Published on Mar 11, 2014
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Take the fundability test through the link above to gain invaluable insight into how lenders will view your business specifically, and learn what you can do to increase your business' overall fundability.
This information will give you a unique advantage over the vast majority of other business owners as it will educate you on how to present your business in the best financial light. You will also be shown exactly what loans and lines of credit you qualify for currently, and will have the option to discuss them with a highly qualified funding advisor to determine if they fit your business' financial needs.
Transcript of Video Key Topics:
Business Credit Lines Summary:
Business credit lines are similar to flexible loan accounts from a bank in that you are approved for a specific amount, and you can take out when you need to boost cash flow.
Each amount taken is treated as a separate loan that is to be repaid with interest separate from other loans. Great business financing option for businesses that have a consistent need to infuse cash flow into their business, and would rather not deal with the hassle of consistently applying for loans as their business needs funding.
Line of Credit for Businesses Terms: Typically, to qualify for business lines of credit you will need to have a low 5 bank rating, 680+ business credit score, verifiable cash flow, and responsible bank account management.
If you are a startup and looking for business financing for working capital, you will need to have a very detailed and solid business plan, and your personal credit score will be evaluated in place of the business credit score.
Various financial institutions criteria will be different, but these are the main factors looked at when considering a business funding application.
Business line of credit repayment terms are negotiated at the time of application, but generally each loan amount will incur its own unique set of fees dependent upon whether it is for purchases, payment of specific expenses, or for cash.
Prior to considering any working capital for businesses, set parameters in place for each loan cost to determine if this is the right choice. You can sometimes benefit from having multiple loans out due to lower interest rates and fees, although the convenience factor goes away.
Calculate 30% of half the potential profit of the each loan you intend to borrow against the credit line. If the total cost of these loans are more than that, consider different funding options.
EX: 1 Piece of equipment, makes $1000 net profit per month, you get loan for two more pieces of equipment at $50,000, your "potential return" is $2,000 per month due to increased efficiency and productivity.
Be sure to include demand probability here as well, such as requests to meet certain productivity which could indicate more probability of achieving the $2000 per month additional income stream.
Take the potential profit, and cut it by half to allow for potential issues out of your control, and then calculate 30% of that. If the cost of the loan per month (interest and fees, not principal) is more than 30% of half the potential profit, consider searching for better terms.
Now if your potential profit is already in hand and/or under contract, you can increase the initial half cut, but still allow for variable change.
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