innovators and new banks coming into the market and in particular into the commercial market. It’s no longer the exclusive domain of the “big four”. Many of these lenders are choosing to get to their clients via brokers. Its gives them the benefit of cheaper distribution channels but more importantly reduces their costs which are then reflected in what they charge you, the borrower.

More importantly they are hungry to do business and there are many ways that we can take advantage of this. You can take advantage of it all, with a little help from someone in the know.

Understanding the lenders and their niches and combining that with finding the right people inside these lenders is always far more likely to get you a suitable and sustainable outcome that might be just right for you. Sometimes it’s a combination so lenders or lender products, sometimes it’s a “re-jig” of your loan products after come consultation with your accountant. Sometimes it’s about releasing a security property like the family home for example and sometimes it’s about separating out your liability from that of your business partner’s liability.

It s A Bit Like Goldilocks And The Three Bears

The three Big Bears are:

  1. Why do commercial loans cost so much?
  2. Why do I need to spend so much money and time simply maintaining the loan going forward?
  3. How do I find the right bank and bank manager that has the time to understand my business?

How do business loans work

Goldilocks is obviously “Just right”. That is a combination of a well priced maintenance free loan portfolio with the support of an experience broker that can ensure that your needs are understood and met by the lender on an ongoing basis.

The one thing for sure is that it’s not just a matter anymore of turning up to your local branch, filling in a form and hoping for the best!



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