Small Business Archives

Evan Vitale – 2016 Might Be Good For Small Business Lending

January 5, 2016 by Evan Vitale

By Evan Vitale

How are things looking in terms of small business lending in 2016?

Well, believe-it-or-not, jumps in the interest rates might also mean good news for businesses who want to seek out bank loans in the upcoming year.

You see, banks only make money when they lend money and with higher rates, banks might be more interested in ramping up their small business lending portfolio.

According to the Biz2Credit Small Business Lending Index, the percent of loans applications approved by big banks reach 22.8%, which is the highest since the recession. The recent interest rate hike makes lending to small businesses more attractive for larger banks. The Biz2Credit Small Business Lending Index believes the loan approval percentage next year could go above 25%. Remember, higher rates means more profit for lenders.

But what about other types of lending opportunities?

Institutional investors look good. During November 2015, institutional investors approved 62.4% of all loan requests.

However, alternative lenders, smaller banks and credit unions are granting loans at decreasing rates. In fact, small banks, which usually generate a large number of Small Business Association (SBA) loans, are now approving less than half of the loan applications received. In 2014, they approved more than 50% of loan applications received.

According to Forbes, community banks are struggling to compete, so many business borrowers continue to look to other sources for funding. In addition, big banks on institutional investors, which are making loans possible via an online marketplace lending platform, are able to make quicker decisions at more attractive rates and terms for business borrowers.

Some other interesting notes from Biz2Credit:

Almost half of all loan applications are made via mobile units.
Smaller banks and credit unions haven’t kept up with technological innovations and, thus, miss out on loan deals since their application process takes longer.
Many times, credit unions want a borrower to come to the branch office and become a member.

Evan Vitale – Why Banks Reject Your Loan Request

December 23, 2015 by Evan Vitale

By Evan Vitale

Securing a bank loan for your business can be a difficult chore and, unfortunately, it’s like you almost know you’re going to get rejected the minute you walk in the door.

Don’t feel bad. Most small businesses can’t get a traditional loan from a traditional lending institution.

However, the answer to your bank loan request is always going to be “no” until you ask.

If rejection comes, dust yourself off and ask the bank for feedback on why your loan application was rejected. Usually, they will be forthcoming on the reason(s) for rejection and you can use this information to improve your chances the next time you approach your bank.

However, there are many reasons why your loan request was rejected. Here are some of them:

For a start-up business, the business idea wasn’t credible and too risky for the lender.
For an established business, applying for business expansion sometimes raises concerns that you will not be able to handle the extra strain on your business debts (even if you are turning a profit). This usually means you didn’t do a good job of presenting a plan on how you were going to be able to afford to pay back the loan.
Not enough collateral if things go bad.
Lack of personal commitment by you. In other words, how much of your own money have you invested into your business. Sweat equity doesn’t work.
Lack of a credible business plan and financial projections.
Not understanding a “good” loan purpose. The purpose of the loan request should be very specific and not general.
Not being able to talk the talk. You should be confident in asking for the loan and in your ability to pay it back. If you’re unsure, then the bank is going to be unsure as well.

Get your ducks in a row before you present your loan request to the bank. And, as always, you’ll be able to gain great advice by talking to your accountant, lawyer and, yes, even with your banker before you apply for a business loan.

Evan Vitale – Capital Snapshot

December 10, 2015 by Evan Vitale

By Evan Vitale

In our six-part series on different types of capital, we offered some basic information as to the different types of capital and investors available for your business.

Here’s a quick review:

Debt Capital – This is capital that a business raises by taking out a loan. The loan is normally repaid at a future date, normally with interest.
Equity Capital – Typically you do not need to pay anything back to the investor. Instead, you are selling complete or partial ownership interest in your business in exchange for the capital.
Private Equity – Similar to a bank loan, private equity funds come from private individuals – or a group of individuals – who make investments or loans.
Venture Capital – These funds are usually for startups or growing businesses and come from venture capital firms specializing in building high-risk portfolios.
Angel Investors – An “angel” investor is someone who is typically a family member or a friend who is really investing in the individual. They want your business to be successful, but they are not looking to gain huge profits from their investment.
Investors – Investors are those who seek to grow their investment and earn an ownership stake in your company with their investment.

Evan Vitale – What Is An Investor?

December 9, 2015 by Evan Vitale

By Evan Vitale

(This is Part VI in our series on different types of capital, including debt capital, equity capital, private equity, venture capital, angel investors and investors)

An investor in your business can wear many hats and the term can mean different things to different business owners and types of businesses.

However, usually, an investor is a person who commits capital with the expectation of financial returns.

They are definitely looking to grow their money and, therefore, they generally prefer to minimize risk while maximizing their returns.

In most cases, investors want to call the shots with your business and become part of your team, which might not work for some startups and business owners who don’t want to give up a share of the company.

Evan Vitale – What Is An Angel Investor?

December 8, 2015 by Evan Vitale

By Evan Vitale

(This is Part V in our series on different types of capital, including debt capital, equity capital, private equity, venture capital, angel investors and investors)

While an “investor” is considered as someone who provides financial backing for small startup businesses or entrepreneurs, an “angel investor” is someone who is usually a family member or a friend (or a friend of a family member or friend). They are a little “closer” and connected to you in some way.

Typically, the capital they can provide can be:

A one-time injection of seed money.

Ongoing financial support.

Funds to help with expansion or to buy a piece of equipment.

Angel investors invest in the person rather than in the business. They do want your business to succeed, rather than be on the receiving on of huge profits from their investment(s).

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Check out Evan Vitale on http://about.me/evanvitale.

Evan Vitale – What is Venture Capital?

December 3, 2015 by Evan Vitale

By Evan Vitale

(This is Part IV in our series on different types of capital, including debt capital, equity capital, private equity, venture capital, angel investors and investors).

Venture capital is another type of funding for businesses and startups. However, with venture capital (sometimes called “risk capital”), dollars are typically earmarked for startup or growing businesses.

These funds usually come from venture capital firms that specialize in building high-risk financial portfolios. In these cases, venture capital (also known as “VC”) is given to the startup company in exchange for equity in the company.

These investments are made to firms that have long-term growth potential for above-average returns.

Evan Vitale – What is Private Capital?

December 1, 2015 by Evan Vitale

By Evan Vitale

(This is Part III in our series on different types of capital, including debt capital, equity capital, private equity, venture capital, angel investors and investors).

Private capital is similar to a bank loan as it is indeed money that is provided to a business. However, the capital “loan” doesn’t come from a bank; government entity or from the public by selling stocks.

Instead, private capital comes from private individuals – or a group of individuals – who make investments (or loans) that are not regulated by the government or by the rules of a public exchange.

A private capital investment typically happens as a one-on-one transaction between the business and the investor. Therefore, the business can seek private capital anytime it needs it: startup, growth, etc.