Are you in
need of financial resources in order to start or even maintain your
small business? Most of us are. The fist step is to take a look at the
vast number of commercial loan sources that offer help in this area such
as Chase, Citibank, etc. Also, with the Small Business Administration
(SBA), you should be able to arrange a connection with one of these
banks. This is one of many organizations that specialize in loans to
small businesses.
Contrary to the belief that bankers
actually look for reasons to turn down prospective clients in need of a
loan, they are in the business to lend money. This means that every time
a banker is sitting in front of a potential client, they are hoping to
make the deal work just as much, if not more than the client wants it to
work.
A bank’s primary role in the small business lending
area is funding growth. An example of this would be to finance the
expansion of small business with a proven track record. Most banks can
offer a wide variety of loan packages designed to finance expansion of
an already existing small business.
Below are a few examples bank loan
packages :
Asset Based Financing. Asset Based Financing is a general term
describing a transaction whereby a lender accepts collateral and
assets of a company in exchange for a loan. Most asset based loans
are collateral against other accounts receivable, inventory, or
equipment. Accounts receivable is the most favored of the three
because it can be converted into cash quickly. Banks will only
advance funds on a percentage of receivable or inventory, typically
being around 75% of the receivable and 50% inventory.
Line of Credit. A line of credit involves the bank’s setting aside
designated funds for the business to draw against for the cash it
needs. As the line of credit is used, the credit line is reduced and
when payments are made the line is replenished. One major advantage
of a line of credit is that no interest is accrued unless the funds
are actually used.
Floor Planning. Floor Planning is another form of asset based
lending in which the borrower’s inventory is used as collateral for
the loan. Car dealerships are a prime example of a business that
often uses floor planning as their primary financial tool.
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