The ongoing global pandemic has badly hampered the revenue and trade of various businesses and companies worldwide. No matter how big or small, most of these businesses are now constantly experiencing negative operating cash flows.

Indeed, the key to a business’s survival is the way liquidity problems are addressed in the midst of every crisis. 

Other than making a mitigation plan and a recovery team, what are some of the pivotal ways of managing business income loss actively? 

Predict Cash Flow 

Establishing a cash flow predicting procedure is one of the first few crucial steps to take amid this pandemic. It assists in making a business’s future financial position more robust based on the business’s currently anticipated expenditures and receivables. 

A cash flow prediction assists a business in improving working capital, preventing funding issues, meeting financial obligations, and managing liquidity. With the help of this, a business can gain the ability to make informed decisions more efficiently and effectively whenever a liquidity crunch takes place. 

Start out by producing a thirteen-week or short-term cash flow prediction. A thirteen-week prediction is required to establish any quarterly receipts or payments that could be covered in a few parts of other periods. A weekly forecast requires the optimal level of granularity. 

On the contrary, a monthly prediction doesn’t offer adequate information to diagnose low cash points, not to mention an adequate time period to provide a business’s management in taking appropriate actions. This thirteen-week prediction must be stress-tested, expecting worst-case scenarios. Every single fixed and variable expense must be checked in detail to avoid any financial surprises. 

Start using a cash-flow tool and make model scenarios to make sure the downside risks are lessened. 

Increase Liquidity

When your profit vanishes, liquidity is right at its core. After setting up a cash flow prediction procedure, a business would have a much better albeit abstract idea of its cash-flow strain intensity. From there, the next thing businesses would like to do is pouncing on every single opportunity that accelerates cash inflow. 

Have a look at some of the usual tangible actions that can help to optimize liquidity when a business experiences income loss: 

• Present cash reductions to all those customers who make repayments swiftly; 
• Use cost rationalization; 
• Apply second mortgage, business loan, fast cash loan, or extended credit;
• File for business interruption claims; 
• Reschedule payment span for all the remaining expenses. 

With that being said, anticipating that this novel virus will stay uncontrolled and the business will not be making profitable money anymore, it’d be perfect if all businesses possess a smooth liquidity runway.

Appropriately Document Liabilities

Other than optimizing a business’s liquidity, businesses should also consider making an efficient record-keeping system for the weeks and months ahead since it is still unknown when the pandemic will come to an end. 

According to some experts, a business must obey the following when documenting liabilities in a clear and concise way:

1. Determine a general ledger account to keep a record of incremental expenses. In the business’s expenses accounting system, gather all losses and costs related to COVID-19 in a different account number. 
2. List the business’s operating baseline. And in order to do that, conduct a 2-3 year review of how your business ran pre, during, and post-coronavirus. 

Solid financial supporting documentation can significantly enhance the chances of getting aid from the local small business administration (SBA) and even the federal government. 

Business Interruption Claim

There is a requirement for reviewing policy thoroughly for all those businesses that possess a business interruption policy. Always remember what is included in the coverage, such as the policy’s limitations and the type of losses covered. If there is a perplexing structure and confusing language in the policy, clarify them through an attorney or an insurance company. 

In addition to that, a business interruption claim is more likely to be granted in case a business provides excellent financial supporting documentation. It must show how the coronavirus hampered your business. Moreover, it must also include incremental expenses incurred, customer attrition rates, and income loss as described by the insurance policy. 

Now that the majority of the companies are at the very edge of financial distress because of the global pandemic, this is the most suitable time for submitting a business interruption claim. But, keep in mind that prior to filing a business interruption claim for losses incurred during the pandemic, try to comprehend why most insurance companies think these days differently.

Insurance Companies’ Perspective on the Global Pandemic

1. Some of the insurance companies firmly believe that the ongoing global pandemic is a “Force Majeure” event. This legal defense necessarily frees a party, in this case, the insurance company from fulfilling its duties because of unusual circumstances that are not in control of any of the involved parties. These insurance companies claim that this massive virus outbreak is one of those unfortunate events. 

2. According to the majority of the policies, coverage is offered if and only if a policyholder or a business goes through a loss of income caused by damage to the covered property or a direct physical loss. As stated in the insurance companies’ contracts, the coronavirus is neither damaging to the covered property or a physical loss. 
   
3. Coverage for loss of income is not offered for the government’s actions that are specifically developed to prevent the spread of the deadly virus. Particularly, it is not offered to policyholders because of economic slowdown or market conditions related to the massive virus outbreak. 

4. The primary reason why this pandemic is uninsured is that it is not insurable in the first place. The majority of the insurance policies offer coverage that takes care of business income losses caused by a natural disaster. Since this virus isn’t a natural event, it is uninsurable.

To further learn how to effectively managing business income loss during covid-19, click here!

The post How to Manage Lost Business Income During Covid-19 appeared first on Lebit Finance.

Well, it’s time to reconsider your application and find out why your business loan application was rejected in the first place. 

Step # 1: Try and figure out the major reason behind the refusal. While some bankers may be courteous enough to share some details, others won’t. However, according to law, banks are required to send you a notice describing the reason(s) why your business loan application was rejected.

In case this has recently happened, you must probably be demoralized right now. But, hey, there’s always light at the end of the tunnel. There’s no reason why a small refusal should send you into a state of disbelief. Always keep in mind that every successful business owner has gone through this phase in his life, at least once, if not more. Grasping the reasons behind your business loan application rejection is the fundamental step towards a successful future financing application.

Throughout this article, we will have a look at some of the major reasons for business loan application rejections

Low Credit Score

Among the several reasons for business loan application rejection, the most prominent one is the low credit score. This usually happens in case the lender judges your credit score to be too low. The cut-off score is solely dependent on the situation and the lender. 

Your personal credit score is also crucial to attaining a business loan, even if your business has been running for a while. Building a strong credit history requires some effort and is a more strategic decision that requires conscious decision-making. 

In case your personal credit score isn’t too appealing, the lender thinks, “If he couldn’t manage his personal credit, how will he pay back a business loan?”

If you’ve finally figured out that a low credit score was the reason behind your rejection, take immediate steps to improve it. It’s always a great idea to brush up on what goes into your business and personal credit score, too, so you know exactly how you’re being evaluated.

New Business

In case your business is comparatively new, you might not have developed enough good business credit history to qualify for a business loan. Keep in mind that vendors or lenders don’t automatically tell about your payments to the relevant business credit agencies. Therefore, when you set-up a fresh account with a vendor or a supplier, ensure that they report your payments to the business card agencies so your business can develop a robust credit history with time.

Indeed, it is possible to have robust financials and a very successful business even if your business hasn’t been operating for long—you are simply required to locate the appropriate lender. Most lenders tend to need a lot of time in business than others; therefore, have a detailed look at all your choices when choosing where to apply for business credit. 

Risky Industry

Traditional lenders typically reject loan applications of businesses in risky industries. For instance: Restaurant owners tend to get their loan applications rejected in the beginning just because their industry has a higher risk of failure. 

Moreover, in case your business is in some particularly risky industries, such as gambling or betting, you might also face some additional hurdles along the way. 

If this is the reason for your application rejection, find lenders who specialize in your industry.

Not Enough Collateral

The majority of the standard lenders ask you to put down collateral to attain a small business loan. In case you lack the appropriate kind of collateral or don’t have sufficient collateral, your loan request might get rejected. If you’re struggling with this, try to look for other ways of financing like unsecured loans. 

High Debt Utilization

Usually, lenders wouldn’t like you to use more than thirty percent of your overall available credit. If you go beyond thirty percent, most lenders would consider you to have overreached and will doubt your ability to pay back. In simpler words, if your line of credit is $100,000, and you have utilized $90,000 of that, then you are considered as “high risk.”

Other than that, if you lack a history of utilizing credit responsibly or don’t have any debt, that can go against you as well! Ensure that you are keeping a record of your overall credit limits, involving lines of credit, personal credit cards, business credit cards, and maintaining decent debt usage.

Not Enough Cash Flow

Needless to say, this is among the first few things lenders look at while determining whether to reject or approve your business loan application. They are interested in knowing that you possess adequate cash flow to not only pay back the loan but also to cover your routine business expenses. If you constantly suffer seasonal slumps or your cash flow is spotty, the lender might see that as a red flag.

Low or insufficient cash flow is one of the biggest causes of business failure, so if this is the reason why your loan request was turned down, you may have to analyze your cash management skills. Use accounting software that allows you to easily produce cash flow projections and reports; then, keep a track of your cash flow on a weekly basis to stay on top of it. Collect all the due payments from customers on time.

Getting your business loan application rejected when you needed the loan desperately is undoubtedly the worst feeling ever. However, in such challenging times, you need to keep a calm head and try to understand that the rejection isn’t personal. Once you get through that initial phase of frustration, it could be quite a learning curve and prepare you for what’s to come. Take some time and think about what you can do to enhance your application.  

Got rejected and still wondering what went wrong? Seek our experts’ advice. Our representatives have the right skills and knowledge, along with the required experience to help you make the right steps and get a loan that will serve your purpose. 

The post Why Did Your Business Loan Application Get Rejected? appeared first on Lebit Finance.

SBA – Small Business Administration Loans are a terrific financing choice for businesses seeking favorable loan terms. As compared to conventional financing, small business loans offer great flexibility in terms of required borrower equity investment, the inclusion of funds for working capital, time taken for repayment, and so many other flexibilities designed to enhance the opportunities for success.

An SBA loan isn’t just a big sack of cash available for your next groundbreaking business idea. If only that were true. There are three different kinds of SBA loan programs, each with its own terms, conditions, and advantages:

• SBA 7(a) loan – goes as high as $5.5 million in cash with terms up to seven years 
• CDC/504 loans – explicitly meant for purchases like real estate and machinery with terms up to 25 years. 
• SBA microloans – give a maximum of $50,000 with terms up to six years

Each of these three loans are designed very specifically to accomplish different business goals. These include financing and major fixed-asset purchases; thus, choose wisely.

The SBA 7(a) loan, as you might expect, is the most desirable and common due to its flexible nature. It is essentially what comes to mind when you think of an SBA loan – a traditional term loan product. 

There are several benefits we should consider before pursuing an SBA loan. We have listed some of these advantages below:

1. Low-Interest Rates

When applying for a loan, one thing that worries most applicants is how it will affect their balance sheet in the long-run. This is why interest rates are a big concern, and low-interest rates are considered a substantial advantage.

Interest rates for SBA loans are relatively low. These interest rates usually depend on creditworthiness and the qualifications you bring to the table, which means you could be looking at rates at low as 6.75% on SBA. Unlike other loans, you will not see interest rates climbing into double digits with SBA loans.

Well, of course, other loans are more expensive for specific reasons. Non-SBA loans charge you higher interest rates for a myriad of reasons – one reason might be because they are making money available to you right away, or they may be taking a significant risk on you by foregoing background checks or setting low credit requirements. But in terms of a long-term loan, capital doesn’t get any cheaper than an SBA loan.

2. Down Payments

Depending on the type of financing you are looking for, your lender might ask you for a down payment. Down payments for small business loans mostly come down to the amount of money you may be borrowing, which mostly defeats the purpose of getting a loan. The relationship between credit rating and down payment requirements is inversely proportional. This means the lower your credit score, the more money you’ll have to dole out as a down payment.

Even though an SBA loan requires a down payment, it often requires a lower down payment than many other loan types. This is one of the most significant advantages of an SBA loan. On the other hand, an SBA microloan does not require a down payment at all!

Some types of loans may put you down up to 30%. In that case, if you have an option to access a loan that requires a significantly lower down payment, it is certainly worth pursuing.

3. Repayment Terms

A small business loan isn’t a helpful tool if you are stressed about the repayment timeline more than pre-financing. That’s why it’s crucial to make sure you find the right product for what you’re looking to do with the money and be 100% sure that the loan terms are fit for your business’s cash flow.

One key advantage of SBA loans is that they have the most extended repayment terms, which means having a payment that doesn’t put financial stress on your business and mental stress on your brain. 

Most small business loans require shorter payment terms. For example, sometimes short-term loans require as few as three months, with weekly and occasionally daily payments. In fact, any other non-bank term loans give about one to five years to repay principle.

SBA loans, on the flip side, offer a lot more ease. For instance, monthly payments for 25 years for real estate, 10 years for equipment, and up to seven years for working capital. This flexibility enables you to plan out how you will be paying your loans back as your business grows.

4. Terms and Conditions

Most people argue that SBA requires a lot of paperwork when applying for a loan. The ones who get accepted for an SBA loan are often surprised by how reasonable the terms are. The down payments are low, and interest rates are low, the repayment time is high and more.

Thus, despite the lengthy paperwork, the terms and conditions are such that you may want to reconsider lazing away due to it.

SBA has comprehensive, negotiable terms and conditions as these loans are based on merit: how good your credentials are and the risk assessment of your business plan.

5. Cash Flow

SBA fixes the uneven cash flows most businesses have throughout the year. If your business is struggling to manage cash flow, allocate capital to invest in new equipment, or ensure that you can make payroll, an SBA loan might be something you should certainly consider.

After all, without cash flow, you will face multiple challenges while attempting to run your operations at a level that your customers expect. According to a US Bank study, an alarming 82% of businesses that failed stated cash flow problems as a reason for their failure.

6. SBA Resources 

A common misconception regarding SBA is that it doles out loans, which is not true. They are a government organization, and their initiative aims to lessen the risk for lenders. However, their primary goals lie with the business owners, which is you. They wish to help you grow your business with maximum access to capital and education, with the minimum amount of obstacles in the way. 

An example of SBA resources is networking. SBA loans come with access to a network affiliated with the Small Business Administration, which provides business owners invaluable training and mentorship opportunities. SBA is affiliated with departments and associations like SCORE, Office of Women’s Business Ownership, Office of Native American Affairs, etcetera. 

The cherry on top is that even if you aren’t amongst the borrowers approved to get an SBA loan, you can still take advantage of the resources. SBA hosts programs nationwide to give small businesses an opportunity to succeed by providing access to the tools and resources required to do so. State and local-level SBA offices all over the country hold courses, seminars, and various networking events to help connect small business owners. Be sure to check them out on their calendar.

Conclusion on SBA Loans

All in all, education is always crucial in deciding between different loan products. In some instances, SBA loans may make the most sense, or at times may be the only option available to access your franchise’s financing needs. However, if you find loans that offer similar benefits, such as low interest and down payment rates, negotiable terms, and positive cash inflow, it may be smart to avoid collateral requirements that may impede future growth.

The post SBA Loans: What Are the Advantages? appeared first on Lebit Finance.

In today’s blog, we’ll go through how SMART goals work and why your business should consider them.

What are SMART goals, and why are they important?

SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, and Time-bound. Based on these parameters, goal-setting becomes much more efficient. SMART financial goals give you a clear picture of what you want to achieve, how realistic it is, whether it aligns with your broader business objectives, and how long it might take. 

Let’s examine what each of these elements means individually

Specific

To make your financial goals more specific, you must think about the who, what, where, when, and why. The devil is in the details when it comes to setting goals. If you don’t sufficiently examine your goals, you may encounter unexpected problems, sending you back to square one. To avoid the pitfalls of planning, consider the following questions:

Who has involved in financing this project? Who do I reach out to for additional funding? 

Where should I start this project? Where will it end?

What am I trying to achieve? What resources do I have at my disposal?

When can I start seeing results? When do I need this done by?

Why am I trying to achieve this? Why is this goal important?

After working out the specifics, you’ll have a clear idea of your goal. For example, “I want more revenue” is an unspecific goal. A more specific example would be “I want to increase my sales revenue by 20% in the coming quarter.” To take it one step further, you can ask yourself, “How?” and then make it more concrete: “I want to increase my sales revenue by 20% in the coming quarter by securing an equipment financing loan and upgrading the plant machinery.”

Measurable

A goal without a measurable outcome is like a sports competition without a way of keeping score. In the business world, numbers are essential. Having a quantifiable element to your financial goals will help you gauge your progress re how you are doing, what needs improvement, and what you have accomplished. So how can you measure your goals?

Metrics and analytics are an efficient financial management tool and an excellent way to measure success.  You can chart your organization’s performance through easy-to-read infographics using key metrics such as liquidity, profitability, and revenue growth. Once you know how teams are performing, you can reward high-performers, intervene in low-performing teams, and address problems seamlessly.

To further break down performance, you can set monthly Objectives and Key Results (OKRs) for your teams. Four to five measurable key results should follow each objective. Measure each Key Result on a scale of 0-100. Depending upon the outcomes, you can adjust your short-term targets to suit your long-term goals better. This will help you improve your bottom line without over-burdening your employees.

Keep in mind that communication is vital when striving to achieve your goals!

Achievable

Before you confirm a target, make sure that it’s achievable. The reason for setting SMART goals is to avoid the disappointment of failing to achieve your business objectives. 

This does not mean setting easy targets, as you need to challenge your teams to achieve organizational growth. However, there needs to be a balance, which is why achievability is a crucial element of SMART goals.

Achieving this balance can be tricky. You’ll need to understand your teams’ existing skills and capabilities as well as their growth potential. Utilize business analytics and accounts to conduct in-depth research, or hire a professional for expert help. Once you have the findings, you can set goals that are both formidable and attainable. Building on the previous example, a 20% growth in quarterly revenue is a realistic target; however, if you set a goal of 80% growth, you will likely demoralize your employees before they even set out to achieve it.

Relevant

Creating a business is like embarking on a journey. If you don’t want to get lost, you should regularly check your compass to make sure you’re moving in the direction you want.

Making sure your goals are relevant to the overarching organizational objectives is another important aspect of SMART goals. If your plans are relevant, you’ll continue to progress toward your intended destination. However, if your plans are irrelevant, you run the risk of losing your bearings, resulting in inefficiency and revenue loss.  For example, if your business has a short-term liquidity problem because of a low receivables turnover, a relevant plan would be to apply for invoice factoring.

Time-Bound

Stephen R. Covey famously said, “The key is not in spending time, but in investing it.” There’s only so much time a business can invest in its many aims and objectives. For this reason, it’s immensely vital to position each goal by a relatively fixed time-frame. This will help you gauge how much the company can achieve each quarter and prioritize some goals over others. For example, if you have an unfinished project nearing its projected deadline, you can focus your resources to complete it on time. If you require additional finances and have exhausted conventional options, you can apply for alternatives such as Merchant Cash Advances or a Business Line of Credit.

Conclusion

Ultimately, SMART financial goals distinguish average businesses from outstanding ones. Having a clear and realistic picture of your targets is essential to organizational growth. Additionally, when you know what your targets are, you can tap into the relevant resources to meet your financial requirements.

Targets must be measurable and time-bound to quickly measure and track progress, and make necessary adjustments. Ensure that your goals are relevant to your business objectives and realities so that you can prevent mismanagement and organizational inefficiency.

The post SMART Financial Goals for Growing Businesses appeared first on Lebit Finance.

Despite playing such an integral part of the US economy, small businesses continue to struggle to secure adequate financing. There just aren’t enough financiers to keep up with the ever-increasing demand. Almost half the small businesses in the US don’t have a formal line of credit. Access to finance is the second most cited challenge of operating a small business today. According to a US Bank study, an alarming 82% of businesses that failed stated cash flow problems as a reason for their failure.

Conventional Financing Options

Aside from retained earnings, small businesses are either financed through equity, debt, or a mixture of the two. Most business owners are reluctant to take on debt as they want to minimize their liabilities side of the balance sheet. However, debt-financing is actually cheaper than equity-financing for companies that are profitable and expect higher returns in the future. As the cost of debt is limited, and once it’s paid off, there are no remaining liabilities. Whereas with equity-financing, there can be perpetual obligations, and the cost might be much higher than it seems.

Debt Financing

While commercial and development banks are the primary and formal sources of funding, businesses also rely on informal financing channels, namely friends, family, or the community. 

It’s possible to secure sufficient funding through the informal sector; however, this heavily depends on your networking capabilities. If you’re not well-connected, this option may not be suitable for you. There are also many Community Development Finance Institutions (CDFIs) country-wide that you can approach. Crowdfunding has also become a popular method of financing through platforms like GoFundMe, Kickstarter, and Indiegogo. These platforms allow businesses to pool funds from various investors instead of a single source. 

Even though commercial banks maintain their position as the biggest financiers for businesses, many are reluctant to finance small businesses due to market risks and uncertainty. Banks prefer funding larger organizations, as they generate higher profits, and assume less risk. Additionally, small businesses are usually looking for relatively small loan sums, and it’s not financially viable for commercial banks to process these.

Government grants and subsidies are an additional funding source, albeit highly regulated. An example of government funding is the Paycheck Protection Program (PPP) —which incentivizes employee retention— rolled out during the Covid-19 crisis as part of the CARES Act. 

Additionally, the passing of the PPP Flexibility Act of 2020 had further relaxed several PPP loan guidelines. Small businesses can apply for both the Paycheck Protection Program and Economic Injury Disaster Loans (EIDL) through an SBA approved 7(a) lender. Unfortunately, the PPP is not taking in applications anymore, as it expired on August 8th, 2020. However, under the new Biden administration, there are talks of a fresh round of PPP small business loans. 

For small businesses that have already taken aid from the PPP, there is some good news. The SBA has announced a more streamlined process and simpler form for loan forgiveness for loans of less than $50,000.

You can learn more about SBA loans and eligibility criteria here.

Equity Financing

For some SME owners, the most convenient form of equity financing is investment through personal savings. This might be risky, as you don’t want to gamble away your retirement savings on a new project or venture. Additionally, there might be some emergency for which you need funds straight away. It’s not a good idea to mix personal and business finances when it comes to entrepreneurship. Partnership financing is also an option. In this, another player in the industry funds your growth in exchange for access to your products, staff, total sales, distribution rights, or a combination of these. This option is usually overlooked by small businesses

Another source could be venture capital (VC) financing, which is much more competitive and more difficult to secure. However, the benefits of VC are not only financial. They may also help you build your business through their vast business network, invaluable knowledge, and visionary thinking. VC financing requires high rates of return, a chunk of your revenue, and/or a seat at the Board of Directors’ table. For a business that’s still trying to find its legs, this option may be costly as you’re essentially selling a part of your company before it even takes off.

While conventional financing is popular amongst larger companies, most small businesses have better luck with alternative financing solutions that offer less oversight and higher approval rates.

Introducing Alternative Finance!

Have your previous loan applications been rejected? Do you feel like you’ve run out of financing options? Well, don’t despair! Alternative financing is an innovative solution for those businesses that have struggled to secure funding through conventional means. 

Here are some excellent options to consider:

1. Merchant Cash Advance (MCA): MCA is the most suitable option for SMEs in need of immediate cash. A merchant cash advance has no collateral and doesn’t need an excellent credit score for eligibility. This is a great alternative for SMEs that are disqualified for traditional business loans with stringent requirements. The repayment is also flexible, depending on your sales and profit margins. In case of a slowdown of sales, businesses can readjust the repayment plan with the lender. Additionally, this type of loan has the least amount of paperwork involved, making it hassle-free.

2. Invoice Factoring: If you have a significant amount of your money stuck in unpaid receivables, this option might be just for you. Invoice factoring helps you free up cash that you may like to reinvest in your business or do with as you please. It also allows you to control your cash flow, improve profits, and has relatively flexible eligibility requirements. You don’t need collateral or high credit scores to qualify.

3. Business Line of Credit: If your business is going through a tough time, and you need an added safety net, securing a line of credit may be helpful. Additionally, making timely payments will improve your credit score and help you secure more credit or other business loans in the future. Anytime you need cash urgently, you can draw upon your credit line without having to worry about time-consuming paperwork.

4. Equipment Financing: If you’re looking to switch out your equipment with new or used replacements without losing out on liquidity, an equipment financing loan might be worth considering. In this option, the asset itself will serve as the collateral. Unlike the first two choices, equipment financing has a fixed repayment schedule, which allows you to maintain liquid cash for expenses such as salaries, inventory costs, taxes, or other business opportunities.

5. Business Term Loan: If you’re running a successful business and require additional funding to buy equipment or capitalize on new opportunities, a business term loan is ideal for you. The option is much cheaper than alternative microfinancing options. A good credit score, high revenue, and profitability will land you an excellent term loan package.

Conclusion

Sky’s the limit in the financing world. Conventional means are great if you have a well-established business with an excellent credit rating, massive revenue figures, and consistent profits. However, if you don’t fall in this category and are struggling to secure funding, microfinance products offer a quick, convenient, and reliable alternative. If any of these products interest you, visit our website and apply now!

The post Conventional vs Alternative Financing for Small Businesses appeared first on Lebit Finance.

Throughout this article, we will discuss different funding options while taking a quick look at the bigger picture.

Financing options are solely dependent on what sort of business you run. Your business’ team, market value, market opportunities, overall performance, position, age, etc., are incredibly crucial. Therefore, to acquire decent funds, you will have to customize your approach and your funding search. Don’t waste your precious time in search of a phony sort of financing.

Get Familiarized with the Realities of Obtaining Funding

Let’s start with a fast reality check. A lot about business financing is heavily dependent on some specific minute-yet-powerful details. Realities go case by case, depending on the resources, growth stage, and several other components. 

Are you an ongoing business or a startup?

The outlook for funding depends mainly on certain specifics of a business. For instance, most ongoing businesses have unrestricted access to traditional business loans from a standard bank that wouldn’t be available to startups. Moreover, all the high potential tech startups have access to investment funding that wouldn’t be available to establish stable businesses that only demonstrate slow growth.

Figure Out How Much Funding is Needed

Each business has distinct requirements, and there is no financial solution that suits businesses of all kinds. Your business’ vision and personal financial situation will form the financial future of your business.

Once you figure out how much funding you’ll need, spend a little time figuring out how to get it. Some viable options are:

• Loans
• Investors
• Self-funding

Fund your business yourself with self-funding

To support your business, self-funding allows you to leverage your financial resources. Self-funding can come in the shape of going to friends and family for capital or utilizing your savings accounts.

Through self-funding, you will be able to keep complete control over the business; however, you also take on all the risk by yourself. So, act smart and don’t spend lavishly. 

Get venture capital from investors

Investors can provide you all the funding you need to kick-start your business in the shape of venture capital investments. These investments are usually provided in exchange for an active role or an ownership share in the business. It is different from standard financing in numerous ways. Venture capital usually:

• Has a broader investment horizon than usual financing.
• Takes more significant risks in exchange for high returns.
• Concentrates on high-growth companies.

Almost all of the venture capitalists would ask for a seat on the board of directors. Therefore, be prepared to give up some part of your business ownership and control in exchange for funding.

How to get venture capital funding?

Though there is no 100% guaranteed way of obtaining venture capital funding; however, it requires you to follow some fundamental steps.

Look for an Investor

Find venture capital firms — at times called “individual investors” — or angel investors. Ensure you conduct thorough background research to identify if the investor is reputable and has relevant experience working with startup businesses.

Share your business plan

You would be asked to share your business plan with the investor, who will further review it to ensure it matches the investing criteria. The majority of the investment funds focus on a geographic area or industry.

Go through due diligence review.

In case an investor is interested in funding you, he will have a detailed look at your business’ financial statements, corporate governance documents, services, and products, market, and management team.

Decide the Terms

The next step of the process is to agree on a term sheet that briefly defines the fund’s terms & conditions to invest. 

Acquire a small business loan

If you would like to retain complete control of your company, but don’t have adequate funds to kick-off the proceedings, think of getting a small business loan.

To boost your chances of attaining a loan, you must have an expense sheet, a solid business plan, and financial projections for the upcoming five years. These tools will help you get a rough estimate of how much you’ll need while also helping the bank understand that they’re making the right move by giving you a loan.

Once you are ready with all the materials mentioned above, start contacting credit unions and banks to request a loan. You will have to compare offers to get the best possible terms & conditions for your loan.

Alternatively, you can even connect with us at Lebit Finance directly. We’re specialized in financially facilitating small business owners through our paycheck protection programs which are SBA approved. 

Locate lenders who provide SBA-guaranteed loans 

In case you are having trouble acquiring an ordinary business loan, take a look at SBA-guaranteed loans. If a bank considers your business too risky to lend money to, SBA could be your only way out. 

Small Business Administration investment programs

Small Business Investment Company (SBIC)

SBICs are privately managed and owned investment funds regulated and licensed by the SBA. They utilize their capital, plus funds borrowed under SBA guarantee, to make debt and equity investments in qualifying small businesses. 

Small Business Innovation Research (SBIR) program

The small business innovation research program invites small businesses to get involved in federal research and development that possesses commercialization potential. 

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You need to relocate or expand

There is a chance that while your business has grown, your space hasn’t, and your new assistant doesn’t even have a cubicle of her own. If you have outgrown your initial office location, you might need additional space. But you might not have money to fund the expansion, which is where a loan can help. With your significant overheads, generating an up-front investment would not work. Before committing to something like this, you must measure how much revenue you will end up making. Do some research, consider your options, and apply for a loan.

You’re building credit for the future

If you want to scale up your business and secure a more massive finance deal in some years to come, starting small will add to your credit history. Building your business credit would be easier this way; for younger businesses, qualifying for larger loans could be tricky. But with regular on-time payments, you can show your credibility. This is also helpful in building connections that will help you secure a bigger loan in the future. However, you must only apply for an amount that you can reasonably pay off. A single late payment can prove to be detrimental to your credit history.

You need new resources

Purchasing equipment to improve your business offering is something you can’t ignore. Machinery, IT equipment, and tools that can help you perform better and become more competitive need to be secured. And if you can only do that by applying for a loan, then be it. Similar to a car, investment in the equipment itself can serve as collateral for a loan. But before taking out a loan, make sure you have identified what is necessary for your business, instead of focusing on what might make your operations look fancy. 

Similarly, a big chunk of your spending goes into building your inventory. To keep up with demands, investing before seeing a return can prove to be complicated. To measure such a decision’s financial viability, sales projections based on different trends could prove to be very useful. Since sales figures can vary widely from year to year, being conservation won’t harm.

If your team is currently small, and it is likely that given the workload, finishing tasks has become challenging. Then it must be time to expand your team and hire resources that can add value to your operations without compromising on your business model. Most businesses choose to invest their money in talent and remaining competitive and innovative.

There are many other investment options that can help you grow your business, making the right move requires you to anticipate and gauge your options to enable the best possible scenario for your business. Sometimes this can be a tough call but then the business is all about taking that risk, only if you think it is worth the return. With a small loan, going down is less likely because your payments are going to be way lower and by just taking up extra work, you would be able to take care of them yourself. There are a lot of ways you can diversify your risk but that debate we will leave for later. 

You’ve found a business opportunity you don’t want to pass up

There are times when an opportunity falls into your lap that is just too good to be missed. It could range from getting a discount on a larger order to steal on retail space. When this happens, you will have to weigh the loan’s cost versus the revenue you are likely going to generate if the deal is secured. If the potential return on investment outweighs the debt, then it would be a good idea to go for it. Underestimating costs or overestimating revenue is something that should be avoided. 

While it is also possible that you had been waiting for the right time to jump ship and finally when it is here, but you don’t have the cash to fund it. Well if it is your dream to go big and it requires you to make the best use of a given opportunity, then going ahead with your plans would be a good idea. Just that you need to ensure that the financial feasibility is well in line with everything you do. 

While these are some of the popular reasons most SMBs may opt for a loan, many other reasons can lead to the same decision. So whatever your reason may be to apply for a loan, remember that as long as the value your decision will add to your business is higher than the loan’s cost, there is no harm in obtaining debt.

Bringing this to a close, we at Lebit Finance offer the support and surety that small business owners require when seeking monetary backing. Our platform is geared to assist small business owners in meeting internal targets and leveraging new financing opportunities. If you’re looking for the kind of services we proved, we’re here to help!

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While these smaller firms are an essential fragment of the US economy, they’re usually financially fragile — with limited cash on hand and fewer resources to buffer even a minor financial shock.

Lack of capital is among the most significant challenges small businesses face when operational. As they gain a competitive advantage in the market, additional funding becomes necessary. Existing capital isn’t always sufficient to support growth and achieve organizational goals in the long-run.

The key characteristic of successful SMEs is that they never lose sight of their objectives. They realize that their success isn’t solely dependent on their dedication to said targets; they also require sufficient funding. Thus, business loans serve as powerful tools for SMEs to survive and sustain. 

There are various reasons why businesses take out business loans. Here are the top seven:

1. Improved Expansion and Growth Rate

Successful businesses never stop growing and broadening their horizons, and there’s always room to grow even with maximal revenue. Depletion in cash reserves can often cause delays in achieving their goals. To capitalize on the everyday opportunities for growth, SMEs take out loans to support their expansion and new investment targets. Hence, business loans help them to accomplish rapid growth in their respective industry.

However, it’s crucial that you have a clear forecast for your revenue when taking a business loan. You have to ensure that your expansion or new investments are profitable in the long run, and this way, you’ll be better able to schedule your repayments.

2. Increased Inventory

Time is money. Although we’ve all heard this expression, it’s now more relevant than ever, especially for SMEs offering seasonal products/services. For example, in the retail industry, your success depends on how ready and prepared you’re to tackle each profitable season. Existing cash-flows can prove to be insufficient when preparing for the holiday season. Successful entrepreneurs don’t limit their inventory, but usually double or triple it during peak seasons. This requires extra capital and a business loan acts as an excellent solution.

3. Capitalize on modern technology and equipment

Every business wants to attain efficiency, and investment in the latest technology and equipment is the ideal solution. Advanced technology can offer countless benefits ranging from fast production to improved security, increased employee productivity, better communication with the customers, and lower operational costs.

4. Managing Cash-flow Issues

Among the biggest challenges next to business operations is cash flow issues. For instance, if you don’t have enough funds to pay the suppliers or rental fees and haven’t prepared for this in advance, it can spell disaster for your business.

Successful business owners always have a method of effectively managing a cash flow crisis. Securing short-term loans is the secret to achieving a consistent cash-flow. It can help pay for cyclical bills, rental fees, employees’ salaries and take care of other operational costs necessary for keeping your company afloat.

5. Building a Credit Profile

Being financially savvy, especially when it comes to money management, is one of the key requirements of becoming a successful entrepreneur. Having a master plan for the future of your business is also a key trait. 

SMEs never stop searching for ways to achieve increased growth and higher returns. To this end, securing a business loan is one solution. SME’s usually start with the smallest loans on offer and repay it on time. As you continue to make regular payments, you become known as a responsible borrower, leading to a high credit score.

With a higher credit score, licensed moneylenders offer larger loan packages. Another perk of having a good credit profile is low-interest rates. However, be mindful of your own limitations and only take out a loan if you’ll be able to pay it with interest rates.

6. Costs less than Equity Financing

When it comes to equity financing, it’s possible to improve cash flow; however, there are a lot of downsides. In the long term, this type of funding can be significantly more expensive. It requires you to give up a chunk of your business. 

Whether it’s 5% or 10%, you’re losing out on that money within the life span of the business. Loans, on the other hand, have limited repayment terms. It might take 2 to 3 years or more but will not span across the business’s entire lifetime. Further, it’s a wise decision to take out a loan, since you can opt for either a fixed or a flexible repayment option.

Smart entrepreneurs leverage debt financing since they know that they still have full ownership of their business. This is also a wise choice because of associated tax benefits (it’s tax-deductible). Forecasting is also a breeze since you either have a fixed or flexible repayment with standard interest rates and fees.

7. Capitalize on Strong Business Opportunities

A keen entrepreneur always keeps his doors open for opportunities. There will come a time which calls for huge discounts on bulk purchases, super low rental fees, or discounted equipment pricing. 

Taking out a short-term loan is an ideal solution to capitalize on these fleeting opportunities. By offering discounts, it’ll allow your business to increase its revenue significantly. Purchasing capital-intensive machinery can also increase productivity, reducing overall costs. This is mostly observed in the manufacturing industries.

When obtaining capital to support your growth opportunities, it is ideal to conduct a revenue forecast. By doing this, you can recognize the return on investment (ROI) and make an educated decision. It’s important to see how much a loan can contribute to your revenue.

Conclusion

An SME will achieve success as long as it’s consistent in reaching business targets. A successful business never stops searching for ways to increase its growth potential. Getting a business loan is an excellent option to achieve long-term success for your business.

If you are a new SME owner with less than one year in the industry, it might be challenging to seek a loan, especially with traditional lenders. Interest rates offered might also be high. But with a licensed lender, you have the option to choose from a variety of loan packages to suit your needs. You also have the option of a fixed or flexible term, paying only what you owe plus interest.

When you’re ready to take your business to the next level, don’t be afraid to take a Business loan. Lebit Finance is here to help you. Visit our website to learn more about our lending services.

The post 7 Key Reasons Why SMEs Take Business Loans to Become Successful appeared first on Lebit Finance.

A study by U.S. Bank showed that 82% of small businesses fail due to poor cash flow management and lack of financing. Investing in new equipment, hiring more workers, or renovations are expenses that can be quite hefty. This is especially true for new businesses because they have to wait for sales to pick up and generate a considerable amount of revenue to start aiming for future business growth.

Obtaining a business line of credit is one of the many ways through which you can provide stable financing for your business, allowing it to flourish and grow without being held back due to a lack of monetary support. Let’s find out more.

What Is A Business Line Of Credit?

Often compared to a credit card’s workings, a business line of credit is a loan option that is both flexible and convenient.  It provides businesses with a maximum credit limit based on your credit rating, current cash flow, and other factors, including the lender’s requirements. Unlike a business loan, a line of credit does not involve a lump-sum disbursement. You can withdraw any amount of cash from your line of credit whenever you need it.

A business line of credit is of 2 types. Businesses can acquire either a secured or an unsecured line of credit. In a secured credit line, the lender benefits from having collateral in terms of any asset(s) that the business owns. An unsecured line of credit does not require declaring any collateral.

In the latter case, the lender assumes a greater risk, but the borrower is free from the risk of having their assets seized.Even though an unsecured credit line reduces certain risks, a secured one provides other benefits essential for newly established businesses and startups. Here are 3 reasons why a secured line of credit is a better option than an unsecured one.

1. Higher credit limit, lower in Higher Credit Limit, Lower Interest Ratesterest rates

The maximum credit limit and the interest rates are dictated by the amount of risk the lender is taking. In a secured credit line, the lender’s risk is lower because they have the security of having collateral to fall back on if the business defaults on loan repayment. Due to a reduced risk factor, lenders are more likely to offer a higher credit limit and significantly lower interest rates on your offer.

Such leeway is extremely beneficial for SMEs. A higher credit limit means you have more funds to work with. If you’re planning on getting more inventory or expanding your business operations, you could easily start financing the new business plan. Thus, a secure line of credit proves to be more reliable and profitable in the long run. Additionally, the lower interest rates make it easier for you to pay back the credit. It’s easier to make payments on time, especially for SMEs, which tend to have fluctuating profits.

2. Longer Loan Repayment

With a secure credit, lenders undertake lower risks, which reduces interest rates and gives lenders the margin to offer an extended loan repayment period. The more valuable the asset you can offer as collateral,

the more likely it is for a lender to offer longer repayment terms. This is ideal for small businesses that take out the loan to make up for sudden financial losses to stay afloat. A longer repayment plan gives businesses more time to accumulate revenue and repay the loan quickly once the situation becomes more stable.

3. Lower Credit Ratings Are Accepted

It can be challenging for many businesses with poor credit to apply for financing. Sometimes, a secured line of credit becomes necessary if your business credit rating isn’t up to the mark. Lenders mainly consider your credit score since it’s a measure of how likely you are to repay the loan. Putting up a suitable asset to back up the loan will convince lenders to overlook a less than optimum track record. 

Even if your business does not have a good credit rating, you can revamp and gear your business towards a better trajectory. Once you have a revised business strategy, you can use a secure line of credit to get your hands on much-needed cash to explore new opportunities for business growth!

However, in some cases, lower credit scores are an indication of higher risk to lenders. As a result, they might charge a higher interest rate on loans. Despite that, interest rates for a secured credit line will still be lower than an unsecured line of credit. This is why it is essential to acknowledge that obtaining a secured cash works in favor of SMEs with low credit scores.  

If you are part of an emerging startup or SME looking to get a secure line of credit for your business, you can start by getting in touch with us at Lebit Finance. Our expert financial advisors and consultants will help you find the right solutions as soon as possible.

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