Your Bank and Business Financing – Reality Check

Business owners and managers want to compare equipment finance companies to their bank and for a good reason; a bank is a company’s first point of reference when borrowing money or financing equipment or an expansion project. A bank is the most obvious place to start and a secure place to store your money and use their multiple services. But what a bank does not do well, both historically because of their structure and the recent tightening of the credit market, is offer business financing for capital assets (equipment). Yet many people get confused when looking for an equipment loan because they are not seeing the whole picture; this is a case where you definitely want to compare apples to apples to get the best results.Here are a few points to compare; these are not set in stone but based on years of experience, these trends apply a majority of the time.1) Total Dollars Financed – banks normally require that you keep a balance of 20% or 30% of the equipment loan amount on deposit. This means they are only financing 70% or 80% of your equipment costs because you have to keep a certain amount of YOUR money in a fixed account for the duration of the loan. In contrast, an equipment finance company will cover 100% of the equipment including all “soft” costs and will only request a one or two month prepayment. No fixed deposits required.2) Soft Costs – banks also will normally not cover “soft” costs like labor, warrantees, consulting and installation which means these costs come out of your pocket. An equipment finance company will cover 100% of the equipment price including “soft” costs and some projects can be financed with 100% “soft” costs which no bank would ever consider.3) Interest Rates – this is the most popular question in the finance world; what’s my rate? If the bank requires 30% deposit in a fixed account then that automatically raises a 5% interest rate to a 20% rate. Now people will argue that you get that deposited money back at the end of the term but that is money which you do not have access to and has an opportunity cost associated with it. Equipment finance companies target their financing rates between 3-5% for cities and 7-9% for commercial financing which is a real fixed rate and not under-stated as the bank rates can be thus independent finance company rates are very competitive with “true” bank rates.4) Process Speed – banks often take weeks to review and approve a finance request while independent finance companies normally only take a few days and can work much more quickly. Finance underwriters only review business financing while a bank has other types of requests clogging their channel.Banks also have many more levels of approval and review to pass while independent finance companies normally only have two, underwriting and credit committee. Even with complicated deals, the finance company’s process is always faster.5) Guarantee – banks require, as a standard part of their documentation, a blanket lien on all assets, both personal and business assets are used as guarantee against default on the loan. Your business assets, your home, your car, and your boat can all be on the line when entering into a bank transaction. This may also be the case with an equipment financing company but if your business operation is solvent then only your business will be listed as collateral and not your personal assets; this is known as a “corp only” approval.6) Monitoring – banks require yearly “re-qualifying” of all their business accounts which means on the anniversary date of your loan each year, you must submit requested financial documents to assure the bank that everything is going well and nothing has affected your business in a negative way. Finance companies do not require anything during the term of the loan or finance as long as the monthly payments are made on time. Nobody will be checking into your business or policing what you do.When comparing your bank financing to an independent equipment finance company, you have to make sure you are evaluating all the key parameters, not just one. Clearly, the fine print and terms of the transaction are more important than the big numbers. Banks work well within their space but have proven time and again not to be as flexible or solution-oriented as an independent finance company which solely focuses on business lending can be.

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I Have a Small Business, Should I Advertise?

First of all, let me give you a pat on the back for taking the bold step forward. As a person who has been through it myself, I know making the decision to start your own small home-based business is not an easy one. So, congratulations, from the bottom of my heart, is in order. Take comfort in the fact that not a lot of people dare make the step and go to their graves wishing that they had taken the step…a small and seemingly insignificant one…forward.So now that you’ve given yourself a headstart or a new beginning, it’s time to get serious. How do you get business? Should you advertise? How big should your budget be? where do you start? How extensive should your online advertising strategy be? how much are you supposed to spend on advertising online? Is AdWords the only way out of the realm of invisibility…no, the right question is, is it the only door open?One word of advice, from one small business owner to another…never put all your eggs into one basket. There are lots of ways to find exposure and we should never limit ourselves to just one method. That would be like putting all your hopes into one advertising avenue and when it crashes or just doesn’t turn out the way you have hoped for it to turn out, your hopes crashes along with it.We want to prevent that and a small business, especially a start-up one, cannot survive without an emotionally trodden owner. The first thing you need to do is to adapt a BIG PICTURE mindset for your small business. As small as it is, advertising and marketing needs to be done in incorporating larger scale in order to reach maximum number of people within the shortest period of time using minimum the cost. Impossible? Think again.Now, the thing is that you can promote your small business in a big way using multiple methods of advertising and marketing. For a start, tell everyone about it. when I first started out my small writing and designing business, I printed out 500 business cards and handed 10s to people I am familiar with, 5s out to people I am QUITE familiar with and then 1 to those I’ve just met. Ask your friends and family members to keep your business card handy and hand them out to the people they meet whom they think might need the services that your small business provides.Contrary to popular beliefs, it IS POSSIBLE to advertise for free on the internet. I won’t go into that in this article since I know I can write a whole book on that one alone – but it’s possible and many people all around the world has been generating reasonable to mind-blowing traffic to their websites with proper search engine marketing, online promotion strategies, tie-ups, partnerships, affiliations, link exchange, article marketing…just to name a few. Free advertising is possible but it takes a heckuva lot of time, so you need to have the patience and diligence for that one.While advertising for free is possible, you should not rely on this method alone to get the word out because it might take YEARS! And I know you can’t sustain the cost of maintaining your small business this way, so you’ll definitely need to advertise. On whether to use a big or small budget, it all depends. I would strongly recommend jumpstarting traffic with advertising like AdWords or small, random banner advertising. But like I always say, don’t get ahead of yourself…keep to your budget and try to worm your way in to see if you can barter it in for something worth your time.Another popular method of getting the word out for small business owners is to populate the internet with links into their website via a network of people. Facebook is mighty popular these days and although I don’t know how long the fad is going to last, it’s worth a look. Article marketing is another fantastically effective (but time consuming) method of getting links into your website. Last but not least, you can always spend a small amount of money printing out brochures or small flyers, stand on the road side and hand them out to passer-bys.I have a friend who owned a small boutique and online business. With a tiny budget, she spent approximately USD$150 a month printing cute little bookmarks and handed them out randomly to people in shopping malls. She had the guts, determination and ‘desperation’ to just walk up to someone and introduce herself this way. “Hi, you don’t know me but my name is Lilian. I have a small boutique down the road and I would like to give you this little bookmark. The website address is here and there’s my phone number of it. Have fun shopping. Bye”. And she’d just walk off.Today, Lilian owns four boutiques in strategic locations and earning a handsome income from them. All because she started small and dared to just do it. (Pssstt! I have a feeling she’s earning even more than me now but…let’s just keep it between you and me.)

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How To Find and Size Up Good Businesses for Sale

Purchasing existing businesses for sale from someone who is looking to cash out of their business or retire is a great way to become an entrepreneur! You buy an already-proven and profitable business, and then use your skills and acumen to grow it further. However, finding owners who want to sell is not always easy. Consider this your guide for finding and sizing up good businesses to buy.Business Opportunities Rarely AdvertisedMost business sales are rarely known, largely because companies do not want the word getting around to their employees and customers, who might panic about the change. Instead, most business owners looking to sell are left with no choice but to wait patiently for a quality buyer, or use a broker to market their deals.Call-Mail-CallOften small business lawyers may know of a client who wishes to sell, however, it is typically best to focus on a particular industry and just contact owners directly. To do this, simply start calling business owners in your target industry, and ask if they know somebody who might be interested in selling their business. Often it helps to not expect an immediate answer, but instead give them some time to think about it.Instead, follow up after a week or two by mailing your business card along with an inquiry letter. Lastly, call again to see if they have any ideas. This strategy communicates the fact that you are a serious buyer. Even if the owners you speak to are not willing to sell, they usually know someone who is.Trade NewslettersIf the above strategy is not your cup of tea, or does not bring you quality leads, another thing you might try our trade newsletters or industry magazines. Often these will have classified ads for business owners in the industry looking to exit. These can be a great way to help you build leads in a particular industry.Business MagazinesBusiness publications, both those dealing with a particular region and particular industries, also have listings or even write ups of business owners who may be reaching retirement age. Many business owners in this stage of life want to retire, yet are unable to because they do not know what they will do with their business. You could be just the answer, by giving them a way to keep their legacy alive, but leave more time for golf and grandkids.Build Your TeamFinally, one of the best ways to both find deals and evaluate opportunities, is to surround yourself with a network of business professionals who can provide resources or advice. These should be investment bankers, lenders, business brokers, and venture capitalists. This way, not only will you be guaranteed to find a business to buy, but you will have a team of advisors in your pocket who can help guide the way.

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