Before the further discussion on tips on obtaining a small business loan, the business owner must first invest in his or her mind to increase the level of their skillset toward their vision.
Because without that, how can a business owner duplicate his or her skill to their employees and the rest of the staff helping to operate the business? The business owner needs to know his or her business to a T first and foremost.
Further, the business owner must establish a foundation of their monthly recurring expenses, and make sure the product or service he or she is selling is creating positive revenue as a result of net income.
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There are multiple variables before obtaining a business loan no matter the size of the company as the fundamental concepts remain the same. These fundamental concepts are having a product or service and demand which is your customers.
It really is that simple but there are many variables involved and a lot of adversity that a business owner has to go through to achieve a good cash-flowing business. The only difference between the two concepts mentioned is the revenue model as there are a few thousand industries and occupations, each with different models and variables that produce revenue.
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These variables that will help your product or service be sold is your ability in using sound judgment, instinctual, and analytical skills to know what to invest in before reaching your customers. This can include a budget for advertising, hiring staff, creating a website, customer service, inventory, etc.
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With all that said, Besides the simple notion of having good deposits and a high credit score, this article will give you tips to not only improve your chances of obtaining a business loan but improving the strategy in putting the capital to work.
#1 Tip: Understanding Your Product/Service:
The business owner must have a good enough product or service with a demand from customers to generate at least $10,000 in monthly revenue. However, this is the bottom of the barrel, but it is a start. The average business loan for someone with at least a 600 credit score and $10,000 in revenue is $5000 to be repaid back in 3 months.
Because the payment term is short you must know what you need to invest in whether it be inventory or advertising for the business loan to benefit you. A business loan isn’t designed to solve a problem with no cash being produced. It is a working capital that is designed to strengthen the cash flow of your business and help it grow.
Before you know it as you get your business operation down to a T, you will be generating $50,000 or more per month and taking on more capital to help continue to strengthen your business. A good Segway to this is a business owner who is doing $100,000 a month on average but wants to increase his monthly deposit volume to $150,000 he or she would accelerate this process dramatically by taking on the cost of a small business loan.
Not all debt is bad debt especially when the business owner doing $100,000 is using it to hire new staff, buy more equipment, open a new location, etc. The decision is surrounded by a good instinctual vision of wanting to strengthen their business. When this happens everyone wins, not just the business owner, but their staff wins, their family, and friends win, and the lender wins.
This is how good business works and vice versa not everyone is meant to take on the risk and responsibility, as a business owner, it’s more than just you but the people around you who need you to succeed. A strategic deployment of working capital can increase a business’s earnings by 300%-400% if they were to take on the loan.
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#2 Tip: When to Take a Business Loan:
Taking a business loan at the spur of the moment because your cash flow is bleeding isn’t the best decision, because all that is going to do is cause more problems because the cost of borrowing capital costs money in interest. So first you need to correct your leaks, this could be downsizing your employee size for nimble management, or shifting your advertising to a different alternative that is cost-effective.
Once you have that down then it would be a great decision in proceeding with a business loan which will help your business grow and is used for a number of things such as managing cash flow, accounts receivables, inventory, etc.. Especially starting out, there will be a lot of experimenting and adversity, but once you fine-tune your revenue model; you simply rinse and repeat every single month.
From there you can think about whatever is working for you to duplicate that by accelerating the growth of your business with working capital. An experienced business owner with high monthly cash volumes may also want to take a business loan to cover payroll expenses while they are undergoing an expansion.
The point is a business loan and its cost can accelerate growth but act as an employee because it is working positively for you when planned correctly. Yes, there are occasions when your business is in a slump and you need a business loan to get out of it but it needs to be set up for a long-term solution.
The meat and potatoes of your business are what sell how to get your customer to your product or service and rinse and repeat. As you grow as a business owner and as your company grows a small business loan will help accelerate the growth of your business.
#3 Tip: Allocation of Capital and Revenue Model:
Cash Flow is king, every good business owner knows this, but what many business owners lack is fine-tuning their revenue model. Each and every month there is an inflow and outflow of capital. Your job as a business owner is to have more inflow than there is an outflow.
Whether that be purchasing radio ads to bring in more customers or buying more inventory to meet your current customers’ needs Winning in business is simply having more inflow than outflow; hence the reason why cash flow is king. Once you get the ball rolling, you can scale the growth with a small business loan to duplicate whatever is working for you.
Even with the cost of capital if your profit margins are at least 30% then a small business loan will benefit you tremendously. A quote that is cliche is that many business owners run out of business because they run out of capital, as working capital is the lifeblood of any business, but that is only because they made the wrong decisions in allocating their capital in a way that will produce revenue that ends up being a good sum of net income.
#4 Tip: Use a Broker:
You wouldn’t go to court without a good attorney or chances are you will lose. This approach similarly applies to a broker who helps business owners to obtain a small business loan. A broker’s fee is certainly worth the value as he or she will not only educate you on sound financial decisions but they are also there to help you get the best rate and cost.
Let your broker do the heavy lifting while you focus on your job. Depending on the broker’s company influence and relationships on borderline decline files will oftentimes turn into approval exceptions. The small business industry is littered with unskilled who don’t provide value in their fee. However, at VIP Capital Funding, you will have talented brokers who are very confident because they give you the best chances of approval even with bad credit.
Not to mention VIP Capital Funding brokers are very personable, dedicated, and communicative to ensure a smooth sale’s experience. Because of VIP Capital Funding’s relationships with underwriters and lenders in the industry, they will aggressively go up to bat for you to waive exemption to get a deal done when otherwise would be declined if you were to go about it yourself. Point is, to use an expert in any field
As the Owner and Principal Managing Partner of VIP Capital Funding have been able to help originate over $100MM in small business funding across multiple industries over the past 2 years. I’ve learned about many different industries and have analyzed both bank statements and financial statements enough to give you the best tips for obtaining a small business loan.
In addition to this and I hear this all the time “Well I have the idea but don’t have the capital.”This is a major excuse because I started from scratch and many successful entrepreneurs started from nothing, Again start small, invest in your mind, and strengthen your skillset before you start down the road of your vision.
Don’t settle for anything less than what you want, pick your industry, start at the bottom, level your way up toward your vision, and reach your potential. It is well worth the reward and a small business loan will help get you there, but ask yourself this “How can I handle a 20 employee company if I haven’t even started a 5 employee company.”
This isn’t an overnight thing, a small business loan can certainly accelerate the process, but don’t expect it to be the magic pill that will solve your problems, it should be approached as a tool or employee that will work and accelerate your vision.