What's the Best Way to Secure Small Business Loans Today?
Small business loans are critical to the long-term success of virtually all new companies. You may be planning to secure a loan now to start your company or you may be fortunate enough to be able to finance it from your savings. Perhaps you will use money from a personal line of credit--such as a home equity line of credit. In any event, you still need to nurture, cultivate and firmly establish business credit for the long-term health and viability of your business.
If you are in your own business long enough, there will come a time when your very survival--the life or death of your business--will depend on ready access to cash. We heard about it happening in the Great Depression and we all witnessed it personally in the Melt Down of 2008! So whether or not you need the extra bucks right now, take the steps to to set up a loan and lines of credit.
In this section, our editors take to the streets to find out what real life entrepreneurs are doing to survive and what newbies, about to start a business, should be doing in the realm of business credit and finance.
Interestingly, an interview we did several years ago on business finance and credit applies today more than ever. It involved a wise and successful business person in his 70s who started a company in 1955. He detailed for us the importance of having readily available cash for emergency situations and to take advantage of incredible product and materials buys.
He said that new businesses have to go that extra step, as difficult as it might be, to set up business lines of credit, arrange for loans, get business credit cards and the like. Then he told us that businesses should not rely completely on the credit markets for emergencies. He told us that all businesses should keep at least two-and-a-half years of operating expenses at the ready in short-term, liquid investments. He said that amassing this sum is not something you can do overnight but you can achieve it over time. He said that in ordinary slowdowns and recessions, you won't need this kind of money but when a big one hits, you will. We think the Big One hit and you do!
After the Melt Down of 2008, we followed up with him about his strategy. He told us that he--like other businesses in his industry--had had their credit reduced or eliminated. Nothing personal, the bankers told him. He said that this is the first time since he started his business that he will have to dip into this reserve. He said that he got these words of advice from his businessman father who had to use his own cash reserve once in his business career...in the Great Depression. His advice for new entrepreneurs starting in business today is this: develop relationships with banks and lending institutions and create lines of credit to get you over serious economic downturns. But he also advised saving money and building up cash reserves to tide you over the rough spots in business. We also suggest that you talk with your accountant or CPA about this.
Frequently Asked Questions on Small Business Finance
Here are a list of frequently asked questions you need to ask and answer to your own satisfaction.
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