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Borrowing from banks is every small entrepreneur’s nightmare. One gets turned down for bank loans for a variety of reasons, including lack of assets, collateral and business experience. Don’t despair, however. There are several common types of alternative sources of capital for setting up a business available to young companies.

Savings and Investments

The first source you should consider is your own savings and investments. One disadvantage though of self-financing is that if things did not turn out the way you want them to be it will be your money that goes down with the ship.

Angel Investors

Angel investors are affluent individuals who provide capital for a business start-up, usually in exchange for ownership equity. These individuals are looking for a higher rate of return than would be given by more traditional investments (typically 25% or more).
Angel investors are an excellent source of early stage financing and high-growth start-ups. They are often willing to tread where there is too much risk for banks and not enough profit potential for venture capitalists. And since angel investors are often retired business owners and executives, they can also provide valuable management advice and important contacts.

Peer to Peer Lending

Peer-to-peer lending is a means by which borrowers and lenders may transact business without the traditional intermediaries, such as banks. It can also be known as social Lending, ordinary people lending money. The process may include other intermediaries who package and resell the loans–examples are Prosper.com and Zopa-but the loans are ultimately sold to individuals or pools of individuals. Prosper.com, which is available in the US only, offers business loans for small companies.

An enabling technology for peer-to-peer lending has been the internet, which connects borrowers with lenders, for example through an auction-like process in which the lender willing to provide the lowest interest rate “wins” the borrower’s loan. (wikipedia.com)

Money pool

Instead of a bank loan, borrow smaller sums from several family members, friends, or colleagues. The lenders have no legal ownership in the business, but can act as advisors and cheerleaders for your venture. Remember though that nothing causes tension in a family like lending money that is never paid back.

Credit Cards

Many business owners use their credit cards to fund their businesses. Credit cards offer the ability to make purchases or obtain cash advances and pay them at a later time. But as a long-term financing method, they can be expensive. Most credit cards will charge you 2% to 4% of the face value of a cash advance as a “fee” making this method of financing very risky.

Bootstrapping

Another source of capital for setting up a business is bootstrapping. It is a way to finance a business by saving rather than borrowing money. It’s being as frugal as possible so your business can be started on as little cash as possible.

The use of private credit cards is the most known form of bootstrapping, but a wide variety of methods are available for entrepreneurs. Other forms of bootstrapping include owner financing, minimization of accounts receivable, joint utilization, delaying payment, minimizing inventory and subsidy finance.

While bootstrapping involves a risk for the founders, the absence of any other stakeholder gives the founders more freedom to develop the company. Many successful companies including Dell Computers were founded this way.

Venture Capital

Venture capital is not suitable for all entrepreneurs. It is an option for small companies that have a seasoned management team and very aggressive growth plans; however, venture capitalists will rarely invest in small businesses that have no intention of going public. If a company does have the qualities venture capitalists seek such as a solid business plan, a good management team, investment and passion from the founders, a good potential to exit the investment before the end of their funding cycle, and target minimum returns in excess of 40% per year, it will find it easier to raise venture capital.

The venture capitalist objective is to invest in a company for a short period of time – say 5 years – and then cash out of the business while making a significant return on their investment.

Amy Grace Remollata is working for http://www.agentsofvalue.com, a webmaster staffing company located in the Philippines. Her current project is for http://www.prosper.com, America’s first online marketplace for people to people lending.

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Christmas is around the corner, wild spending defies every logic and bills are being pushed forward, next years resolutions are to cut down on unnecessary goods and to be wise with money.

You fake a smile and try to be merry, deep down you only know how you are struggling to make meets end.

If things were not bad enough, your brother has asked you to lend him some money, so what do you do in such a situation.

Bad credit is a causing you concern because you were just about to apply for a loan.

If you have been a good customer for a long period and the banks have accounts of this, then instead of personal loans with bad credit you might try to look for an overdraft facility or an extension on your existing loan.

How bad is bad credit?

Bad is not bad at all nowadays, in fact it is good to be bad, you get to choose from so many options.

Put it like this, bad credit is become an acceptable standard, as long as it’s not cause for concern.

What could be cause for concern?

Well if you are in full time employment and have kept payments stable, your situation has not swung drastically from left to right. There should be enough positive response from the banks to apply for a personal loan.

The only reason why personal loans are awkward to achieve is because of customer’s own background and they often have nothing to back up the application.

Personal loans, bad credit and overdrafts fall in the same categories.

What are the options?

* Payday loans
* Overdrafts
* Re-mortgages
* Secured personal loans

Documentation?

Your bank might need to see proof of tackling bad credit, and your personal credit history and efforts in improving the situation.

So always keep all correspondence and documents in a safe and secure place.

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Proponents of pooled funds argue that there is a great uncertainty on the stock market, and that it is dangerous for the private investor to play there, as they get prone to high losses and costs. Although there is a grain of truth in this, the argument for holding an investment in a unit trust or investment trust is just as good as that for holding equities. In the long term, returns from holding equities have outstripped returns from safer investments such as corporate bonds, gilts and deposits. In spite of these gains, the fact still remains that professional investors have some advantages over private investors. The advantages enjoyed by professionals span three main areas, namely:

(i) information gap

(ii) economies of scale and

(iii) expertise, and these shall be considered in turn.

Professional investors, fund managers to be specific, have become increasingly powerful as the strength of institutional investors have grown over recent years. In the course of using their powers to instil goal congruence in corporate governance, professionals have had more access to insider information from companies than the private investor. Directors are quick to part with such information, if a denial will cost them their prestigious jobs. It is claimed that when the private investor buys a share in a company, he has bought ownership, implying access to information to help him to vote sensibly when making corporate decisions, but this is not what happens on the field. This disparity in information makes the private investor toil to no avail to identify a winner, as any benefits inherent in such shares must have already being factored into the price by the time they are discovered.

Private investors have to make do with usually adulterated media information on investment, whereas the professionals have sophisticated analytical machines and tools, readily at their disposal, on the back of the strength of their pooled funds. As if this is not enough, there is as well the expertise they can flaunt.

Professional investors also gain enormous advantages by exercising economies of scale. This occurs in various aspects of their operations, including R&D (research and development), administration and transaction costs. The availability of greater financial resources to the professionals enables them to employ the services of experts to research into detail the companies, products, and services they want to invest in. A lot of cost is saved, since one expert can consider several companies, products and services on the same project. This is a benefit the private investor cannot dream of. There are impressive cost savings when it comes to paying fees and commissions on transactions, since a lot of the securities will be considered in bulk.

In spite of the above-mentioned advantages, one area in which the private investor beats the professional is ‘flexibility’. The private investor only have to invest in a stock that will provide the desired return and does not have to invest just to keep up with the market, like the professional. Fund managers also have to operate within the confines of the styles prescribed by their trusts, whereas the private investor can employ a ‘free’ style in investment. Indeed, to his own detriment, he can sell all the shares in his portfolio, go and bask in the warm sunshine of Spain, and come back to invest whenever he wants; such flexibility is totally out of the reach of the professional. As an aside, with the application of due care and technique it is possible to select a share that will provide long-term returns, but there is no method for choosing a good fund manager.

It is true that there are fluctuations in the stock market and can lead to losses for the private investor. Equally, there are a lot of fund managers who make losses and fail to achieve their targeted returns. Either side of the coin has its own ups and downs, private investor or professional investor. It is perhaps wise to combine the two in a portfolio, to even out the negatives with the positives.

E-mail: davido312@aol.com
Web: http://www.investmentyouneed.com

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First of all, it’s a credit crunch not a credit freeze!

Sure, banks are more cautious about their lending, but when were they not? The reality is that the majority of banks are lending, and to remain profitable they will continue to lend to small business owners. Those that understand the situation are acting now!

“Buy low, sell high”

With the current economic low, it is the best time to get financing at a low rate, with lower-than-ever requirements. Big banks like Citi and HSBC are making their decisions based on business credit scores, not personal fico’s.

Personal guarantee is a promise made by an entrepreneur to personally repay company debts if the business defaults. It is a way for banks to protect themselves, while reflecting the seriousness of the business owner to repay debts. Without a personal guarantee, they are thought to not believe in their business and are high risk. Small business owners don’t want to provide a personal guarantee if possible. Even if they are diligent about repaying debts, some unforeseen catastrophe may happen preventing a loan payment. Then the bank seizes personal assets.

Using personal money and assets for financing involves a risk in damaging personal credit because the credit score reflects every time a financing inquiry occurs. The more business credit is personally guaranteed, the less likelihood of getting any future credit for personal use.

Banks might be willing to waive the necessity of a personal guarantee if they have the assurance that a business can stand on its own. They need to see history of excellent business credit, continued growing and increased revenue.

Regardless of personal credit history, the goal is to limit use of a guarantee, to build business credit, to no longer use personal credit, to limit personal liability, and to protect personal assets from any business losses. Business credit provides greater access to company purchasing and lower interest rates on loans, therefore saving money.

To get good business credit without personal guarantee, a company must register with all three business credit reporting agencies, find vendors, suppliers and credit card companies to give some credit for the business without using a personal credit score. They must ensure all business payments are reported to the credit bureaus so they can track keep track. The goal would be to attain a minimum of 75 rating in credit, and minimum 630 FICO score, based on payment history and trade references. Apply for 3 to 5 retail business credit cards that don’t require a personal guarantee.

Lenders look for current payment history, D & B rating, years in business, trade and banking references, aging receivables, business tax returns and sometimes owner/office credit score.

Ilya Bodner’s Specialties:

Leadership, Enterprenuerial Spirit and Mind, management, negotiation skills, determination for success, understanding and willingness to work hard

Sincerely,

Ilya Bodner
Small Business Owner
Initial Underwriting Group

*Breaking Down The Barriers To Small Business Financing*

http://www.initialunderwriting.org

photo credit: HAMED MASOUMI

It is a toss up sometimes if our experiences are going to be pleasant or not. When borrowing money online, you must have some things in mind before you pick a lender.

A customer needs to be informed and ready to ask important questions regarding their transaction to safeguard themselves. There are a few quick and easy things you can do to ensure that your loan application goes smoothly and ensure that you are protected from fraud.

1. Is the Company Real or Just a Website?

Real companies will have a physical address listed on their website. This information should be easily found and not hard to locate at all. Be wary of post office box mailing addresses. Compare the address to a listing in the yellow pages online or call the phone number to make sure it is not fake.

2. Where Are They Located?

The company may have a real location but they may not be located in the United States. Making sure they are headquartered in the U.S. allows you to take advantage of federal and state lending laws and legal protections.

If you borrow money from a lender out of the U.S. you are doing so at your own risk as they are not held to the laws and restrictions in the United States.

3. Ensure the Site is Safe and Protected

To tell if the site you are on is a secure one before you begin the application process there are two things to look for.

A. There should be a yellow padlock icon at the bottom of your browser winder that indicates you are on a secure connection.

B. The web address should start with “https” and not just “http”. Some browsers actually give you a warning window for fraudulent websites.

4. Do They Adhere to the Truth in Lending Act?

Make sure that you are told what your interest rate and APR will be before finalizing the application. Rates should be based on your credit history so it therefore should not be the same for every person who borrows.

Payday loans don’t work this way, but you should be told what your interest rate and fees are. If you are not given the information quickly and easily, you should walk away and consider another lender.

5. Are Allotment Payments Available?

Making allotment payments keep you from losing or forgetting a bill when you move. It is illegal for a lender to make this a requirement and should not be considered into your loan decision. If they offer it, it can be an advantage to you.

6. Check the Better Business Bureau

If the site has a “BBB Reliability Program” icon on their website, click it and see if it takes you to the BBB website. This icon can easily be copied and pasted to any site. Or go to the site yourself and look them up individually. Check for complaints and resolutions before making your decision to use that lender.

7. Does the Lender Help You Determine if You Can Pay the Debt Back?

Any company that loans you money should be leery about giving you more debt than you can handle. Most companies will check your debt to income ratio to determine if you are getting in over your head. It is your responsibility to pay the loan back so make sure you are dealing with a lender that will help you stay afloat.

8. Satisfaction Guarantee

A company that offers great products and great customer service will offer a satisfaction guarantee. Online lenders shouldn’t be any different.

9. Your Privacy is Important

The privacy policy should be listed on the website and be easy to find. Look for this before you even start your application. Read it thoroughly to protect yourself and know what you are getting into. Find out how that company will use, share and protect your information before signing on the line.

10. Peer-to-peer Lending…BEWARE

There is something online that is called “peer-to-peer” borrowing, a person loans money at an agreed upon rate to someone else. These sites are trusting individuals that you don’t know, may not care much about your best interests and may not use your information in a legal way. They also are not held to federal lending laws so be very cautious with these sites.

11. Do They Offer Financial Education Resources?

Good lenders want their consumers to make smart financial decisions. By having resources on their site they are giving you that chance.

12. Your Credit Report is Yours to Protect

One of three companies should be used to check your credit (Experian, TransUnion or Equifax). Some lenders will only report negative items. Ask the company what their reporting policies are. If they do not do any credit reporting, beware.

These tips can safeguard your transaction and ensure an easy and painless loan. Be an educated consumer armed with knowledge. Good luck!

Michael New Jr. is an authority in the financial industry. He has written hundreds of articles relating to consumer services and Payday Loans Nevada.

Contact Info:

Michael New Jr.

(866)294-4672

miken@checkcity.com

http://www.checkcity.com

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In the past getting a loan used to be a pretty intimidating process, getting dressed in your Sunday best, looking your best and venturing into town to the bank for a date with the Bank Manager. Once there you used to have to throw yourself at the mercy of the manager and plead for them to lend you money, getting declined for a loan was often a demoralising and embarrassing process.

These days applying for a loan is much more stress-free with the decision on whether you get given the money being based more on details such as your income, credit report and other factors, but still people can get turned down for reasons other than a poor credit record. In light of the recent credit crunch many banks are being more cautious about whom they lend money to and in some cases have ceased offering unsecured loans.

Luckily there is another option for those turned away, and no it isn’t visiting the local mafia! Peer to Peer Lending is a recent phenomenon in the lending business where organisations bring people looking to borrow money together with people who are willing to lend money. Companies such as Prosper, Zopa and Lending Club offer this service and have proved popular.

These personal loans are a bit of a hit and miss though with some lenders sticking to a high Interest rate in order to make their investment worthwhile, lenders are warned that the larger the amount they are willing to lend is, then the more risk they are putting themselves into. Obviously all loans from these services are not secured loans and so there is little equity for the lenders to be assured by.

Lenders are urged to check the site’s procedures for getting repayments as in some cases the lenders may default on their repayments and this is to be expected as the type of borrowers this scheme appeals to are mostly people who have been deemed high risk by the banks and refused conventional loans.

If you are struggling with debt and other expenses then maybe consider arranging personal loans for smaller amounts or if you need larger amounts and own property then consider secured loans as an option. As with all loans ensure you are able to make the repayments and consider the APR.