To help you secure the lowest possible insurance rate, it’s important to learn about the factors that could be affecting your premium—and how to use those factors to tip the scale in your favor!

Factor #1: Your Driving Record

It’s probably no surprise to you that insurers look at your driving record. They do so to gauge or estimate the risk to insure you. But what exactly are they looking for? Insurers will scan your driving record for at-fault accidents, traffic violations and claims made, usually within the last three to five years. If you’ve received marks against your driving record, you can bet you’ll be paying more for your auto insurance.

The good news: Marks against your driving record usually fall away in the eyes of your insurer after three years. You can avoid being penalized for a less than stellar driving record by driving as defensively as possible and avoiding filing small claims (such as those for hail damage) and paying for the repairs yourself.

Factor #2: Previous Insurance Coverage

If you’re applying for car insurance under a new insurer, your prospective agent will almost certainly look into your previous insurance coverage. He or she will want to know if you paid your premiums on time, how many claims you filed with your old insurer, as well as any other problematic behavior that would increase your risk to insure.

Any red flags in previous insurance coverage will likely result in an increased insurance rate. And unfortunately, if you’ve not been previously insured, you may pay more car insurance until you establish an insurance history.

The good news: You can avoid these penalties in the future by paying your premiums on time, avoiding filing small claims and maintaining a respectful relationship with your insurers.

Factor #3: Your Credit History

According to a recent study by insurance research firm Conning and Company, 92 percent of the nation’s 100 top insurers are factoring credit history into auto insurance premiums.

And while insurers are looking directly at credit scores, they’re more interested at how you’ve used your credit in the past. Insurers will look at the length of your credit history, the amount of revolving debt you have and any collections or late payments to form an insurance score.

And while critics and consumers alike accuse insurers of using credit-based scoring as an excuse to inflate auto rates, there’s a surprising amount of statistics to back the use of insurance scoring. In fact, studies have found that consumers at the bottom of the credit pool file 40 percent more claims that consumers with good credit. Insurers also use your credit history to judge the likelihood of paying your premiums on time. It’s for these and other reasons that insurance scoring is most likely here to stay.

The good news: You can improve your insurance score by paying your bills on time, paying down high existing balances (such as those on credit cards), and having your car insurance premium automatically withdrawn from your account every month.

Bonus tip: Insurers tend to grant discounts for customers with automatic bill pay!

Factor #4: Geographic Location

Can insurers charge you more because of where you live?

Yes.

Statistically speaking, metropolitan areas see greater incidents of car accidents, theft and vandalism. These factors increase the risk that an insurer takes to cover you. Thus, if you live in the city, you may pay more for car insurance than if you lived in a more rural area or suburb.

The good news: While your premiums may go up in urban areas, you can score discounts if your car is kept under a carport, garage or parking structure. Make sure your agent knows of these safety measures—including any electronic theft deterrents in your car.

Factor #5: The Car in Question

It comes as a surprise to most that a brand new car often costs more to insure than one that’s been around the block a few times.

How is this possible?

With all airbags and anti-theft devices in new cars, you’d think your premium would go down. But the fact of the matter is that newer cars can be more expensive to repair and replace—which will increase the amount you pay to cover the car.

The good news: Don’t discount discounts! If your car has multiple air bags and other safety features, make sure your agent is aware of all of them. And you can avoid premium surprises in the future by getting an estimate on your insurance before buying that luxury coupe.

Factor #6: Use of the Car

Believe it or not, your insurer cares how much you use your car and what you use it for. While this may seem relatively unimportant, to an insurer, the more you’re on the road, the greater your chances of getting into an accident—which translates to an increased risk for the insurer.

The good news: Okay, there’s not much you can do about this one. Living closer to work should save you a couple bucks, but if that’s not an option (and sometimes it isn’t), make up for any rate increase by asking about additional discounts, cash incentives and rebates. Chances are good that your insurer won’t bump your premium up much for this anyway.

An Educated Consumer is a Powerful Consumer!

While the final decision about car insurance rates ultimately lies in the hands of the insurer, using the tips above can help tilt the scales in favor of the consumer.

So get your cheapest car insurance premiums by educating yourself on the factors mentioned above. And remember, different insurers may use these factors in varying fashions—so shop around and obtain multiple quotes to find the cheap auto insurance you need!

About InsureMe

Megan L. Mahan is a copywriter and insurance information expert with InsureMe in Englewood, Colorado. InsureMe links agents nationwide with consumers shopping for insurance. Specializing in health, home, life and auto insurance quotes, the InsureMe network provides thousands of agents with insurance leads every year. For more information, visit InsureMe.com.

Large companies have always had a number of options that they could depend on to raise capital for their businesses. The have always had access to a number of alternatives such as selling stock, issuing bonds, bank loans and accounts receivable financing among others. Looking at the other side of the coin, smaller companies, those that have between $20,000 and $500,000 of yearly revenues, have always had a challenge trying to find capital to operate their businesses.

The lack of access to capital has prevented many small businesses from growing and capitalizing on the many opportunities that are available to them. It is not uncommon for small companies to reject large deals or opportunities because they do not have the necessary capital to obtain the resources to service the account. However, even when small businesses do take on large contracts, they find that they are never paid immediately upon delivery of services. Most contract terms demand that the supplier provide 30 to 60 days for the customer to pay their invoice – in effect, forcing them to extend them with supplier credit. The lack of adequate capital resources, along with the necessity to offer commercial credit to clients, creates a “perfect storm” that prevents small businesses from growing and that is very difficult to avoid.

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A number of these issues could be sidestepped if the company had immediate access to working capital. Working capital could enable the business to add employees and resources to serve new clients and larger contracts. It also enhances a company’s ability to extend 30 to 60 day payment terms to their customers.

This paper outlines the most common sources for working capital and provides an evaluation of each source. Each source has also been assigned a score, which summarizes the availability and flexibility of the source.

Scoring System

Each working capital source that has been evaluated has been given a score from 1 to 10. The following features where considered when assigning a score:
# Accessibility to small businesses
# Requirement complexity (e.g. do they require significant financial reporting?)
# Flexibility
# Payment terms

A higher score indicates that the source of capital has a positive outlook on a number of these criteria and is available to small businesses. A lower score indicates that a particular source of capital may not be best suited for most small businesses.

Financial Options
# Venture Capital – Score: 1

Many books and publications tout the benefits of obtaining venture capital to finance a new or ongoing operation. Venture capital 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. 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.
# Angel Investors – Score: 2

An Angel investor is a wealthy individual or group of individuals that typically invest in pre-venture capital companies. That is, companies that don’t meet the current requirements of a venture capitalist but that could meet their requirements with a capital and management influx. However, you should not rule out angel investors completely since there are angel investment groups who focus on the growth of certain communities and will invest in small businesses. The best way to find an angel investment group near to you is to search them on the Internet using a search engine such as Google (www.google.com).
# Banking Institutions – Score: 4.5

Most small businesses owners will first approach their bank to try and obtain a loan or line of working capital. However, unless the business has been in operation for a number of years, has substantial assets and all the appropriate financial records, their chances of obtaining any financing are minimal. Banks, however, can provide lines of credit if the business owner personally guarantees them. This means that the business owner will be personally liable for the repayment of these loans. These lines of credit can provide the business with the needed working capital; however they can be very risky, especially if the business does not produce the expected results and the owner is unable to repay the bank. Business owners should use this method of financing very cautiously.
# Credit Cards – Score: 5

Much like bank lines of credit, 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. It should be noted that credit cards can be a very expensive source of funding. Although most credit cards have reasonably low interest rates for purchases, their cash advance rates can be as high as 17% to 19% due to greater delinquency rates. Furthermore, most credit cards will charge you 2% to 4% of the face value of a cash advance as a “fee”. Much like bank lines of credit, the business owner personally guarantees payment of a credit card. Thus, this method of financing can be very risky if the business does not produce the expected results and the business owner cannot repay the credit card company. Business owners should use this method of financing very cautiously.
# Home Equity Lines of Credit– Score: 5.5

Business owners who are also homeowners have the option of tapping into their home equity to finance their ongoing business operations. Home equity loans and lines of credit have many advantages, such as low interest rates and the possibility of having some portion of it deducted from taxes . This method of financing gained a lot of momentum between the years 2000 and 2004 when interest rates where at their lowest point in decades and real estate was appreciating in value. A major disadvantage if this financing method is that it directly places the business owner’s home at risk. In fact, the business owner is placing a bet – with their home as the potential wager – that the business will succeed and will be able to repay the loan. Much like lines of credit, business owners should use this method of financing very cautiously.
# Small Business Administration – Score: 7.5

The US Small Business Administration (www.sba.gov) provides a number of very viable options to finance business operations. Although the whole scope of SBA services is beyond the scope of this paper, the SBA provides a “Microloan” program. The program objective is to stimulate micro-enterprises and provides loans of up to $30,000 to small businesses. These loans are usually provided through a financial institution or a bank. They have higher interest rates than traditional loans, but their requirements are more flexible, making them more accessible to small business owners.
# Founders, Friends and Family – Score: 7

Friends and family are one of the most conventional ways of financing small businesses. Many entrepreneurs have been able to leverage existing relationships and obtain funding, either as a loan or as a capital investment, for their businesses. Although this source of funding can be easier to obtain that others, it does have some inherent problems. First, the business owner runs the risk of placing the relationship in jeopardy if things do not go as expected and the business defaults. Furthermore, these transactions are usually done with little formality and without written agreements, further complicating matters. If you elect to use this funding option, you should consult an attorney and draw some formal documents that describe the intent and responsibilities of each party.
# Accounts Receivable factoring– Score: 8

Accounts receivable factoring, also known as invoice factoring, has been a source of working capital for large companies for many decades. It is now becoming mainstream and available to mid-size and small businesses. Factoring enables a company to sell their slow paying accounts receivable to a financial company, who in turn pays for the invoices within a day or two. After the sale, the financial company waits to be paid for the invoices. A key feature of factoring is that the factor will take the credit strength of the business’ customers, as it’s main consideration. Until recently, accounts receivable financing was out of the reach of the small business owner. However, enhancements in technology have now turned this method of financing into a viable alternative for small businesses. This means that a small company with little or no credit can leverage a strong roster of clients, sell their invoices and get funding very quickly. Factoring should be considered as an option for businesses that sell products or services to other businesses, rather than to consumers.

Conclusion

Obtaining working capital for their businesses is one of the most important decisions that a business owner can make. Like all important decisions, it should be carefully thought out and deliberately executed. The old adage that “the best time to look for capital is when you don’t need it” is still true. You should spend some time researching the all available options for your business ahead of time, so that you can be ready to “tap” your war chest when the right opportunity arrives.

DISCLAIMER

This paper is written to provide small business owners with an overview of the financial options that are available for their businesses. However, this paper does not intend to provide financial or legal advice as only qualified professionals can do so. The author and Commercial Capital LLC disclaim all liabilities arising from the use of the information on this paper. Please consult a professional before making an important decision about your personal or business finances.

Invoice Factoring Group

Invoice Factoring Group and its small business factoring subsidiary can provide you with factoring and purchase order financing quotes at no cost to you. Marco Terry, its president, can be reached at 866-730-1922.

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The Working Capital Journal is one of several commercial financing resources which should be reviewed regularly by small business owners to assist in keeping up with the imposing difficulties posed by rapid changes in the business finance funding climate. As noted below, there have been some surprising actions taken by lenders as a direct result of recent financial uncertainties. The increasingly complex and confusing environment for working capital finance is likely to produce several unexpected challenges for commercial borrowers.

The working capital finance industry has primarily been operating on a regional and local basis for many years. In response to cost-cutting that has permeated many industries, there has been a consolidation that has resulted in fewer effective commercial lenders throughout the United States. Most business owners have been understandably confused about what this might mean for the future of their commercial financing efforts, especially because this has happened in a relatively short period of time.

Of course, for some time there have been ongoing complex problems for commercial borrowers to avoid when seeking commercial loans. But what has produced a new set of business finance funding problems is that we appear to be entering a period which will be characterized by even more uncertainties in the economy. Previous rules and standards for commercial financing and working capital finance are likely to increasingly change quickly, with little advance notice by business lenders.

Business owners should make an extended effort to understand what is happening and what to do about it due to this realization that substantial changes are likely throughout the United States in the near future for commercial finance funding. At the forefront of these efforts should be a review of what actions commercial lenders have already taken in recent months. The Working Capital Journal is one prominent example of a free public resource that will facilitate a better understanding of the responses by business lenders to recent economic circumstances.

By publicizing actions taken by commercial lenders, this will contribute to these two goals, both of which are likely to be helpful to typical business owners: (1) To highlight controversial bank-lender tactics with a view toward reducing or eliminating questionable lending practices. (2) To help business owners prepare for commercial finance funding changes. To assist in this effort, sources such as The Working Capital Journal are encouraging business owners to report and describe their own experiences so that they can be shared with a broader audience that might benefit from the information. Some of the most significant commercial financing changes reported so far by commercial borrowers involve working capital loans, commercial construction financing and credit card financing. A notable situation of concern is that predatory lending practices by credit card issuers have been reported by many business owners. Some specific businesses such as restaurants are having an especially difficult time in surviving recently because they have been excluded from obtaining any new business financing by many banks.

One of the few recent bright spots in business finance funding, as noted in The Working Capital Journal, has been the continuing ability of business owners to obtain working capital quickly by business cash advance programs. For most businesses accepting credit cards, this commercial financing approach should be actively considered. Business cash advances are literally saving the day for many small business owners because most banks appear to be doing a terrible job of providing commercial loans and other working capital finance help in the midst of recent financial and economic uncertainties. For example, as noted above, restaurants are virtually unable to currently obtain commercial finance funding from most banks. Fortunately, restaurants accepting credit cards are in a good position to obtain needed cash from credit card receivables financing and merchant cash advances.

Obtain candid and individualized advice about commercial financing and business cash advances – Stephen Bush is a business finance funding expert => AEX Commercial Loans and Working Capital Finance.

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With the new TFSA account becoming available to Canadians in the 2009 tax year, many business owners are interested to find out how this account may be beneficial for not only their own financial future, but also that of their business.

TFSAs Primary Benefits

There are several financial benefits of the new TFSA accounts that small business owners should take into consideration.

1. Tax free investment growth- The funds inside of the TFSA will grow on a tax deferred, tax free basis. Any account activity, capital gains or dividends will be treated on a tax free basis which is an attractive feature for active and passive investors.
2. Tax free withdrawals- Tax free withdrawals are attractive as funds saved into this account will not add to the individual’s or the business’s annual tax liability.
3. Catch up or re-contribution limits- This provision allows an account owner to save into the TFSA accounts at future points if they did not take advantage of the annual maximum for prior years. And, if the funds were withdrawn, the re-contribution provision allows the account owner to replenish the funds without penalty. This provision is particularly important to business owners as it will allow them to use the account over and over again to meet their growing financial needs on an ongoing tax free basis.
4. Investment Flexibility- The TFSA account owner can invest in virtually any type of investment within their account, including individual securities, mutual funds, individual bonds, real estate investment trusts, cash investments and some private corporations. This flexibility makes the TFSA a great choice for any investor as they can choose their own investment diversification and balance based upon their personal risk tolerance, their investment goals, their total investable assets and their investment time frame.

Because the funds within a TFSA are so flexible, they can be used to aid a small business in several primary ways. They can be used to start a small business, to fund necessary operating costs of a current business, to obtain additional financing as a down payment or for expansion needs. And as the funds can be replenished over and over again, the account can be replenished and reused for future business needs.

The initial annual contribution limit per person has been set at $5,000 per year. But this amount is set to increase on an annual basis. Any Canadian who is over the age of 18 and who has a social insurance number is eligible to contribute funds into a TFSA, no matter what their stated annual income is for tax purposes.

Canadians need to save for many different purposes over their lifetimes. Reducing taxes on savings can help. That’s why the Government has introduced a new Tax-Free Savings Account (TFSA). It’s likely the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).

The TFSA will allow Canadians to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetimes. TFSA savings can be used to purchase a new car, renovate a house, start a small business or take a family vacation. With the TFSA Canadians from all income levels and all walks of life can benefit.

Download your Free Special Independent Review of the TFSA at: http://TaxFreeSavingsAccountInfo.com/

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In order to succeed as a business you need a definitive and solid understanding of your business’ finances. While many new small businesses are often times financed out of, you the owner’s pockets, most of the others need some extra funds from other sources in order to get off the ground. The truth is however, you need to be smart about your choices.

You need to be selective and pretty keen when it comes to finding finance for your business. A few wrong choices and you’ll find yourself along with your business in a lot of trouble. There are several methods to finance your business especially for small businesses. Here are five places where you can find finances for your business:

* One way to finance your business is through a business loan. Try researching the The Small Business Association for any loans available for what you are doing. They are one of the best sources of information for financing a business. Of all the sources of funding on this list, a loan will require to spend a lot of time and energy to do the legwork for it but it definitely will pay off in the long run. Make sure you have a well-written and clearly defined business plan in order to expect to be approved.
* Have you thought about possibly utilizing your home’s equity? Obviously this only pertains to those of you who own a house but it is a viable option if you do. You basically use the equity of your home in order to finance your business and allows for a tax deduction on the interest paid. Many savvy business owners use the combination of this in order to get the business loans discussed earlier. The only downside is that the security of your home ownership is now tied into the business’s success. If the business fails, you can lose your home.
* Another option often overlooked is the possibility of person to person lending. There are numerous personal investors out there looking to provide the appropriate funds in order to see a return on their investment. Some websites and businesses deal solely on brokering these types of deals. You can also approach friends and family members for money as well.
* One of the hottest trends in business finance is the use of investment financing. This can found in the form of venture capital firms and business partners looking to make an investment with the hope of receiving a return on it down the road. The only problem is that finding an investment group can time consuming and the process is sometimes not that easy. You even run the risk of giving up a percentage of ownership to the investor.

* The final option for you to choose from is the use of business credit cards. Many financial institutions will approve business with a credit card but it depends on a number of factors such as the amount of financing you need. I would only recommend this choice of financing is your business can afford to pay the high interest rates that come with these cards.

Merit Capital Advance looks at the big picture by offering a financing program that provides small businesses with fast business cash. It is the most convenient way to get a small business cash advance when you need it most. Visit Merit Capital Advance at http://www.meritcapitaladvance.com.

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There are many new challenges which are increasingly evident with commercial mortgages, particularly those involving commercial construction loans. Many commercial financing experts currently project that the changing environment for working capital loans and most other business financing will produce several new but avoidable problems for small business owners.

There have always been complex problems for business owners to avoid when seeking commercial loans. By most accounts, these difficulties are now expected to multiply because we appear to be entering a period which will be characterized by even more uncertainties in the economy. Prior standards for commercial mortgages are likely to change suddenly and with little advance notice by lenders if the current financial turmoil continues.

This article will evaluate why commercial construction loans have become harder to obtain and will discuss possible commercial finance funding solutions. The current economic uncertainties combined with less capital availability for commercial mortgages in general and construction financing in particular means that it is much more likely that borrowers will need to look beyond their regional market area for business financing help. In many areas of the United States, virtually all business construction funding sources are effectively inactive at this time in addressing new loan requests.

Even before business finance funding options became more limited recently, construction loans were generally considered to be riskier than other commercial financing by most lenders. For a commercial lender, the most significant risk factors for commercial construction financing usually include the following: (1) until the new building is completed, a commercial property cannot produce income to repay a loan; (2) a substantial risk factor is the possibility for contractor liens; and (3) many commercial construction projects take more time to complete than originally projected and/or exceed initial cost estimates. Of these factors, the risk of potential contractor liens appears to be a particular concern for commercial lenders because of the deteriorating health of the construction industry. In any event, current delinquencies in loan payments for commercial construction financing are running well above normal.

Construction financing for homebuilders has always been viewed separately by lenders because the eventual owners of single-family homes are individuals rather than businesses. From a commercial lending perspective, it is likely that the current difficulties seen in residential construction are indirectly impacting the availability of construction funding for commercial properties because the potential for contractor liens incurred during residential projects can quickly reduce the financial stability of contractors involved in both residential and commercial construction projects. This is a further reason why lenders are increasingly focusing on the risk of contractor liens as a rationale for providing less construction financing.

The feasibility of real estate investments has traditionally included an enduring theme of “location, location and location” which reflects the importance of a specific locale for investing. This is still an important factor when lenders evaluate the prospects for commercial real estate loans involving both existing commercial properties and new construction. A lender is likely to be most comfortable with a stable to growing revenue stream for a business which will in turn result in a stable to growing property valuation, thus preserving collateral for the commercial mortgage loan.

For the first time in several years, however, we are generally seeing widespread reductions in both residential and commercial property values throughout much of the United States, with some areas of the country exhibiting more volatility than others. A severe recession will result in decreasing income for many businesses over an extended period of time, and it is very difficult for either lenders or borrowers to project when this downward trend will reverse.

Given the difficulty of arranging financing based on location, using non-local lenders can be a practical solution for commercial financing involving both existing commercial properties and new construction. Small business owners should seek straightforward advice from a commercial loans expert who can provide effective strategies for changing and difficult business finance funding situations, especially in light of the challenging commercial borrowing climate prevailing currently.

Learn about avoiding commercial financing mistakes – Stephen Bush is a commercial loans expert => AEX Commercial Mortgages and Working Capital Loans

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Business loans are meant to finance business activities so that there is no halt in business. The business is required to carry out smoothly only then one can earn more profits. Thanks to instant business loans I that people find it simple to carry out their businesses. Making your business successful is in your hands and if you want you can take help of business loans.

These loans can be secured as well as unsecured in nature. It depends on the kind of loan you are opting for the terms and conditions of the lender. It is actually not difficult to find out lenders in US’s financial market. This is because there is cutthroat competition and so you can definitely find out reputed lender with nominal deal.

If you are opting for instant business secured loans then you must keep some security with the lender. And in that case, you will be charged less interest as the lender has a security with him. In case if you fail to make appropriate payments then the asset will be taken hold of by the lender. And if you opt for unsecured loan then the interest that you will be charged is higher. This is because that the lender does not have any security.

Now, the term, rate of interest etc. depends on the credit status. If you have a good credit history then you will be given some really attractive facility at lesser interest. But on the other side, if you have an adverse credit history then instant business loans will be available to you at a higher rate of interest.

Instant business loans are quick in approval and so you can finance your business activities during the time of emergencies. This will help you out and so your business activities will not suffer.

Jennifer has been associated with Loans. Having completed his Masters in Finance from Lancaster Uni. Management School, he undertook to provide useful advice through his articles. To find Business loans UK, Unsecured business loans, Small business loans visit http://www.businessloansuk.net.

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When times get tough like they are now, businesses small and large run into cash flow problems. To make ends meet, most look to the financing of invoices for needed cash flow relief. If you are thinking along these lines, there is a key issue to consider.

Selling one’s invoices, known as “factoring”, is a process that has been around for a very long time. For as far back as money has existed, one party has offered to pay another an advance on monies due from yet another party. On a personal level, these are often known as payroll advances.

The decision to finance business invoices is a more complicated one. The primary issue is the cost involved. Some businesses run large profit margins and some do not. For those that have health profit margins, factoring almost always makes sense when it comes to resolving cash flow issues. For those with smaller profit margins, it is a more difficult issue to figure out.

As with any form of financing, factoring costs money. The fee is highly negotiable, but there is always going to be a fee. The thing that causes many businesses difficulty is trying to figure out that fee. In most factoring cases, the fee is determined on a sliding scale using time as the key variable. Let’s take a closer look.

Most invoices are due payable net 30. This means your client has 30 days to pay. When a factoring company buys the invoice, they will quote you a fee for that period of time. What happens, however, if the client takes longer to pay the invoice? The factoring company will charge a larger percentage of the invoice the longer it takes to get payment. The fee might go up slightly each day or every few days. The exact process is different with every company.

Now, assume you are quoted a fee of 3 percent if the invoice is paid on time and the fee goes up 1 percent for every 5 days payment is late. After 60 days, you are looking at a 9 percent fee! This can be a problem if your profit margin is only 8 percent because you will be losing money on the deal. In some situations, losing money on factoring is not a huge issue because it is more important to have cash on hand. This is often the case when the economy is in bad shape, but it is not a situation you want to continually experience.

Selling your invoices for cash flow relief is a fairly straightforward process. Just make sure to crunch the numbers so that you don’t run into a situation where you are continually losing money on the transactions.

Stephen Teak is with http://www.FactoringCompanyInformation.com – providing accounts receivable factoring for businesses large and small. Get cash for your business fast.

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Inviting investors to invest in your business is something you will want to prepare for in advance. Have a proposal ready with your business plans, goals, financial needs, and record of your achievements and past business ventures. If your franchise has a well-known brand, then make sure to note that the business is likely to succeed. Finding investors will not seem easy at first, but the more you get into it the more confident you will be and more likely to find interested patrons.

Retirement Money

A lot of new business owners run the risk of taking money from their 401k or other retirement funds to finance their business. While this is a risky step for a new entrepreneur, it is much less risky when you are opening a franchise, as the success rates are significantly higher. As long as you keep a tight budget, and remember to put money back into your retirement, it can be a very smart and fairly simple way to finance a franchise.

Borrow from Friends or Family

If you have friends or family who have money and a good sense of their finances then you might want to consider giving them a call. If you do not know one person who could loan you the full amount then consider borrowing smaller amounts from a handful of people.

Standard Loan

Getting a loan from a bank can be more difficult, especially in our current economy, but it does come with benefits. However, bank lenders will want a lot of information, financial history, and collateral to convince them to lend to you. Be prepared with a full business plan, including past business ventures and all new information on your current project.

SBA Loans

The Small Business Association (SBA) is dedicated to helping people who want to start a new business. Many new franchisees look to the SBA, and find their process fairly simple and painless compared to other options. Take a look at their site or just give them a call to find out what you will need to qualify for a loan. Remember, it does not cost anything to ask a question.

Franchisor

Your franchisor may have a franchisee money-lending program to help them help you. It is in your franchisors best interest that you do well, and if they are confident in their own franchise plan, then the may be willing to help you seek out financing. Additionally, your franchisor might have alliances with banks that could help you get approved for a loan.

The Roni Deutch Tax Center is one of the nation’s hottest income tax franchise. For more information on owning a franchise visit RDTCFranchise.com, or check out Watch Me Franchise to see what it is really like to run a franchise business.

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There are many criteria that banks require in approving loans for businesses. What usually comes to mind first is credit; given today’s financial crisis. While credit is extremely important, there are many other factors in addition to credit scores that business must be aware of and account for when seeking capital for business growth. The following outlines a company’s ability to repay or service a new debt facility. Banks and other financial lenders will not just give you money because you think you need it, you have to be able to pay for it as well.

You must be able to repay your new debt – both the principle amount and the interest. Now, there are many structures to business debt like interest only (which I do not recommend), balloon payments, quarterly payments, etc. Still, you have to generate enough income from the business to service the payment amount. Further, not only do you have to generate enough money to pay the P & I, but you usually have to have a little bit more – usually 25% to 50%.

Why? This additional ‘cushion’ provides the bank with assurance that your business could have a down period and still cover their payment.

Now to the numbers: To determine if your business could service a $100,000 business loan, begin with your net income. To this amount, add back depreciation (this is a non-cash accounting anomaly) and any and all interest payments that you already make and your taxes. This should be the net amount that your business has to cover your total debt service – this is essentially your earnings before interest, taxes, depreciation and amortization (EBITDA) or your actual cash profits from your operations.

For the remainder of this analysis, we will ignore taxes. The interest on your loan is an operating cost – meaning it reduces your taxable income. However, the principle portion that you pay comes straight out of your net income – after all other obligations are paid including local, state, and federal taxes. The reason we will ignore taxes is to make this analysis simple and demonstrate why banks and other financial lenders require higher debt service ratios.

At 8% for 48 monthly payments, a $100,000 loan would require a monthly service of $2,442 or $29,296 per year (straight amortization for simplicity purposes). Assuming that your business does not have any other debt, you would have to, at the least, earn this amount over and above all other business costs – over your EBITDA. However, most banks want to see a debt service ratio of 1:1.25x to 1:1.5x – meaning that you need to generate EBITDA between $3,053 and $3,663 per month in this case.

Should your business have other debt that is not being paid off with this new facility, add that amount to your debt service minimum payment above. You will then have to cover up to 1:1.5x all your debt obligations.

Further, banks do ‘what if’ analysis on this debt service requirement. Take your operating profit (EBITDA) and reduce it by 10% and 20%. After these calculations, does this new income amount still cover the original payment amount of $2,442? If not, no loan. Again, banks want to ensure that your business could survive a down turn and still make its payment obligation to them.

Keep in mind that the above analysis is based on past financial (past results of your business). While the lender will make every attempt to forecast future projections, it does not significantly rely on expectations of what your business will or may do.

While this is a very basic analysis, I hope you get the gist of what banks look for when underwriting loans. Should your business not be able to meet this requirement, then negotiate a lower payment through interest reduction, loan amount reduction, or balloon payments or reevaluate your need for a loan. If you can’t pay for it, you don’t need it.

Additionally, there may be many other ways to finance your growing business. The most widely used for working capital loans and advances are accounts receivable financing (factoring), purchase order financing, and business cash advances. These types of facilities can help bridge the gap between cash outlay and revenue. Where there is a will, there is always a way.

Joseph Lizio holds a MBA in Finance and is founder and owner of http://www.businessmoneytoday.com Also, visit his blog at http://businessmoneytoday.blogspot.com/

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