Are you in need of
financial resources in order to start or even maintain your small
business? Most of us are. The fist step is to take a look at the vast
number of commercial loan sources that offer help in this area such as
Chase, Citibank, etc. Also, with the Small Business Administration (SBA),
you should be able to arrange a connection with one of these banks. This
is one of many organizations that specialize in loans to small businesses.
Contrary to the belief that bankers actually look for reasons to turn down
prospective clients in need of a loan, they are in the business to lend
money. This means that every time a banker is sitting in front of a
potential client, they are hoping to make the deal work just as much, if
not more than the client wants it to work.
A bank’s primary role in the small business lending area is funding
growth. An example of this would be to finance the expansion of small
business with a proven track record. Most banks can offer a wide variety
of loan packages designed to finance expansion of an already existing
small business.
Below are a few examples bank loan packages :
1. Asset Based Financing.
Asset Based Financing is a general term describing a transaction whereby a
lender accepts collateral and assets of a company in exchange for a loan.
Most asset based loans are collateral against other accounts receivable,
inventory, or equipment. Accounts receivable is the most favored of the
three because it can be converted into cash quickly. Banks will only
advance funds on a percentage of receivable or inventory, typically being
around 75% of the receivable and 50% inventory.
2. Line of Credit. A line of credit involves the bank’s setting aside
designated funds for the business to draw against for the cash it needs.
As the line of credit is used, the credit line is reduced and when
payments are made the line is replenished. One major advantage of a line
of credit is that no interest is accrued unless the funds are actually
used.
3. Floor Planning. Floor Planning is another form of asset based lending
in which the borrower’s inventory is used as collateral for the loan. Car
dealerships are a prime example of a business that often uses floor
planning as their primary financial tool.
