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Outsourced CFO | business loans
Robert Iwasaki author of Rich dad poor dad says good dent is a powerful tool, but bad debt can kill you, this quote is a favourite of outsourced CFO. 50% of all businesses are out of business in five years and 29% of these failed businesses say itís because they ran out of cash. Business loans can often help business owners succeed in their business, but they must know the difference between good debt and bad debt.
Business owners must ask certain questions to determine if they should proceed with obtaining a business loan for their business. The first question is is it easier to finance operating capital or hard assets? Itís definitely easier to finance hard assets says outsourced CFO. The reason for this is much easier for a bank to collect on the loan if the business owner isnít able to service that loan.
Owners need to know if it is easier to finance hard assets on the initial purchase or after acquisition. Itís much easier to finance on the initial purchase says outsourced CFO. The reason for that is if there is cash crunch potential in a business, and most businesses have the potential for a cash crunch, and the business is more at risk for running out of cash.
The question that business owners need to have the answer to when they think about getting a business loan is how long does it take for a business loan to get approved? Outsourced CFO says a business loan is much different than a personal loan which tends to close in about 30 days. Business loan usually takes about 60 days to close. If thereís any due diligence that needs to happen to prove that loan that can take even more time.
Questions business owners are need to ask when they are thinking about getting a business loan is how formal appraisals and environmental assets can affect timelines. Qualifying for a loan often requires obtaining formal appraisals or environmental assets in order to secure that loan. An environmental assessment or formal appraisal may take a minimum of 30 to 60 days in addition to the 60 days the business loan initially takes. This can bring the timeline up to 90 or 120 days, which is quite a significant time period.
The next thing that business owners need to question help business owners decide if they need to get a business loan is they can get 100% financing for some purchases. Outsourced CFO since events it is absolutely possible to get 100% financing for loans. Most often loans that receive 100% financing is for hard assets like operational equipment, vehicles or buildings.
By taking these things into account, business owners can the signed if a business loan is the right option for them. They can also decide if the debt that they are taking on in the business is good dent which can help them succeed, or if itís bad debt which can be extremely detrimental to their business.
Outsourced CFO | business loans
Business owners often canít qualify for a loan they need, or they canít get the loan quick enough and once they receive the loan they have a hard time paying for it says outsourced CFO. Business owners need to understand the difference between good debt and bad debt. 29% of failed businesses will cite that they ran out of cash as a reason for their business failing. By asking some questions, business owners can determine if the debt they are going to incurring will help them in business or not.
When getting business loans entrepreneurs may see that there are several different amortization periods. the CFO says often the amortization. Itís more important than the interest rate because the terms for longer amortization can greatly affect cash flow. A significantly longer amortization can free up cash early in the business, while a short amortization may cause a cash crunch says outsourced CFO.
Each bank is not equal when it comes to getting loans, the banks that you want to deal with as a business owner will be good problem solvers. Each bank has their own set of rules that they must satisfy in order to grant the loan says the CFO, and the great bankers will tell you what those terms are and what you can do in order to satisfy those terms says outsourced CFO. Because of this, good bankers and it being great problem solvers that can help you secure that loan.
Business owners also need to know that there bankers donít necessarily have the final say in whether they get that loan or not. A loan underwriter has the final say whether loans will be granted by banks or not. A business owner and their banker are unable to meet with the loan underwriter because their job is to provide an unbiased look at just the facts and even your banker doesnít have the final say. This is the bankís efforts to ensure that all the loans that they grant are unbiased and financially sound.
Something else that business owners should take into consideration when shopping around for loans, is they should pursue more than one lender at the same time. Outsourced CFO recommends pursuing two lenders at a time. The reason for this is because of the length of time it takes for a loan to get approved, as well as the due diligence such as formal appraisals and environmental assessments. These due diligence may cause the bank to deny your loan, and if a business owner is only pursuing one lender at a time, that 60 to 90 day timeline start over again when they start pursuing the next lender. By pursuing more than one lender at a time, if the bank declines the loan at any point, the business owner has another option already on the go.
These are great things for business owners to keep in mind when they are deciding if they would like to pursue loans to help them achieve their business goals. Visit us now at www.spurrell.ca or just give us a call now at 780-665-4949!
