Five Tips for Successful Business Financing
(FeatureSource) - So you are ready to take the plunge and go
into business for yourself. But like many entrepreneurs, you are finding the
amount of money it takes to get a business off the ground both mind-boggling and
discouraging. For many, getting a bank loan is not a viable option, nor is
running up bills on high interest credit cards. In fact, the Small Business
Administration estimates that 95 percent of company start-ups are backed by a
patchwork of savings and personal loans.
There's no doubt that borrowing money from friends and relatives could be
stressful and risky. While there are over seven million outstanding loans
between individuals at any given time in the U.S., according to the Federal
Reserve Board, the rate of default on these person-to-person loans is fourteen
times higher than that of bank loans.
CircleLending (www.circlelending.com), the nation's leading loan
administration platform for interpersonal lending, helps individuals create and
manage loans among friends, relatives, and community organizations. If you are
borrowing from or lending money to friends and relatives, or even just thinking
about it, these five tips from CircleLending will get you on the right track.
1. Document the loan terms Handshakes are never enough. Relationships can be
ruined due to misunderstandings about loan terms. If you don't write down the
terms in a promissory note, future investors and creditors will also be wary.
2. Use a fair interest rate Lenders will be much happier about forgiving
payments now and again if they feel that the interest rate is fair. The IRS also
may assume, depending on the terms and conditions of the loan, a rate of
interest (Applicable Federal Rate) on a no-interest loan to a friend or family
3. Avoid balloon payments Balloon payments or lump-sum payments at the end of
the loan term are very risky for both borrower and lender. Borrowers inevitably
cannot save enough to make the balloon payment and lenders inevitably cannot
tolerate renegotiating the loan at the end of the term.
4. Remember the tax benefits It is tempting to avoid formalizing loans among
friends and relatives, but there are tax benefits to using a formal promissory
note. If the borrower cannot pay back the full loan amount, the lender is
entitled to a tax deduction as "bad debt" - but only if the loan was formalized.
5. Enjoy the flexibility The ability to change loan terms, make an occasional
late payment, and react to changing life circumstances makes flexibility the
bedrock of loans among friends and relatives.
CircleLending offers easy-to-use tools and resources to help borrowers gain
access to affordable loans, and helps lenders reduce the risks inherent in
informal loan transactions. And with CircleLending, the default rate drops from
fourteen percent to well under five percent.
Financing Your Home Business
So, you have a great idea for a business and, more importantly,
the know-how to bring it into creation. The only thing you're
missing is the cold hard cash to get started. What are your
options? Fortunately, there
are a number of sources of finance for the fledgling small business
entrepreneur, at least one of which may be right for you.
Applying For A Business Loan: Putting Your Best Foot Forward
You may find that as long as you have substantial equity in a home, good credit, and adequate cash flow that you are a tasty morsel in the mouth of a loan officer. However, if you are short in any of these areas, you are going to have to overcome the bankerís natural skepticism.
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After years of free-spending excess, venture capitalists are revealing a new, back-to-basics attitude that's healthy for the venture-capital (VC) industry, and even healthier for the cash-strapped entrepreneurs it supports.
Now they care about quality more than they ever did before.
Survival Tips For Small Businesses
You've got to know how to
keep your business alive during economic recessions. Anytime the cash flow in
a business, large or small, starts to tighten up, the money management
of that business has to be run as a "tight ship."