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Shopping for a lender is important when trying to match your borrowing with the other facets of your business plan. It will open opportunities for obtaining competitive rates.
To get an idea of the number of financial institutions lending money to businesses, do a search of the web. For instance, if you enter "small business loans" on Google you get 4,000,000 responses. You can shorten the list by adding the name of your community and other constraints.
The most obvious sources of funds are the commercial banks. They are most accessible because we go there daily to use their various banking services. Collateral loans (giving rise to, "they lend you money when you already have money"), term plan loans, operating loans, and first mortgages are their standard instruments. Some call these the "lenders of first resort."
Specialized or 'near' banks operating under special government regulations to focus on particular industries. Farmers and users of major equipment are typical clients of these capital leasing companies. Large corporations provide the seed money for these operations. Sales representatives are usually the first line of contact.
Factoring of accounts receivable is conducted by banks and private lenders. The intent is to finance your production costs by assigning to them your expected collections from customers.
Lenders of 'last' resort are of two main types: (1) government agencies supporting businesses in specific geographical areas or specific industries to further political agendas, and (2) private lenders exploiting a niche market with second mortgages and other instruments that balance the higher risk with higher interest yields. Both of these sources conduct extensive advertising in your local media.
Venture Capitalists are not for you, unless you are planning to go BIG! Negotiations require huge resources of time and energy.
Credit card companies are active in encouraging businesses to take advantages of their convenient services. The interest rates are among the highest.
You owe it to your business to investigate these valuable sources of funding, so that you can find the best match for your needs. Save yourself a lot of time and disappointment by doing some research before going through an application process. Save yourself grief from having a lender who does not have an interest in the success of your business.
Stories from members will add great value to these maxims.
Please post your story by emailing it to max@unclemaxsays.com.
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