Logo
  • Home
  • Informational interview
  • Screening interview
  • Individual interview
  • Behavioral interview
  • Job interview
  • Privacy Policy
  • Terms and Conditions
Copyright, 2014
December 3, 2021
Marilyn J. Zang
Job interview
Comments Off on Avoid crisis loans and panic loans

Avoid crisis loans and panic loans

PreviousNext


[ad_1]

As smart as the average small business owner is, it’s impossible to anticipate and prepare for every need. Plus, what a start-up might see as a crisis, an older business might not. With that in mind, let’s talk about the pitfalls of taking a reactionary approach to meeting a company’s debt capital needs, some of the options and approaches to consider if you find yourself in a situation that requires cash flow now, and a more strategic approach to prevent you from needing a crisis loan in the first place.

Emergency loans can be expensive

The coronavirus pandemic and the Paycheck Protection Program (PPP) have been great options that have helped millions of small business owners overcome the challenges associated with the pandemic. The SBA offered very liberal qualifying criteria, but there were still millions of other small business borrowers who simply couldn’t meet the eligibility requirements and were unable to access this potentially free funding. to help them weather the storm.

Maybe they didn’t pass the credit check because they had bad credit, or didn’t have the basic financial block and equipment in place to provide audited payroll records, or a balance sheet. which showed that they were a profitable business before the crisis – some did not even have a professional bank account. That’s not to say that they weren’t all able to find borrowed capital, but they had to look to alternative (and often much more expensive) sources of capital and paid an annual percentage rate ( APR) well above the potential of 0%. interest rate offered by the federal government as part of the SBA’s P3 forgiveness program.

In addition, many lenders normally present in the market have either significantly reduced their lending operations or have withdrawn from the market altogether for a period of time. Including some of the more easily qualified traditional sources of capital such as business credit cards; or any other short-term financing that is less dependent on a business owner’s personal credit rating and more reliant on their business cash flow and income (which was non-existent for many business owners in the past. the time). This essentially meant that the available alternative financing became very expensive as lenders had to charge high interest rates to mitigate the risks associated with lending in this environment.

How can you better prepare for the next crisis?

Using P3 as a guide, he taught us that there are a handful of things you can start doing today that will help you, should something like this (or any other urgent need for funding) happen again. And keep in mind that it likely will, as business cycles come and go regularly. I have personally experienced a number of recessions throughout my career.

Here is a list of four things to help you prepare so that you can access borrowed capital when you need quick emergency funds to get you through a business crisis:

  • Have a professional bank account: Crisis or not, many commercial lenders won’t even consider your loan application if you don’t have a business bank account. Banks that work with the SBA are no different. If you don’t have a business checking account, make it a priority.
  • Make sure your financial records are up to date: I agree that most small business owners don’t start a business because they are excited about the accounting process. But most lenders, especially those who give loans in times of financial difficulty or when you need quick financing to deal with some sort of crisis, want to see your balance sheet, income statement, and accounts. results are all in order. Plus, they’ll likely want electronic access to your business bank account to confirm that you have the income and cash flow to make the periodic payments.
  • Show a profit on your balance sheet: It is common for many small business owners to do a little financial gymnastics to reduce their tax burden at the end of the year by posting a loss rather than a profit. It’s understandable, but a lot of companies just couldn’t qualify for the P3 because they didn’t have the financial records to show they were a profitable business in 2019.
  • Pay attention to your personal and professional credit profile: Your business credit history is important. Your personal credit score too. For example, if your personal credit score is below 650, you have options, but they will come with higher interest rates and stricter repayment terms. If you don’t know your current credit situation, you can view your personal credit score and business credit for free on Nav.

Quick financing options when your business is struggling

Because we can’t always predict when a crisis will strike or when you might need quick access to extra cash, here are some options to consider:

  • Business line of credit: I am a huge fan of the line of credit. It gives you access to emergency capital when you need it. You can use it, pay it off, and use it again the next time you need extra cash to cover a crisis or take advantage of an opportunity. And you only pay interest on what you use. This requires that you plan ahead and have the line of credit in place before you need to draw on it and you will need to make sure that you can meet the qualifying criteria before going through the application process. Fortunately, they are also widely available from traditional financial institutions as well as online lenders. So, depending on your situation, you may be offered a business line of credit.
  • Business credit cards: There are a number of reasons to love business credit cards, but like a business line of credit, you need to apply before you actually need to access cash. Fortunately, if you’re a start-up business with no long credit history, most credit card providers primarily look at your personal credit history to make an approval decision. So if you have a good personal credit score, you will likely be approved.
  • Online lenders: There are more loan options today than ever before, including short-term loans to meet an emerging need. Unlike many traditional lenders like a bank or credit union, online lenders offer loans for small amounts that you would likely need to meet unforeseen expenses like repairing critical equipment, resolving problems. a plumbing problem or any other need for quick cash. . While interest rates are likely higher, the loan application process is faster and easier, approvals can be the same day, and you might even have money in your bank account the next business day. Be aware, however, that you probably won’t be looking at monthly payments, but rather a daily or weekly withdrawal from your business bank account.
  • Cash advance financing: This type of funding comes in many forms. A cash advance is not really a loan. A merchant cash advance or MCA is more like a credit card cash advance. The MCA provider grants you an advance based on your daily credit card receipts going through your merchant account. A business cash advance is an advance based on your cash flow. This type of financing is readily available, relatively easy to obtain, and you can access it quickly, but it is expensive. Depending on the provider, the costs associated with a cash advance can be much higher than the other types of financing mentioned above. In addition, since these providers generally do not express their costs as an annual percentage, it can be difficult to compare them to other types of financing. This Nav Calculator will help you determine the APR for a cash advance.

Get the right loan for your business

Let our experts connect you with lenders based on your unique business metrics.

Match now

When I talk about strategic borrowing, I’m talking about anticipating needs and ensuring that a business is proactive in meeting them – when borrowing can be anticipated. I understand that many entrepreneurs tend to make a lot of decisions on the fly. Due to the costs involved, I don’t think this should be one of them.

Sitting down to plan and anticipate the ebbs and flows of the coming year, taking the time to consider initiatives that might require additional capital, and honestly assessing the ability to successfully apply for a loan is the first step. A more reactionary approach could mean the rejection of a loan application and a lost opportunity and potentially increased costs

Abraham Lincoln is credited with saying, “If I only had an hour to fell a tree, I would spend the first 45 minutes sharpening my ax.

Strategic borrowing involves sharpening the ax.

This doesn’t mean that you will always be able to anticipate when you will need financing, which is why some of these other options are available. That being said, the more strategic you can be in how you prepare and anticipate your business financing needs, the better able you will be to find the best loan with the right costs and the most favorable terms.

This article was originally written on December 3, 2021 and updated on December 16, 2021.

Rate this article

This article currently has 1 rating with an average of 5 stars.

class = “blarg”>

[ad_2]

Related posts:

  1. Best Emergency Loans For Bad Credit In 2022 – List Of Top Direct Lenders For The Best Payday Loans And Installment Loans For Poor Credit Score | Best Bad Credit And No Credit Check Loans
  2. 5 Best No-Credit-Check Loans in 2022
  3. Best Bad Credit Loans With Guaranteed Approval in 2022| Top 5 Online Payday Loans for Poor Or Bad Credit Score | Paid Content | Cleveland
  4. How does an installment loan process work at Heart Paydays?
bad creditbank accountcredit cardcredit scoreinterest ratesshort term
Share this

The Author Marilyn J. Zang

More Posts Like This One

This platform wants to disrupt the payday loan industry

February 28, 2022

Predictions 2022 – an interview with Simon Shinerock…

March 5, 2022

The main reasons why you can benefit from debt consolidation

February 2, 2022

Categories

  • Behavioral interview
  • Individual interview
  • Informational interview
  • Job interview
  • Screening interview

bad credit bank account behavioral health covid pandemic credit card credit score high school interest rates long term lot people mental health payday loans short term united states vice president

Recent Posts

  • Davao City Council Approves Davao Athlete Incentive Act

  • Interview with Dominique Thorne: Black Panther Wakanda forever

  • Is Voyage of the Rock Aliens a galactic home run?

  • How to Get a $500 Fixed Loan No Interest at Wells Fargo

  • Is cannabis really that bad? – The Evergreen Daily

Archives

  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • May 2021
  • January 2021
  • April 2020
  • May 2018
  • April 2018
  • October 2017
  • November 2016
  • September 2015
  • July 2015
  • March 2015