7 Ways Small Business Owners Can Borrow Money
Maybe they want to grow their business, or maybe they just have cash flow issues. Whatever the need, your business owner clients often have a love / hate relationship with banks. The reason is simple: your customer needs the money. The banks are there to lend it. Many people often feel that banks are the most eager to lend to companies that need it the least. Say your local small business owner needs to borrow money and asks you for some advice.
You start by asking questions like, “Why do you need the money?” “And” How long? After more polling, you start to offer advice.
- Credit line. Hopefully they already have one. It was one of your first recommendations when they became your client. Businesses have noticeably uneven cash flow. A line of credit from the local bank allows them to get money quickly, with the understanding that they will pay off the line when their customers pay. The interest rate is variable and generally competitive. It is a good short term solution.
- Talk to your bank. They do business loans. Your client has a history with the bank. They manage their lines of credit wisely. Their payment history is good. If the loan is large, they will probably want to see a business plan. Why does extending the loan make sense? Many banks will not lend to startups because the risks are too great. Here are other ways to get the bank on your side:
- Personal guarantee. The problem with business loans is that the business can file for bankruptcy and the owner leaves. Will you agree to personally guarantee the loan?
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