Business Loans – Information for Business Owners

A business loan provides financial aid to business of all sizes (i.e. small businesses, medium-sized businesses or start-up businesses). It is ideal for business owners who need funding to enhance or expand their business. When you need a loan for your business, you must adopt a strategic approach. Cautious planning is necessary for ensuring success in obtaining business loans.

Business Plan

When you are considering applying for a business loan, it is important for you to take enough time to create a convincing and detailed business plan. Your business plan should include information, which will assist your finance broker as well as the lender/credit provider in providing you with the right type of finance and advice. Here is a list of information you should include in your business plan:

>> Your business structure

>> The purpose and goals of your business

>> Your past and future plans for your business

>> The profit and loss projections and cash flow forecasts of your business

>> Your marketing strategy (i.e. the products or services your business provides)

It is also important to state in your business plan the specific purpose for which you want to use a business loan.

Decisions to Make

Once you have assessed your needs for a business loan, you should investigate which finance products suit your needs for a business loan as each loan has varying features for you to choose. To help with this process, here is a list of things to consider and which you can discuss with your finance broker:

>> The loan amount required

>> The loan term (i.e. the period in which the loan will need to be repaid)

>> Interest rate type and repayments (i.e. fixed or variable)

>> Loan fees, and

>> Loan security (i.e. the type of security offered by you)

Finance Products

There is a variety of business loans available to choose from. Here is a brief summary of common business loan products specifically designed by lenders/credit providers for business owners, which can assist your individual situation as a business owner:

Commercial Bill Facility

A commercial bill (also called a bank bill or bill of exchange) is a flexible credit facility that can give your business a short-term or long-term injection of cash. The finance provided by the commercial bill can help your business in the event that you may need to solve an unexpected or urgent problem, and you do not have the required cash flow. You agree to pay back the face value of the commercial bill plus interest to the lender/credit provider on a specific maturity date.

Overdraft Facility

The purpose of establishing an overdraft facility is to provide working capital for your business in the short-term, before receiving income. An overdraft facility should not be used for capital purchase or long-term financing needs. The overdraft is a normal trading account facility for your business, whereby the lender/credit provider permits you to use or withdraw more than you have in the trading account. But, only up to an agreed amount and any negative balances typically need to be repaid within a month.

Line of Credit

A line of credit (also called an equity loan) can provide access to funds by allowing you to draw an account balance up to an approved limit. The loans are designed as a long-term debt facility and are usually secured by a registered mortgage over a property.

Fully Drawn Advance

This is a term loan with a scheduled principal and interest repayment program. The loan provides access to funds upfront, which can be used for funding long-term investments that will expand the capacity of your business, such as purchasing a new business or even purchasing equipment. Fully drawn advance loans are usually secured by a registered mortgage over a residential or commercial property or a business asset.

Short-Term Loan

A short-term loan can provide short-term funding needs for your business. You can take out a short-term loan if you want to take advantage of a very quick financial opportunity or to help you get out of a financial cash flow crisis. The loan offers a fixed sum advance and requires a periodical interest charge to be paid by you. Short-term loans typically require a security to be provided.

Business Equipment Finance

If you decide to expand your business operations and take benefits of potential tax advantages, you should consider taking out business equipment finance, as the finance arrangement allows you to buy, lease or hire a new vehicle or specialised equipment (e.g. cars, trucks, forklifts, printing, computing, medical and office equipment as well as plant equipment and machinery). Typical finance arrangements to consider for business equipment finance are asset lease, commercial hire purchase, chattel mortgage or equipment rental.

Truly, there are several finance products available in the market to help business owners. When you seek out finance for your business, don’t be in a hurry. Consider all the alternatives in detail and then choose the one that is right for you and your business.

Writing a Business Plan – Is It Really Worth the Trouble?

I often get emails coming through that ask me to “do a business plan”. When I phone the business owner up, and ask what they are looking for, I get told that they have a business idea and have done some informal research and it seems like a good idea… please can I write them a great business plan so they can start or grow their business.

Now some people might say that it sounds like a good business opportunity. Charge them a fee, ask them to email me their thoughts and informal research, and whip up a business plan using a template that I’ve created. If they want changes, I charge them an editing fee until they are happy.

This would probably earn me a fairly nice fee but I don’t think that I would be doing them proper service in the long run. Here’s why I say that. A business plan has many functions:

• It can serve as a vehicle to approach finance houses for finance.

• It can be used to attract investors.

• It can be used to get business partners involved.

• It can give you a roadmap to move forward.

• It can help you think your way through your business idea.

For me, having a business owner write the business plan themselves initially helps immeasurably with the last 2 points. Most importantly for me is the last point. When an entrepreneur takes the time to work through the different areas of a business plan, it forces them to concretely think around the different areas that are important.

• This might be doing proper market research that is quantifiable.

• Who are their competition, what are they offering and how can you differentiate yourselves?

• Who is your ideal client, why do they buy and how can we find them?

• How much finance do we need to start off and what will our cash flow projections be going forward?

• Have we priced correctly taking the above into account?

• What resources will we require, in what order and when?

As new business owners are putting these items down on paper, it’s forcing them to pause and do the exercise. This will help them in many ways:

It forces them to get used to the idea that starting a business is hard work.

It shows them whether it’s a viable business idea.

It makes them come to terms with financial data, cashflow projections and financial systems.

It sharpens their business knowledge, terminology and acumen.

It teaches them how to type a proper business proposal for later on in their business growth cycle.

It allows them to become intimately involved with the whole idea so that they can rattle off a simple elevator pitch if asked what their new business it about.

These are important skills and areas that the new entrepreneur must come to grips with. Even if they produce this great business plan and afterwards stick it in a drawer, it would have allowed them to grow as a person and business owner. I’m not saying that it should be stuck in a drawer, but that it’s a good way to formalise a great idea.

This business plan can then be used as the basis for a 1 year strategic plan going forward, can be used and adapted for financial reasons such as applying for finance of investors, and can be a living document to form company values moving forward.

A business plan does need to be a living document going forward, and should be changed and adapted as the business grows and market conditions change, product lines expand, change and grow. It can also serve as a great retrospective tool, to look back after a year and see if you are in line with your dreams, what changed from your ideas and allow you to be introspective about the business journey.

If you’ve done this business plan, and are not comfortable with some of the sections or areas where you feel that you have weakness or you are uncomfortable with some of the language that you’ve used, then it would be an idea to contact a professional business plan writing company to polish your plan.

They’ll have something to work with and it will still show your personality and passion. When investors or financial institutions read your business plan, they quickly pick up whether you’ve had a hand in it or if it’s an off-the-shelf version. This may directly or indirectly influence how they think about you as the business owner and the type of person you are and how it reflects on the type of business you’ll run.

Got Business Backbone?

If you are new to your own business or come from a corporate or a therapeutic practice background, figuring out the “new rules of business” can be confusing.

*You want to be pragmatic and have a heart at the same time.

*You find yourself trying to give away too much.

*You watch how other people do their business and decide you don’t want to do it the way they do.

Confusing!

How do you figure out what to do, especially when you’re just beginning or are frustrated with the lack of income and clients in your business?

Step 1- Find a coach or mentor who has done what you want to do. Experienced people who are successfully doing what you want to do in your business already exist. Their experience can help you hop over potholes that will limit you and slow down your business growth.

A great place to start with low- or no-cost coaching and mentoring is SCORE (previously known as the Service Corps of Retired Executives, but is now recognized as “Counselors to America’s Small Business”) and your local Small Business Development Center. These centers are often associated with community or technical colleges or universities and have programs to help you in all aspects of business.

There are coaches who offer programs on everything from money management to marketing and sales to productivity. There may be one (or more) that are right for you. If you do invest with a coach, make sure that you share similar values. Your coach will be influencing you and your thinking. S/he will be asking you to take actions and risks that may feel uncomfortable at first. Trusting your coach is essential as you learn new business skills and take actions that lead to success.

Step 2 – Decide what’s most important to you in your business.

What’s ideal and what’s a deal breaker?

Maybe your Ideal is having a lot of referral business so that you don’t have to do a lot of marketing and sales. (Frankly, this is what everyone in small business dreams of, but happens rarely. Running a successful small business involves a lot of work. It will ask you to learn and to do things you don’t like doing or feel uncomfortable doing. But that’s the game of business and stretching past your comfort zone is why it’s such a great teacher, personal growth accelerator, and wealth builder.)

A Deal Breaker for you may be manipulating someone to give you money. Yes, it’s been done forever and happens in business every day. But that’s not the way business HAS to be done!

There’s a New Way of Business that involves the head and the heart and comes from service. Many small business owners got into a service business to SERVE. Learning smart business practices and applying them in alignment with your values will help you serve more people and be rewarded for it.

Step 3 – Aligning Your Head, Your Heart, and Your “Home” Center will give you a more balanced approach to your business. It will help you become a better problem-solver and become more valuable to your ideal clients.

Here’s a simple exercise for you to try from the Art of Feminine Presence™ created by Rachael Jayne Groover. (I am a licensed Art of Feminine Presence™ Teacher.)

You can try it on your own or with a friend.

First Position – Think about a business challenge with your awareness in your Head on your thoughts and mind.

Notice what comes to mind. If you are with a friend, talk to her about what you are thinking.

Notice if keeping your awareness in your Head helps you find a solution to your business challenge.

Second Position – Think about a business challenge with your awareness evenly assigned to your Head, your Heart, and your “Home” Center. Your “Home” Center is in your pelvis about 3 inches below your belly button and in the center of your body.

Notice what comes to mind. If you are with a friend, talk to her about what you are aware of.

Notice if spreading your awareness to your Head, Heart, and “Home” Center help you find a solution to your business challenge.

This second position is what I call your “Business Backbone” because all of you is involved – your brilliant mind, your caring heart, and your wise body. With all three aspects of you represented in the problem-solving process, you get a much better answer than if your mind is the only part of you contributing!

Business is a game with rules. Using your Business Backbone and aligning your energy between your Head, Heart, and “Home” will help you know how you want to play the game, what you value, and how to be a better problem-solver for your clients. And that will make you more valuable and attractive to the people who want to work with you.

This week, practice your “Business Backbone” and notice the differences you experience in your business.