Regardless of the state of the economy, all entrepreneurs, either new at their trade or old hats in business, when seeking financing, tend to get caught up in haggling over the lowest possible interest rate that they can achieve.Who can blame them? Cost savings – especially while we are still experiencing recession like economic symptoms – may be the key to their business’s survival and their personal financial future.But, sometimes, merely basing a financing decision on just its cost (its interest rate in this case) alone can be even more detrimental. All business decisions should be taken in the whole – with both benefits and costs consider simultaneously – especially with business loans.Let me explain: In today’s market, any offer of a business loan – regardless of its costs – should not be taken lightly given the fact that these business transactions are hard to come by. Thinking that this interest rate is too high and that a better one will come along tomorrow may just be destructive thinking as nothing may come along tomorrow – especially in this continued sluggish economy and all lenders being overly cautious.Further, if the business owner’s decision hinges so much on the rate of the loan, then maybe a business loan is not something the business truly needs at this time or may be a decision that just spirals the business further along an unhealthy path.Example: Let’s take a simple but common business loan situation. A $100,000 loan for 5 years with monthly payments at 8% interest. This loan would require monthly payments of $2,028 for the next 60 months. Now, let’s say the interest rate was 12% instead of 8%. This would result in a monthly payment of $2,225 – nearly $200 per month higher. A significant increase – nearly 10% higher with the larger interest rate.This is what most business owners, when seeking outside capital tend to get caught up in – the lower rate means more savings for the business and thus a better decision.But, what happens if the current lender will not lower the rate from 12% to 8%? Or, if another, lower rate loan / lender does not come along? Is it still a good business decision?Looking at the cost of the loan or the interest rate is purely one sided and could potential affect the long-term viability of your business – the benefits of the loan also have to be weighed in.Let’s say that the business can take that $100,000 loan and use it to generate an additional $5,000 in new, monthly business income. Does it really matter the interest rate at this point as the nearly $200 difference in the rate is really trivial (especially over the 60 months period) compared to possibly declining the higher rate loan and getting nothing in return (losing out on the $5,000 in new revenue per month).Or, what if the business would only be able to generate $1,000 in new, extra income from the $100,000 loans? Then no matter what the interest rate (8%, 12% 50% or higher), the business should not even be considering a loan in this situation.Why do I bring this up? Simply because I have seen business after business either lose out on their future potential or fatally harm their organization over a mere one or two percent increase in a business loan rate. We are just conditioned to think that if we do not get the rate we feel we deserve – then the deal is bad for us. That can not be further from the truth. Know that these conditioning instincts we tend to have are more from the fact that competitors (those other lenders seeking our business) tell us we can do better or that we deserve better – but in end only finding out that those ploys never really work to our benefit.The lesson here is that all business decisions are more complex then we may initially think or been lead to believe. We are taught from very early in life to negotiate for the lowest costs – like zero interest car loans or buy now with “the lowest mortgage rates in decades” – either case, one would not buy a car or a house (regardless of the interest rate) if there was not a great need – a need that provides more in benefits then its costs.The same should be done with business loans. Loans are merely an asset to a business and should be treated as such. Business loan assets should be used to generate more in revenue than they cost – the more the better. If they are not being used (like any other business asset) to generate the greatest benefit that they can generate, then they should be pulled from whatever use they are currently being employed in and put into use that will generate the greater benefit. It is simply a law of business.Thus, merely focusing on only one side of a business decision – the interest rate for a business loan decision – can have an unforeseen, adverse affect on the business – creating more harm then good. The entire situation should be taken into advice before a decision is made.In fact, in the case outlined above, the interest rate can increase as high as 56% for the 60 months before the cost would outweigh the benefits – provided there were no additional costs associated with the loan.In my experience, I have always found it much easier to look at the benefits first (like the increased monthly revenue that can be generated) then search out the lowest costs options to receive those benefits. But, as stated, this is essentially opposite of what we tend to be taught in our society or in our markets (remember the zero percentage auto loans – which have the lost interest revenue built into the price). But, sometimes the best entrepreneurs think outside the box and tend to go against any conventional wisdom we may have been subject to – mostly for the benefit of others and not ourselves.Therefore, when seeking a business loan and finding yourself fighting hard for a small decrease in your interest rate – be sure to step back for a moment and look at the entire picture – as a low interest business loan may not be in the best interest of the business in all circumstances.
Business Loans In Canada: Financing Solutions Via Alternative Finance & Traditional Funding
Business loans and finance for a business just may have gotten good again? The pursuit of credit and funding of cash flow solutions for your business often seems like an eternal challenge, even in the best of times, let alone any industry or economic crisis. Let’s dig in.
Since the 2008 financial crisis there’s been a lot of change in finance options from lenders for corporate loans. Canadian business owners and financial managers have excess from everything from peer-to-peer company loans, varied alternative finance solutions, as well of course as the traditional financing offered by Canadian chartered banks.
Those online business loans referenced above are popular and arose out of the merchant cash advance programs in the United States. Loans are based on a percentage of your annual sales, typically in the 15-20% range. The loans are certainly expensive but are viewed as easy to obtain by many small businesses, including retailers who sell on a cash or credit card basis.
Depending on your firm’s circumstances and your ability to truly understand the different choices available to firms searching for SME COMMERCIAL FINANCE options. Those small to medium sized companies ( the definition of ‘ small business ‘ certainly varies as to what is small – often defined as businesses with less than 500 employees! )
How then do we create our road map for external financing techniques and solutions? A simpler way to look at it is to categorize these different financing options under:
Debt / Loans
Asset Based Financing
Alternative Hybrid type solutions
Many top experts maintain that the alternative financing solutions currently available to your firm, in fact are on par with Canadian chartered bank financing when it comes to a full spectrum of funding. The alternative lender is typically a private commercial finance company with a niche in one of the various asset finance areas
If there is one significant trend that’s ‘ sticking ‘it’s Asset Based Finance. The ability of firms to obtain funding via assets such as accounts receivable, inventory and fixed assets with no major emphasis on balance sheet structure and profits and cash flow ( those three elements drive bank financing approval in no small measure ) is the key to success in ABL ( Asset Based Lending ).
Factoring, aka ‘ Receivable Finance ‘ is the other huge driver in trade finance in Canada. In some cases, it’s the only way for firms to be able to sell and finance clients in other geographies/countries.
The rise of ‘ online finance ‘ also can’t be diminished. Whether it’s accessing ‘ crowdfunding’ or sourcing working capital term loans, the technological pace continues at what seems a feverish pace. One only has to read a business daily such as the Globe & Mail or Financial Post to understand the challenge of small business accessing business capital.
Business owners/financial mgrs often find their company at a ‘ turning point ‘ in their history – that time when financing is needed or opportunities and risks can’t be taken. While putting or getting new equity in the business is often impossible, the reality is that the majority of businesses with SME commercial finance needs aren’t, shall we say, ‘ suited’ to this type of funding and capital raising. Business loan interest rates vary with non-traditional financing but offer more flexibility and ease of access to capital.
We’re also the first to remind clients that they should not forget govt solutions in business capital. Two of the best programs are the GovernmentSmall Business Loan Canada (maximum availability = $ 1,000,000.00) as well as the SR&ED program which allows business owners to recapture R&D capital costs. Sred credits can also be financed once they are filed.
Those latter two finance alternatives are often very well suited to business start up loans. We should not forget that asset finance, often called ‘ ABL ‘ by those Bay Street guys, can even be used as a loan to buy a business.
If you’re looking to get the right balance of liquidity and risk coupled with the flexibility to grow your business seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success who can assist you with your funding needs.
How to Avail 12-Month Loans in London?
WHAT ARE 12-MONTH LOANS?12-month loans are a type of short-term loan that has become increasingly popular in recent times. These are designed so as to last for only a year or 12 months to be precise. They are extremely helpful as they help one to accurately budget for the concerned money that they have borrowed as it is known that it must be fully repaid within a year or 12 months. This is the main difference that makes it stand out from other types of short-term loans offered by various direct lenders.These types of loans allow one to borrow a wide range of different sums of money and these types of loans help break up the borrower’s loan into 12 manageable repayments that must be repaid on a monthly basis. Small loans are a good way of allowing one to budget for anything unexpected.DESCRIPTION OF 12-MONTH LOANSThe approximate calculated interest for borrowing 100 pounds under such a scheme comes around 13 pounds per month. There are many people who may suffer from bad credit history and there are many lenders available who are willing to provide loans to people who have a bad credit rating and who may have been denied loans elsewhere. Most lenders have eligibility checkers that help check the individual’s likelihood of being fully approved for a 12-month loan for bad credit before applying.One can improve his or her credit score by being accepted for a 12-month loan and keeping up to date with the necessary repayments for the concerned loan. This makes it easier for the individual to be accepted for any sort of credit in the near future. Missing out on payments has the opposite effect and can damage the borrower’s credit profile making it difficult for him or her to be accepted in the future for bad credit loans.There are many UK lenders offering 12-month loans with no guarantor as not everyone may have access to that facility. These 12-month loans have become extremely popular in recent years as direct lenders have started offering these types of loans which do not require a guarantor.GETTING APPROVED FOR A 12 MONTH LOANOne is eligible for such loans only if he or she is above 18 years of age and is a citizen of the UK. Having a good income source is advantageous but not necessary. One also needs to have a good credit score to increase approval chances for the borrower. Lenders always prefer people with a good credit score as they can be trustworthy and reliable and are more likely to repay back the loan amount in the stipulated 12 months or 1 year.If the borrower’s credit score is not enough for gaining approval for a 12-month loan, then the borrower can obtain loans by getting into a joint agreement which can be done by convincing a friend or family member to become your guarantor for the 12-month loan. In this case, if the borrower fails to make a repayment to the lender then the guarantor can pay in place of the borrower.Asset pawning is also a good solution for the concerned individual or borrower. In case he or she is unable to find a guarantor then he or she can pawn any asset which may be a land, property or even a vehicle. This asset should have a value equivalent to the value of the loan.BENEFITS OF 12 MONTH LOANMany lenders often provide people with 12-month loans even though they do not have a guarantor to furnish. This type of loan also helps those who are in need of emergency money. These loans are hassle-free and usually, do not carry any extra hidden charges and are also comparatively easier to repay when compared to personal loans or payday loans which have higher interest rates.Most lenders nowadays have an easy loan process that allows them to assess the financial situation of the borrower within a short period of time and since most of the systems are now online, this has reduced a lot of paperwork involved. These lenders offer personalized loans to the borrower depending on their financial situation and state of living.These lenders offering 12-month loans also provide competitive rates of interest to the borrower for people with a poor credit score and this helps a person from any strata of society with any economic background opt for a loan without being financially distressed due to the various competitive rates of interest offered to the borrower by the lender.One can opt for a 12-month loan in case of any financial emergency or an unexpected expense that may be necessary to be cleared immediately. They provide quick loan approval processes and also credit the concerned loan amount directly into the borrower’s bank account making the loan obtaining process smooth and hassle-free. The borrower can easily repay the loan to the lender in simple instalments every month for the 12 months time period of the loan.Even if the borrower has a poor history of credit and is in need of emergency money at the earliest, many lenders exist offering a wide variety of instalment loans for all types of credit score borrowers.CHOOSING A 12 MONTH LOANOne of the top reasons for more and more people opting for 12-month loans is the fact that it offers competitive APR, hassle-free and reliable loans with options for bad credit too, the lack of the need for a guarantor, availability of small and big loans as required, repayment of loans in easy instalments, ensuring that people from all economic backgrounds have a fair chance at securing a loan and many other reasons.Carefully compare and choose the best suited 12-month loan option for your needs.