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E-Myth – “Why most small businesses don’t work & what to do about it”

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Outsourced CFO | Interested in Business Financing?

Outsourced CFO | business financing

Many business owners in business today are facing the same problem says outsourced CFO, they either canít qualify for a loan, if they can qualify for the loan they canít get the loan quick enough, or they canít pay the loan once they get it. By helping business owners understand business financing as it relates to their business, they can increase their success in maximizing their cash flow which can mean the difference in successfully running their company or closing their business due to running out of cash. There are several things that a business owner can learn when it comes to understanding business financing within their business that can help them qualify for loans that they need and bapply for loans at the best time for their business.

The first thing that business owners should take into consideration when they are considering getting a loan for their business is knowing how much time they need to budget for. Most business owners who have never gotten financing for their business before assume that the time needed for the loan is similar to personal loans. While personal loans can take anywhere between two weeks to a month to close, business loans take a minimum of 60 days on average, and if the bank requires any additional information that number increases significantly. By understanding this they can apply for the loans that they need in a timely enough manner that will not stall their business.

When applying for their business loans, business owners should also understand that some of the additional information that the banks require may be formal appraisals, or environmental assessments. The reason why business loans take much longer than personal loans says outsourced CFO, is that the bank needs to understand the business that is applying for the loan. The bank made therefore require an appraisal of the business, in order to understand how the business runs and if there likely to get their money back. Since environmental assessments or formal appraisals can take 30 days to complete, if business owners understand that the 60 days of approving the loan may increase to 90 days, they can be prepared and apply earlier in the process.

Something else that business owners should take into consideration when they are considering various loan options, is understanding the difference between amortization periods and interest rates says outsourced CFO. Most business owners only take into consideration the interest rates, believing that the lower the interest rate the better it is for them. Business owners should also take into account the amortization period because the longer the business owner is expected to take to pay back the loan can greatly affect cash flow in the business. For example a 20 year amortization with a slightly higher interest rate can be a lot more appealing than a much lower amortization with a lower interest rate. The sooner a business owner will be expected to pay back the loan can impact their cash flow. If there expected to pay back the business loan then the early years of their business operation, they may run into a cash crunch and be unable to pay that loan back.

Outsourced CFO | business financing

With a sobering statistic that 50% of all businesses are out of business in five years, and that 29% of those business will cite that they ran out of cash says outsourced CFO, one of the ways to help business owners increase their chance of success is helping them understand how they can use business financing to help increase cash flow within their business. One of the ways they can do that is by understanding how banks approve financing, and what they can do to help maximize their chances of success.

Obtaining a business loan can take a minimum of 60 days, and longer if the bank requires additional information in order to make their decision. Itís very important that business owners when considering getting financing should submit applications to more than one financial institution at a time. The reason for this is when banks are doing their due diligence, at any point in the process they can decline the application, even if itís very late in the process so business owners should be putting more than one application another time so that they donít have to start the process all over from scratch if they do get declined says outsourced CFO.

After they have submitted their application, business owners should work to develop a great relationship with their banker, because good bankers can be great problem solvers. The great banker will advise you on what terms need to be changed within your loan application to satisfy the banks requirements. Says outsourced CFO. Not all banks are interested in financing all business loans, and bankers have a set of rules they must adhere to when they are considering loan applications. A great banker will tell you what to change in your application, to make your application fit their banks terms. This way a great banker can mean the difference between a loan being approved or declined.

The business owner should also understand that they will also be a loan underwriter to look at their application, and this can limit the authority of your banker. The reason for this is because a loan underwriter doesnít actually meet with you, and also usually does not meet with the banker. They are to be an unbiased view of just the facts, so they can let the bank know if this is a good loan for them to approve. If a loan underwriter does not approve the loan, often a banker can do nothing to change their mind, the underwriter has final say. So by working with the banker to ensure that the loan application is as attractive to the bank as possible is crucial.

By understanding how to work with banks when considering getting financing for their business, business owners can maximize their potential for getting approved. Learning how to get approved successfully for financing is a huge key to success.