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Outsourced CFO | business loans best practices
With the number of businesses that have cited that running out of cash was the reason they failed, helping entrepreneurs understand business finances is a key to helping them succeed says outsourced CFO. Many business owners donít understand the loan process, and therefore donít make the best decisions when it comes to trying to qualify for loans. They either are unable to qualify for a loan, they canít get the loan they need fast enough, or they canít pay for the loan once they get it. By helping business owners understand the process, they should be better armed at getting the financing they need to succeed in their businesses.
Business owners should understand first that it is much easier to finance hard assets than it is to finance operating capital. Banks are more likely to approve loans when there is an assets behind it. I understanding this, business owners can maximize their financing by increasing the amount of money they are able to get by financing things like their equipment vehicles and buildings. That should help them free up their own cash so they can use it for operating capital within their business. By not maximizing their financing for hard assets, business owners are limiting the amount of money they have at their disposal for operating capital. Running out of money is a number one reason why businesses have said their business is not successful. This is easily addressed by ensuring business owners know how to finance within their business says outsourced CFO.
Business owners should also understand that it is much easier for them to obtain financing on those hard assets at the initial purchase of their business. As their business operates, business owners have a tendency to run out of cash, meaning itís harder to pay back loans. Because of this banks have a tendency to approve loans for newer entrepreneurs rather than longer existing ones. Some business owners make the mistake of thinking they will be able to qualify for a loan at any point in their business life, means that they are unable to secure the loans that they require at the time that they need it.
The process at the bank for approving a personal loan versus a business loan is vastly different. While a personal loan can take under 30 days to complete and usually does not require additional information being given to the bank, a business loan is very different. Business owners should expect to have a wait time of about 60 days being the minimum threshold, and more if the bank requires more information as they process the application. With that knowledge, business owners should be able to appropriately plan in advance, and apply for business loans in a timely manner. Business owners can easily avoid making the mistake of not applying for a loan soon enough to make a difference.
Banks may also require more information than is initially included in the loan application. As banks gather information about the loan and the business, they may require more information to know if this will fit their risk tolerance. The bank may request an business owner gets them formal appraisals or environmental assessments of the business. If the business owner is required to get additional information, additional assessments may take up to 30 days create, before giving them to the bank. This increases the 60 day threshold to a minimum of 90 days with a Outsourced CFO.
Outsourced CFO | business loans best practices
By helping entrepreneurs understand business loans, outsourced CFO believes that it can positively impact business owners by helping them avoid the problem that 29% of failed businesses have, which is running out of money. Business loans are not complicated, but by helping understand how to effectively use business loans as a tool to increase their business, entrepreneurs can avoid common mistakes and become more successful in their business.
Business owners would be happy to hear that it is definitely possible to obtain 100% financing for some purchases. Often business owners donít even try to get financing for hundred percent, because they donít believe itís possible. Itís definitely possible but itís important to note that hundred percent financing is usually only available for hard assets, equipment, vehicles or buildings. Armed with this information, business owners can apply to banks for the best financing options for them as you says outsourced CFO. By finance as much hard assets as possible, business owners can free up their cash for operating capital. The more operating capital and business owner has their business, means the last likelihood that they will run out of money.
Interest rates are not always the deciding factor for financing. Often business owners only look at interest rates when considering loans. This is a huge mistake because amortization plays a much larger role in loans then they understand. For example a slightly higher interest rate with a much longer amortization period of It is often in the business ownerís best interest because the longer the business owner has to pay back the loan, means the more money they can keep in the business. If a business owner favours a very low interest rates but a short amortization, they may not be able to pay back the loan in such a short period of time, making the low interest rate not important at all. Itís very important for business owners to clearly understand the difference between amortization and interest rates says outsourced CFO.
These are some of the most important things that business owners should take into consideration when they are considering business loans within their business says outsourced CFO. Being able to finance as much as they can up front and keeping as much of their own cash in the business is possible, increases the chance that a business owner will give you the money in their business and not run out of cash which is a reason that 29% of all failed businesses say was contributing factor to their demise. Helping business owners beat the odds is important.
