Working Capital Loans and Commercial Finance Funding



As reported in The Working Capital Journal, traditional working capital loans are currently available from a shrinking number of commercial banks. Most of these business lenders are not among the relatively small group of larger banks which have received bailout funds. Small business owners should familiarize themselves about which commercial lenders are still actively providing this kind of business finance funding.

In most cases the active commercial lenders for this specialized form of commercial funding are limiting working capital loans to businesses which are current in their debt payments and are showing a net profit (based on recent financial statements). If these two conditions are met, new commercial loans can frequently be obtained to refinance lines of credit and term loans which have been cancelled or recalled by many lenders. For businesses not qualified for commercial financing using these two requirements, there are alternative funding sources such as business cash advance programs.

Many small business owners also rely on personal lines of credit to finance some of their business operations. There have been many reports of widespread cancellations and reductions of these lending programs as well, especially those involving lenders which have received a multi-billion dollar cash infusion from U.S. taxpayer money that was intended to facilitate the lending of money to businesses and consumers.

Personal and business lines of credit have been eliminated in many cases by lenders due to a reduced ability to pay by borrowers and deteriorating business conditions. As reported in The Working Capital Journal, a high percentage of borrowers, however, had an excellent payment history for many recent credit line reductions or cancellations.

Meanwhile, there are banks willing to make working capital loans. The most notable examples are (for the most part, anyway) not banks which have received bailout funds. In general, these commercial lenders have been willing to provide working capital financing, either in the form of new business financing or refinancing lines of credit and term loans which have been recalled or cancelled by other lenders.

Because it basically indicates that bailout funds have been given (so far) to lenders who primarily have a history of making bad loans (virtually all lenders receiving bailout funds to date), the lending activities described above are a serious concern to many observers. At this point, little attention has been given to lenders with a healthy balance sheet in federal attempts to get more funds into the hands of consumers and businesses.

Based on recent commercial lending activity, there are several notable conclusions.

(1) Businesses need to increasingly prepare for life without relying on a traditional bank line of credit and instead consider other viable sources of commercial financing such as business cash advances (which provide working capital based upon future credit card processing activity).

(2) The recent unwillingness by most lenders receiving bailout funds to report in any meaningful way how and where these funds have been used would certainly seem to be a loud and clear signal that these particular lenders are probably in worse shape than they are reporting to anyone.

(3) Commercial lenders that have a history of making good loans rather than bad loans should be the focus of further government funding programs.

(4) Business owners should be willing to seek out commercial finance funding sources beyond their previous banking relationships when they encounter difficulties obtaining working capital loans and commercial loans from normally dependable lenders.

Business Financing Alternatives For Growing Companies

Lately, the news has not been very encouraging for business owners. The country is amidst the biggest credit crunch in its history and the federal government is making major policy changes to try and contain the problems. But credit crunch or no credit crunch, business owners still need working capital to fund the businesses.

One conventional approach is to apply for a business loan. For a long time, institutions had access to cheap money and could provide small business loans to companies without being too stringent. Unfortunately, nowadays getting a business loan is very hard. Banks require substantial collateral before providing business financing. This leaves few options for the owners of small, new or growing companies.

One alternative that has been gaining traction is factoring invoices. This is a financing option that is available to companies that sell goods to other companies and offer 30 to 60 day terms.

Most companies that engage in commercial sales face a common problem. They have to wait 30 to 60 days after invoicing to get paid. Although more established companies have enough working capital to cover this wait, growing companies usually do not. They can't afford to wait 60 days because they need the funds to pay employees and suppliers.

Going to a client and asking for a quick payment seldom helps. Good clients, like big corporations, have set schedules for payment. Waiting to get paid is part of the cost of doing business with them.

But what would happen if your clients started paying you immediately? Would your company be in a better position to leverage opportunities? Would it still have trouble making payments to suppliers and employees? Invoice factoring can help you accomplish this.

Invoice factoring is a business financing solution that provides you with an advance for your slow paying invoices. So, instead of waiting 40 days to get paid, the factoring company gives you an immediate working capital advance using the invoices as collateral. The key to this type of financing is your invoice. Factoring is an alternative for companies that invoice businesses that have good commercial credit records.

One of the biggest advantages of accounts receivable factoring is that it's very flexible. Most companies can get it, provided they are free from problems and have good invoices. And, as opposed to conventional financing, invoice factoring grows with your sales.

Getting A Business Financing Loan

Business financing loans are a line of credit which help people who are in business. There are different kinds of business financing loans that are offered to different lenders either to raise funds or loan capital to your business in order to expand your company.

Although there are many ways also to finance your business and one should have sufficient cash flow within the existing business you have so that the lender will be able to finance the growth of your company by its own means or you can turn to a bank or other financial institutions that can provide different variety of loans.

Having a business financing loan is not as easy since they have some criteria or financing programs where in you meet the following criteria such as:

  • Your business must have commercial customers
  • Your business must be established and must have consumers or customers.
  • They don't finance on real estate projects

Some of the business financing programs:

  • Business are available of every size
  • Easy to obtain
  • Have many advantages over conventional business loans
  • Can be set up in a few days

There are some business financial loans that don't require you to have a good personal credit or showing countless financial statements since their financing program or loan allows being flexible to help your business grow but before looking for a business financing loan, you need to know how business loans work and used.

You can see that there are many sources of financing loans that are geared to types of businesses but the sources have certain criteria for investment and loan but that depend to the area which they participate.

These are some of the areas of Business Financing Loan:

  • Commercial Property
  • Start-up Financing for business
  • Loans for Government
  • Purchase Order Advances
  • Leasing Equipment
  • Commercial Financing
  • Invoice Factoring
  • Asset Sales Leaseback
  • Investment Banking
  • Angel Investor s which is known as informal investor
  • Venture Capital known as Private Equity Capital

But private money business financing loan is different since it includes equity loan, hard money as well as private money loans. They limit only to small business investment companies, private investors, business angels, ventures capital firms and commercial lenders.

The loans have two types for you to choose when in regards of terms in payment. There is the short term and as well as long term which suits your budget and you will notice also that there are lots of commercial lenders, business loan brokers and business financing companies had gone out of business due to global crisis and many people were having loans anywhere and everywhere in order to survive.

If you need financing for your business, you need to plan and study hard of it since financial institutions requires business plan that includes detailed start up cost, marketing plans, monthly expenses, projected profit, etc. Remember that having a business one should do hard work, passion, and determination and have dedicated workers who desired to have the business of their boss grow with success.

So If you think that your business is doing good and need some additional capital for expansion, then you need to plan for that and think it over to have a successful business.

A Novel Way to Get Small Business Financing for Your Venture

My neighbor happens to be one of those men that you've always heard of but have never actually seen. He had a great relationship with his wife and two kids until one day, his wife suffered a stroke. He took loving care of his whole family by himself - while he held down a well-paying executive's job at Ford. And then, his parents, he discovered, were getting too old to actually live by themselves. Almost anyone in his position would have thrown up their hands in despair and put their parents up in a nursing home. Not him. He decided that he would quit his job, and actually start a home care franchise on his own. This way, he figured he would be able to take care of his family's growing needs for intimate help, while still staying solvent. He had just one problem. Taking care of 5 people this way for a couple of years, he had spent every last cent of his savings. He needed at least $100,000 in small business financing to set his home care franchise up. How was he going to do it?

Actually, I was able to help him with what some consider to be a novel idea - I told him that he could fund his business by withdrawing as much as $150,000 from his 401(k) account with Ford. I told him that if he did it correctly, he wouldn't even have to pay an early withdrawal penalty.

People do get to doing this for small business financing these days. It's called ROBS to the technically initiated - or ROllover as Business Startup. About one out of six people nearing retirement apply for a ROBS withdrawal each year to fund their business with.

Of course, the IRS isn't completely crazy about this. Your 401(k) has generous tax benefits; when you just go in and raid your retirement account, they feel you might do this to exploit the system. They've decided to scrutinize these applications especially closely these days to make sure that people really do use their retirement withdrawals for what they claim they use them for. If you plan to apply to withdraw your 401(k) for your small business financing needs, you'll find that you stand a chance of getting audited by the IRS.

The good news is though that the IRS almost never finds anything amiss with these audits. Usually, to make sure that everything's done the way the IRS approves of, new business debutantes take the help of a financial services company to handle their 401(k) application and to start their business and everything goes smoothly.

A financial services company would be able to really help the small businessman start off in a professional manner. For instance, in the case of the home care services businessman above, I asked him to start his own corporation, and make it so that his corporation had its own 401(k) plan. He then got the 401(k) money he had at Ford and rolled it over into the 401(k) plan in his new corporation. And then he used that money to invest in shares in that very company. That way, he got his retirement money to fund his new venture. This can be a great way to go about it.

Consolidation loans for people with bad credit history

When considering payday loans, other loans co-signed unsecured bad credit personal loans without personal credit; the borrower must not have any collateral to secure the loan. However, car title loans and savings account secured loans are secured by car title and include the time of the borrower's account / savings, respectively. Among them, payday loans are the best alternative to meet current liabilities because the borrower can get these loans from banks and credit unions with reasonable interest rates for a period of six months a year.

The above loans are for people with very bad credit history. However, these bad credit loans are only for short periods of time to meet short-term obligations of debt. They can not help borrowers to improve their credit score and build a good credit history.

Many banks consider people with less than perfect credit, bad credit loans and bad credit bill consolidation or debt. For people with credit scores of 650 or less, consolidate debt loans is always an option if you have a house or a car. Debt consolidation loan is as follows:

Mortgage Refinancing: Mortgage Refinancing is different from obtaining a mortgage or line of credit. In the latter case, the borrower uses the equity in the house to get a loans. Built on home equity is the difference between the market value of the home and the outstanding mortgage balance. Mortgage refinancing can cause the borrower to obtain a new loan at a low fixed interest rate. In the event that the net value of housing built is positive, the borrower can withdraw cash (through supplementary loan).

Getting debt consolidation loans is better to opt for loans with little or no collateral. The first helps people pay their debts and build a decent credit rating, while the second is only a short term solution.

Not Paying Back Payday Loans

Recession Business Finance Tactics

During tough economic times, finance is a huge challenge for business owners. In the "Going Forward" section of the January '09 Entrepreneur Magazine, Mark Hendricks quotes some sobering statistics which frames up the extent of the recession we are experiencing:

-- During the Second Quarter of '08, 65% of bank senior loan officers stated they recently tightened lending standards for small businesses.

-- In August '08, 49% of business owners reported cutting back and by October that number grew to 69%.

-- Sales Growth for businesses in all sectors fell from an 8% average increase over the last five years to 6% for the year ending October '08.

Our best advice to meet the challenges is have a well developed and implemented Business Plan and Financial Strategy which proves your Cash Flow Model and determines which financial sources and structures fit that Model. With your Funding Business Plan, Loan Package and Investment Overview in hand, here are some real world funding options and strategies to consider when Lenders' purse strings become increasingly hard to access:

1. Networking: Increasing your Networking activities through morning executive breakfast events, trade associations, Chamber of Commerce events and Rotary/ Kiwanis/ Lions Groups can be a great way to find suitable, local, private money. Local investors are much more approachable in hard times as they have a connection and understanding to the area and your track record. Other business owners in these groups, associations and events can be extremely helpful in finding suitable private money.

2. Supplier / Trade Finance: According to Rosalind Resuick, CEO of Axxess Business Consulting, no outside party has a bigger interest in your company's success than your trade partners and suppliers. Having your supplier as an Equity Partner can be very advantageous when you are having difficulty making payments or want to quickly develop a new market. The participating Equity Stake is assigned to your past trends, present and future orders. Start-up Consultant, Joe Fulvio, suggests your Business Plan "show not only a direct return on investment, but also the value of future business to be gained". By making your supplier a partner in your business, the supplier is better suited to understand your Finance needs

3. Lease Finance: When times are tough and your cash is tightening, Leasing can be the answer. Small deposit, lower payments and flexibility are often associated with Lease verses Buy Terms. At the end of the lease, you can easily upgrade equipment and roll into the Lease Payments so your out of pocket costs are much smaller than a typical finance loan.

4. Community Bank Loans: Amy Loera, owner of Tio's Mexican restaurant chain, was denied at nine different banks, for a loan to open a new restaurant, although she ran a very successful business. These Lenders cited the Nation-wide downturn of restaurant sales due to the current recession as the chief reason for the loan declination. There is no doubt a year ago, these banks would have lent to her. Instead of throwing in the towel, Ms. Loera turned to a local, community lender, Arrowhead Credit Union, and she was approved for a $643,000 loan. What was the difference? The Credit Union was based in her business region, and she could make a strong case for the health of her restaurant chain.

Reasons Ms. Loera cited for her success in obtaining her expansion loan:

1. Low overhead costs

2. Reasonable Prices

3. Family-Style restaurants picking up the slack from people by the Fancier establishments in the area.

4. Smaller, localized lenders are typically in better shape during an Economic Downturn

5. Community Banks are more cognizant of the local economy's health and vitality

6. Larger / Regional / National Banks are more reliant on Credit Scores and cookie cutter Applications. Local Banks rely more on a Business Plan.

7. Niche Market: Suburban market that likes an affordable meal at the end of a busy day

8. Historical Financials showing track record

9. Debt-free

10. 12 month Realistic Projection for the new restaurant

11. Comprehensive Business Plan; every detail about the business

12. Received approval from the Credit Union due to:

a. Experience

b. Existing locations cash flowing well

c. Affordable meals in a recessionary environment

d. Detailed, well-thought-out Business Plan

The Inside Story: What the Local Bank Looks for:

1. Not Credit Score Driven

2. Look behind the scenes of the business

3. Cash Flow is Key: An important indicator of the ability to pay off the loan.

4. Believable, forward-looking Cash Flow Projections for the new business. Realistic Financial Statements.

5. Provide Best & Worst Case Scenarios on your Financial Projections

6. Small, Community Banks assess a business loan on a case by case basis. This is a huge advantage over Regional Bank Loan decision making, especially, in an economic down-turn.

7. In recessionary times, certain industries will be hit harder than others, like Construction Companies or Auto Dealerships; therefore, it is very important to have a well developed Business Plan and a forward looking Strategic Plan that includes a well researched 12-18 month industry outlook, based upon a believable Marketing Plan.

8. Small Bankers can see successful pocket areas in a struggling local economy. These pocket areas often have a Strong Niche Marketing Offering

9. Financial problems are best disclosed to the bank early on so a mutual solution can be implemented

10. Small Banks do loan to Companies showing past financial "hiccups" if they can show they were proactive and overcame the issue

In my next article, I will review what businesses do well in a recession and provide more recession business tactics so you can succeed, despite this lousy economy.

Small Business Startup Loans - What Are the Fundamentals of Business Finance?

If you want to set up or considering setting up a business of your own, you must bring one thing in mind. You must know that you will need money to make sure that the business functions as it ought to. For the purposes of this study, we shall think of business finance as all the money that will be required for the smooth functioning of the business. This will include money from a variety of sources such as loans from lending institutions, cooperatives and these loans may be acquired either on short term or on long term bases.

One thing that should be borne in mind is that it is necessary for every person to understand the fundamentals of business finance. This study is not only meant for those coming into business for the first time. Keep in mind that at every stage in the business, there will be a need to finance to expand, transform or even give a new facelift to your business. The good side about this study us that it will enable you to know where you can seek for finance for your business, it will help you to better manage these finances so that you should avoid falling into debts by paying your loans and it will equally let you know what type of loan is appropriate or not for your business.

Knowing the Essentials of Business Financing

Ahead of opting for any source of finance that might be open to you as an investor, there is always an obligation for you to not only become aware, but to understand and appreciate the importance that financing has to do to your business. As of now, one of the sources of finance to your business is venture capital. Venture capital will refer to a venture group that is willing and able to pump in finance to your business. But it should be kept in mind that this is done with the intension that the venture group will become part of the business.

It will have to take part in the running of the business and equally in the profits of the business. In some cases, the option of an angel financing may also be available. This is a situation in which high risk ventures will be financed for the reception of high profits. Another source of financing is corporate venture capital financing. This is almost the same thing with venture capital but the difference is that groups and not individuals will be involved into the financing. You can also think of taking a loan from a bank or any financing establishment.

If you are an experienced financier, you will realize that identifying and making use of these sources of finance is easily done if you are aware of all the essentials of business financing. This will be difficult for the novice. What has been realized is that most lending institutions have already created and developed some form of confidence with those already in business, plus the fact that they think their money will be better protected with those who already have some worth to prove.

It May Be Necessary To Integrate Your Business When Seeking For Financing

The rationale for confidence building will vary from one lender to another and will also depend on the lender's personal conviction about the business. It is normal that every lender will want to scrutinize and make use of any former financial record of a business before it can give loans to that business. In other cases, it is known that sources of finance may be easily opened to groups of business than to individuals.

This is the more reason why you must understand all the essentials of business financing before making an application for it. Sometimes, it is necessary that as a sole proprietor, you may decide letting a takeover of your business. This is to give your business a positive credit worth so that it can stand a good chance of being financed. But you must make sure that you seek expert advice in doing this. Remember that there are so many essentials in all of the above and you must be skilled enough in these before you can achieve any success.

Business Finance Misinformation and Confusion

Confusion about commercial loans and working capital financing seems to be increasing despite efforts by the federal government and commercial lenders to suggest that there is ample business loan funding. As a result, the actual availability of business financing for commercial finance programs such as commercial mortgages and business cash advances is unclear to most business owners.

It seems apparent that there have been many reports suggesting that normal commercial finance channels are either frozen or extremely sluggish. In reality there are probably more opportunities for commercial loan needs than suggested by such reports. However, increasing uncertainties in financial and credit markets have produced conflicting and misleading information about the availability of commercial financing. For most business owners, it is probably not clear if business finance funding is realistically available to them or not.

In spite of some admittedly bad news, there continue to be to reliable funding sources for commercial real estate loans, working capital loans and especially for business cash advances. At the same time, the current negative economic conditions will prove to be difficult for most businesses. Commercial borrowers should expect that extra efforts will be required to successfully arrange commercial financing. An especially harsh reality for business financing is that many banks have discontinued all or most of their business lending activities, often with very little advance notice.

One common example of commercial finance misinformation distorting what is actually feasible is that some kinds of commercial financing have been more disrupted than others by recent events. Commercial borrowers might be unnecessarily confused by reports that do not refer to all commercial loan situations but rather primarily apply to a very specialized form of business financing. For example, by most accounts commercial construction loans are in short supply currently. Such specialized business loans are not as easily available as they were just a few months ago, and a more accurate accounting would reflect that the number of commercial lenders currently active in construction financing has shrunk dramatically. At the same time, most commercial real estate loans without new construction have not been as severely impacted as funding requests which do involve construction financing.

Several publications have reported that most new business financing requests are on hold or have simply been rejected due to recent financial market uncertainties, and this is another example of how business finance funding reports might confuse small business owners. While the sources for this information might have been honestly told by one or more lending institutions that they are in fact deferring new commercial loan funding, this does not mean that is the case for the entire country. If the discussion involved automobile sales, it would be comparable to concluding that nobody is selling cars anywhere after learning that several major dealers and two manufacturers announced that they were going out of business due to lack of adequate sales. Just because one or more banks fail or stop making business loans, it does not mean that there are not commercial loans available from other sources.

Commercial borrowers would be wise to maintain a cautious perspective in determining how to refinance or obtain small business loans simply because the banking industry has been involved in financial disruptions of an epic proportion. Many banks are sounding and acting like they have been through the equivalent of a train wreck. In such a natural disaster, it might not be prudent for business owners to seek the advice of banks which effectively caused the train to derail in the first place.

Despite reports about limited availability of business financing, some commercial lending activities such as business cash advance programs are actually as active as they have ever been. In the current commercial funding crisis, small business owners should seek a commercial loans expert for a realistic assessment and candid discussion about working capital loans and business finance programs.

Search Results

Whether you are starting up your business or expanding it you will need finance in order to do so. This is especially relevant to new businesses that are just starting up. There are numerous avenues that you can approach in order to gain this start up finance and there are many different forms of it open to you; choosing the right finance that will benefit your business most is the important thing.

There is a saying that states 'it takes money to make money,' this applies so much to new business ventures. For your business to become a success you will need a large amount of money to start off with that can be used to get your business set up. This money will be used to buy equipment, pay the rent on your business property, employ your staff and ensure that you have enough stock to get your business going as well as being used to pay the first few months of all your bills.

Two of the main reasons why many new businesses fail to get anywhere beyond the starting point are due to inadequate business capital and poor management skills, which is why raising money is so important in the early start-up stages of business.

Some ways in which people choose to fund their business idea is by using savings, but realistically not many of us have that sort of cash tucked away, which is why we require outside help. You could opt to borrow money from friends or family if they have the financial resources to help you or you could take out a credit card for the specific use of funding your business. All of the financial options that are open to you can be split into two sections, either debt finance or equity finance. Debt finance is classified as being money that is borrowed from varies different aspects. This is finance that is required to be paid back.

Some examples of debt finance include:

o Bank loans

o Credit cards

o Overdrafts

o Leasing

o Asset financing

All of these are the borrowing of money in one form or another and they will require monthly repayments that will have added interest. Most people however use their bank as the first call of gaining start up finance regardless of the fact they are going to end up paying more money back.

There are disadvantages and advantages of using a bank loan to fund a new business idea. However the disadvantages of having a bank loan to fund your business start up far out-weigh the advantages. The benefit of using a bank loan for business finance include being able to organise a repayment holiday meaning you only have to pay interest for a certain amount of time and you don't have to turn over a share of your profit. The disadvantages however are that bank loans have strict terms and conditions and can cause cash flow problems if you are unable to keep up with your monthly repayments. Also bank loans are often secured against assets and you may be charged if you decide you want to repay your loan before the end of your loan term.
The other form of finance; equity finance, is often more overlooked than it should be when in fact equity finance could be just the answer that your business is looking for. The main forms of equity finance come from business angels and venture capitalists. Equity finance is money that is invested into your business in return for a share of the business. With equity finance the advantages out-weight the disadvantages and equity finance is a lot more helpful to small businesses than bank loans are.

Some of the advantages of equity finance include your investor being committed to your business and intended projects, they can bring valuable skills, contracts and experience to your business and they can assist you with strategy and decision making as well as often being prepared to follow up funding as your business grows. Two disadvantages of equity funding are your business may suffer as you are spending time securing your investor deal and the investor will own a share of your business.

The one thing that you must do when choosing your business start up finance is to use a finance option that is most suited to your business needs.

Small Business Finance - Helps You Finance Your Business Cause

When you start a small business, you soon discover that things just do not happen in the real world the way they tell you in business textbooks. Possibly, it is the finance which plays a leading role that makes your business inflow smooth. You lend funds from commercial institutions. For that, you have options of small business finance. With this, you take out its benefits to the development of your business venture.

People can take out this small business finance in categorised form i.e., secured and unsecured. On applying for the former i.e., secured loans, arrangement of collateral keeps an important part of it, while the latter i.e., unsecured form of it is obtained without any sort of pledging placing. Entrepreneurs secured the required sum of money as they wish to, in the way they applying the finance for.

Before, it is required that you may have a business plan before you start up an enterprise. You need to outline your financial ability. The planning shows the way you operate your business efficiency and productivity. At the same time, it makes a satisfactory profit and gives an attractive look to potential investors. It is indispensable tool in business exercise which not only aids in raising funds but also aligns your idea to their objectives to ultimate business completion.

Numerous lenders are going in for providing business finance to the people getting short of fund required to start or develop their business ventures. To make your approval fast, you can apply for this finance benefits online too. There are galaxies of sites available online for small business loans. Owing to many lenders for the same cause, it has affected the rates of the business finance. Candidates find good chances of securing this at comparative. But the thing that is necessary for is to shop around for the best loan rate. In this prospect, you can take out different business loan quotes from the sites available. Through comparative study of the different quotes, you can able to find the best business finance for the success of your venture.

Commercial Finance Funding and Identifying Zombie Banks

In the world of business finance funding, the colorful terms "Zombie Banks" and "Dead Banks Walking" have been applied recently to a number of commercial lenders. Although these discussions have an element of humor and entertainment, there is a practical aspect to them as well. Ultimately it is not likely to be in the best interest of a business owner to have extensive involvement with any of the banks which these terms describe accurately. In any case it should be beneficial for commercial borrowers to understand what constitutes a zombie bank and what they should do if they are working with a dead bank walking.

For any business owner currently needing a commercial loan or working capital financing, the concept of "Dead Banks Walking" is likely to be an essential part of their decision. This description has been used by several sources recently, all with a similar reference point of banks which have already gone broke. This critical but apparently accurate assessment is largely derived from a straightforward net worth approach. Such an analysis recognizes that many banks have substantial assets which are either worthless or at least worth well below the values reflected on their books, with the resulting real current value being less than the current debts of many banks.

Based on the evaluation of many observers who have realistically reviewed current asset values, most of the largest banks in the United States been shown to be worth even less than Lehman Brothers (which is already in bankruptcy). Many banks have compounded their public relations nightmare by demonstrating very little common sense in how they make commercial loans and spend money. If a bank is already worthless, it certainly calls into question how businesses and commercial borrowers will benefit by the government throwing money at these "zombie banks" in the first place. This controversy has been fueled by the failure of most banks to increase their commercial lending to business owners after receiving government bailout funds. Banks who have received bailout funds appear to be determined to hoard the money in order to preserve their own solvency rather than providing commercial finance funding to commercial borrowers.

This raises several questions. The emerging consensus is that giving otherwise bankrupt companies (the dead banks walking) more cash does little more than cover the internal operating expenses for the zombie banks.

First, should we really believe that a bank should be "saved" simply because it is so large? There appears to be a growing majority of the public which would suggest that these banks have already lost too much good faith to ever recover in response to some arguments that the largest banks cannot be taken over even if they are already insolvent.

Second, is there a better way to solve the problem than giving insolvent banks more money? George Soros and others have recently described in detail how other banking systems have successfully handled mortgage financing. Even though residential and commercial real estate loans are thought to be at the heart of the current crisis, there is no real effort underway to revise this approach.

Third, can business owners really afford to wait for the government to solve this problem? Although waiting a few weeks or even several months might be viable for a practical solution which results in needed commercial loans, the current logjam impacting business finance funding shows little evidence of subsiding that quickly. Prudent commercial borrowers should seek alternative sources for essential working capital financing such as business cash advances. In case it is not obvious from the discussion above, dead banks walking and zombie banks can be avoided when seeking new commercial financing.

The Other Essential Checklist for Business Financing

There are 4 very basic things a business can do to make sure they do not get declined instantly. These steps are to:

1. Form a separate legal entity

2. Check for name conflicts

3. Get a separate business address from a home address

4. Make sure the company is listed in the local 411 directory

Next, we will examine other simple things a business can do to appear favorable in the eyes of lenders and credit providers. Remember, some of these steps are not absolute necessities for getting business credit and financing, but they will help substantially.

Step 5: Get an 800 number

Again, this is not a necessity, but having an 800 number for your company can enhance its appeal in the eyes of lenders. Perception is everything in the biz financing world, and having an 800 number goes a long way in boosting your image.

Step 6: Make sure you have an EIN

An EIN, or employer identification number, is like a social security number for a business. Even if your company has no employees, it should still have an EIN. This number is very important in separating business from personal credit because you can use it in place of your personal SS# in many cases.

If you form a new company, take in partners, go through a bankruptcy, or buy a business, you will need to get another EIN number.

Step 7: Verify contact information for major listings

It is vital that your business is listed exactly the same in all of its major listings. These listings include your state, the IRS, 411 directory assistance, and your biz bank. Sometimes these listings will have variations of your business name or address, or could be flat out incorrect.

For instance, one listing may be ABC, Inc and another could be AB Consultants. One listing may have you listed at Suite 200 and another could be #200. These may not seem like a big deal, but having all your business listings exactly the same is important for establishing a solid credit profile and securing financing. You can even take it one step further and verify that every bill you receive has the correct information listed. The last thing you want when applying for financing is the lender to be confused.

Step 8: Know your bank rating

Most people, including business owners, are not aware that bank ratings exist. Banks and other lending institutions use bank ratings to gauge the cash flow of a company and how well it will be able to manage debt and other expenses.

Bank ratings are scores based on the average minimum balance in a business bank account over a 3 month period. Here are some common scores for small to mid-sized companies.

Bank Rating Account Balance Bank Rating Account Balance

Low 4 $1,000 - $3,999 Low 5 $10,000 - $39,999

Mid 4 $4,000 - $6,999 Mid 5 $40,000 - $69,999

High 4 $7,000 - $9,999 High 5 $70,000 - $99,999

A lender wants to be confident that you have the resources to repay any funding they give to your business financing.

That concludes the essential checklist for business financing. It is not guaranteed that you will get approved for financing if you follow these 8 steps, but your odds are guaranteed to increase, even if you only complete some of these steps. Hopefully this checklist will help you on your way to establishing a solid business credit profile and obtaining financing for your company.

Business Finance Consulting - Avoiding Bad Banks

For small business owners, one of the most perplexing situations is a realization that there are now essentially "good banks" and "bad banks". To make matters worse, it is rarely easy to distinguish between the good and bad ones. For many commercial borrowers, business finance consulting has emerged as a helpful tool to determine which banks are still effective. But overall, the world of banking has changed dramatically for almost everyone, and many business borrowers are angry and confused by a new commercial banking landscape that does not seem to be working very well.

One of the more difficult aspects associated with the "good bank and bad bank" analogy is that there are so many competing explanations as to what constitutes a "good bank". One popular analysis has focused on how much banks are really worth in view of the toxic assets that are so complicated to evaluate. With this analysis, "bad banks" are typically those with assets worth less than their liabilities and as a result such banks have been referred to as "dead banks walking" or "zombie banks".

It is fair to say that we have not yet encountered a bank which has openly agreed that they deserve to be looked at as a zombie bank because their liabilities exceed their assets. This would be tantamount to describing themselves as a bankrupt bank. If a bank is truly deserving of the bankrupt status (and there are a number which certainly appear to be in this category), the current banking laws do not permit such a bank to go through the kind of bankruptcy process being considered by General Motors and Chrysler.

Instead the Federal Deposit Insurance Corporation (FDIC) is supposedly required by law to assume the operation of the bankrupt bank until a new management and ownership arrangement can be established. For a number of smaller banks, this has in fact occurred during the past few months. What has been missing so far from this legal bank takeover approach by the FDIC has been the inclusion of larger banks which appear to have problems that are much more serious than the smaller banks which have already been liquidated and transferred to new owners by the FDIC.

The FDIC and other public officials have not made public why large problem banks have not been liquidated. One obvious possibility is the belief that the public failure of a major bank would create a crisis of confidence for virtually every other bank whether they are financially healthy or not. An equally strong likelihood is that the FDIC simply does not currently have sufficient assets to cover the failure of a big bank. This viewpoint is supported by the recent announcement that the FDIC is in the process of raising fees paid by banks in order to replenish the FDIC insurance funds.

Small business owners need their own evaluation standards to determine what constitutes either a "bad bank" or "good bank" as it relates to the future financial health of their own business. Business owners should include an assessment that focuses on results as to which banks can provide the needed help for their specific business circumstances involving working capital financing and commercial loan needs. While such information would go a long way toward establishing a good bank-bad bank distinction, the banks themselves are not likely to be helpful in providing the needed data to produce this candid evaluation.

There are possibly several large bankrupt banks that have not rushed to advise the public that they are in serious trouble and are still functioning normally. Similarly we are already seeing that while most banks proclaim that they are making small business loans and SBA loans in a normal fashion, in reality virtually all banks have reduced commercial lending dramatically during the past few months. Some specialized business lending such as commercial construction financing has been frozen altogether in many areas.

In addition to the critical importance of identifying "good banks", we have published a related report which describes the delicate issue confronting many business owners who might need to fire their banker. Just as there are "good banks" and "bad banks", there are also "good bankers" and "bad bankers".

Business finance consulting has emerged as an important tool to help small business owners work their way through a complicated commercial banking maze. In the Bernie Madoff fiasco, one of the common questions asked repeatedly is why investment advisors did not evaluate the Madoff internal operations prior to placing investor funds with Madoff and his Ponzi scheme.

Our candid final point is that the use of a commercial finance consultant should be at least considered by commercial borrowers in their search for new working capital loans and commercial mortgage financing. Businesses now need to act more aggressively than before in order to protect their own financial interests.

Free Tips on Business Financing

For a business to stand firmly there is need for adequate funding. You must learn the many types of business financing, learn how to keep cash, how to increase sales, how to do market analysis, how to keep proper customer's records and how to source for capital for a business. You must consider carefully where to source for funds, how much money you needed to start the business and where to site the business entity. I recommend you source for more money than you actually needed so that the surplus can be transferred to emergency fund. The emergency fund will be kept in case of any unforeseen circumstances.

There are various options of raising funds that may be cheaper than bank financing. The nature of the enterprise will determine how much money needed to start the trade. You must decide whether the project is for a long term or a short term. This will give you the directions on which type of business financing that suite your business plan. You may decide to lease or purchase equipment, this will depends on the opportunity cost and the duration the equipment will be used for the trade.

When deciding on financing a business that suite you ventures needs, it is significant you submit your business plan to the bank or financier of your business organization. The business plan will give details of the amount needed to run the firm, date of loan repayment, an industry overview, sales analysis, market analysis and customers demand. It includes other sources of revenue to your industry. It also includes the amount you are ready to introduce into the business ventures, whether from your personal savings, friends, relatives or social club members.

Finally, many things are connected with business financing. If you really want to be successful in day to day running of your entity, make sure you keep adequate records of your daily sales transactions, general expenses, bills receivable and bills payable. Ensure to open separate current account or savings account for your business enterprise. There are some free business resources online that can help you manage your firm properly. These will enhance growth and success to your business.

Small Business Financing Methods

Small business financing comes in a number of different forms. Typically, when an entrepreneur wants to start a new business then they approach their local bank as it relates to receiving a loan in order to launch their operations. However, obtaining a loan from a bank comes with a number of risks. As we have discussed before, you are almost certainly going to need to provide a personal guarantee as it relates to receiving the capital that you need for your new business venture.

Second, you may need to provide your home, car, and retirement accounts as collateral as it relates to your loan. As such, the risks related to this type of financing are extremely high as it relates to your personal financial situation. We strongly recommend that you speak with your certified public accountant as well as your financial adviser before you undertake a large debt obligation in order to launch or expand a new business venture. We are going to continue to touch on the subject of the risks relating to small business financing as we write about this subject.

Of course, and as we have mentioned before, you can always seek the assistance of a private investor as it relates to financing your business operations. However, there are significant risks involved when you are working with private funding sources due to the fact that they can take control of your business very quickly. As such, we recommend that you speak to your lawyer before you begin the process of raising capital from a private investor. This is not only due the risks that you business may face as you seek this type of funding, but also because you are going to need to comply with a number of securities laws as you obtain capital from private sources. Additionally, your legal counsel will be able to provide you with a tremendous amount of guidance as it relates to negotiating a proper deal with an angel investor or outside funding source.

Finally, all types of small business financing comes at a cost. Whether you are going to have to pay a significant amount of capital for a loan or sell your business to a third party there are issues that you are going to need to confront as it relates to your cash flow. One of the other things that we constantly recommend is that you develop an appropriate profit and loss statement and cash flow analysis that you can use to determine the cost of capital as it relates to your business venture.

New Business Financing - Options and Obligations

Starting a new business is exciting but it can also be a major problem as well. Where will the business be located? How well will it do there? And, most importantly, how will you pay for the expenses of opening this new business? Financing a new business can be a major consideration and is often one of the biggest stumbling blocks that a potential business owner must overcome on their way to the grand opening.

Financing a New Business With Individual Funds

Self-funding a business opportunity is one of the fastest ways to get started. If you have the money to cover all of the expenses of starting and running the business, it eliminates the hassle of trying to find funding and also eliminates the need to have others involved in the process.

However, self-funding means that you and you alone are going to have to come up with all of the money that is involved with that business including any of the unforeseen or emergency expenses that tend to come up. If you are planning to self fund your business, make sure that doing so will not put too much of a burden on your family or other obligations.

It is also important that just because you are financing a new business with personal funds that you don't try to cut corners in regards to safety and other issues which might keep your business from being able to open as scheduled or from being legal and safe.

Financing a New Business with Partners

Not everyone can afford to start a new business with money from their own pocket, even if it is great idea. For them, it might be possible to get a few friends together to cover the start up costs. But, sharing the cost of financing a new business with friends or family members means that you are going to be sharing profits, expenses and decisions for the business.

You also have to decide if these decisions will be made by equal votes or if there is a division of power that is equal to the amount that the person has invested into the business. If you have partners you may also have to decide whether your business should be a corporation or other type of entity for tax purposes.

Financing a New Business With Professional Financing Options

Getting your new business off the ground might not happen if you can't get the financing. If you cannot get financing on your own or with friends and family, it might be possible to get financing from your local bank or from other options including business incubators and the Small Business Administration.

The SBA does not technically give the loans, but instead offers advice and suggestions to potential new business owners. They can also guarantee the loans that you obtain through the bank for yourself. They can also point out other agencies that can be of great help while you are trying to get your business off the ground.