I Need A Business Loan | Huntington Coast Capital, Inc.

I Need A Business Loan | Huntington Coast Capital, Inc.

 

Are you thinking about getting a business loan? Like individuals, businesses also need credit from time to time. The loan comes in handy if a company has cash flow challenges or you need to use the extra funds as a strategic tool to help the company grow.

 

Although the needs of each business may vary, there are common instances when all companies may need to secure financing. Keep reading to learn the signs that you need a business loan.

 

1. The Company Doesn’t Have Enough Funds to Cover Employee Salaries

Your employees are the backbone of the company and need their salaries and wages to meet their personal and family needs. Sometimes, the business may not have adequate funds to operate and still pay their employees. This usually doesn’t mean the company is failing or unprofitable, just suffering from cash flow constraints.

 

Maybe some emergencies have caused a cash flow problem, and the business still needs to stay afloat and cover all expenditures, including salaries. If there is not enough money to cover your day-to-day overhead, you can secure a business loan.

 

Lenders can provide business loans and lines of credit to meet the working capital needs of your business. Depending on the type of business loan being requested, the turn around time from initial application to funding can be in as little as a week to up to 90 days. Because of the urgency, lenders fund payroll loans more quickly than other business loans. Payroll loans are most typically secured against your company’s accounts receivable. Consider this loan as an option when looking to level out your cash cycles. Many companies experience peaks and valleys in their cash flow that causes stress and uncertainty. A working capital business loan such as this, alleviates the stress associated with cash flow fluctuations.

 

2. The Business Is Growing Rapidly

Each time a small or middle-sized company experiences rapid growth, more funds may be useful. Rapid growth is often good, but the endeavor can strain your finances before you get the profits. You may get a business loan if you are not ready for rapid growth or the company savings aren’t enough to facilitate the growth expenses. Purchase order financing meets the capital needs in growing companies and is favorite type of business loan. Purchase order financing covers the cost of your orders received from your customers. This type of business loan pays your suppliers covering up to 100% of your cost of goods.

 

When a company grows fast, you may need money for inventory, expand the business premises or hire more workers. These things can be costly, and you may be in debt if you fail to manage the situation correctly. With a purchase order financing business loan, you’ll get money you need to cover these expenses and ensure the business grows efficiently. The result is adequate capital to meet the demand and an increase the bottom line.

 

3. The Company Needs Debt Consolidation

Whenever a small or middle-sized company struggles to pay multiple debts, it may be good to consolidate the debts through refinancing. Through debt merging, one may lessen interest rates, reduce monthly payments, and complete debt payments faster.

 

If you calculate the interest rates creditors charge on your debts and realize they are incredibly high, it is prudent to roll them up in to a new, lower interest rate, loan. The loan will allow you to reduce the interest rates, helping you save the company money.

 

Also, loans are useful when you want to come out of debt fast or struggle to make monthly payments. Once you combine the debts in one loan, the payments will be easy to manage.

 

Before you secure this loan, your company will need good credit (and typically above a 620 FICO score for each guarantor on the loan) — this helps acquire the loan at a low-interest rate. In addition, you’ll need to have a adequate debt service coverage to qualify for the loan. Your company’s debt service ratio improves when you refinance your company debt at lower interest rates. Your financial advisor can share tips on handling this process and ensure you get the company out of debt as quickly as possible.

 

Operating a business without enough capital can be challenging. You will struggle to sustain it, and if matters like rapid growth occur, you may face funding challenges. Luckily, you can rely on business loans to maintain a positive cash flow. At Huntington Coast Capital, Inc., we can help you secure a loan that meets your business requirements and increases the chances of growth. Talk to us today to get a suitable loan for your company.

 

Call today to see how we can help your business grow, 844-239-2362!

 

Myths About Small Business Loans | Huntington Coast Capital, Inc.

Myths About Small Business Loans | Huntington Coast Capital, Inc.

 

 

A business may occasionally require additional cash for short or long-term purposes. As a business owner, you can invest your own money or seek external investment. A small business loan, however, is a more common option.

However, some business owners, especially those who have never taken a business loan, can have several doubts about business loans. Indeed, the process involved in arranging a business loan, its benefits, and many other issues are commonly misunderstood.

Here are some common myths about business loans and the facts that all business owners should know.

 

Loans Only Benefit Businesses That Aren’t Doing Well

Many assume that any company in need of a loan is facing a hard financial time. Distressed companies have a particular motivation to get loans, but plenty of strong businesses also require occasional loans.

The type of business determines the need for additional financing. Your business can acquire a loan to finance growth and expansion, for instance, through hiring more staff or installing additional equipment. Such improvements can boost your business’ success and make it more competitive.

 

You Need to Have a Perfect Credit Rating to Get a Loan

To be clear, you should always maintain good credit scores on your personal and business accounts. Having a good credit rating makes borrowing easier and gives you more options for deals you can choose from. However, a low credit score isn’t an indication that you can’t get a loan.

Bad credit does happen, and lenders recognize that. The lenders also recognize that a lower credit score does not necessarily mean you are a lending risk. Therefore, you may still be able to find a lender willing to work with you. You may have to make a trade-off, such as accepting a higher interest rate.

 

Small Businesses Cannot Apply for Larger Loans

In no way should the size of your business prevent you from approaching a lender for a larger loan. Many lenders prefer high-amount loan applications, including mainstream banks.

However, repayment capability is key for a small business looking to borrow a larger sum of money. Thus, you should be able to provide proof to your lender that your business can afford to repay the loan. If your company lacks adequate cash flow, you may still get a loan if you convince the lender that your business plan will allow you to repay the loan.

 

All Business Loans Are the Same

Your business may want to borrow money for many reasons, and you have many options for financing your endeavor. Numerous loan options can be advantageous, but they also necessitate research before you apply.

Choosing the right business loan is the first step to obtaining business financing. Some of the types of business loans can include:

  • Working capital loans for every day variable expenses the business has
  • A term loan to finance the cost of fixed expenses or a business acquisition
  • Equipment financing
  • Inventory financing
  • Accounts receivable financing
  • Purchase order financing

You can determine what business loan is best for you by considering factors such as your loan purpose and desired loan terms.

 

Loan Applications Are Time Consuming

The myth was true years ago — getting business finance approval could take months due to paper-based submissions and employee evaluations. Thanks to paperless digital solutions and software, the process is much faster today. You can complete your application within minutes and get approval in days.

But don’t ignore the importance of doing some preparation beforehand. The lender can turn your business loan request around faster if you provide all of the necessary items they need to underwrite your loan request quickly. The count down to closing starts when the lender has 100% of what they need to issue an approval on your loan.

The misconceptions about business loans can prevent you from being able to take advantage of a favorable financing opportunity. Hopefully, having busted a few myths on business loans has given you a good idea about why loans can be an excellent financing source.

For more information on business funding or to complete a funding application, feel free to contact us at Huntington Coast Capital, Inc., today. Call 844-239-2632 and learn how a business loan can help grow your business!

 

Benefits of a Small Business Loan | Huntington Coast Capital, Inc.

Benefits of a Small Business Loan | Huntington Coast Capital, Inc.

 

Business Loans

 

Perhaps a friend or colleague has advised you to take out a loan for your small business, but you’re still in doubt. After all, you may not want to burden your business with debt. However, the following reasons may convince you to consider a small business loan.

 

1. Enjoy Flexibility

Loans for small businesses have varying terms and repayment periods that can suit your business needs. You can go for a long-term loan with an extended repayment duration or a short-term loan that has to be repaid after a short time. Your choice will depend on whether the loan is for personal, business, or mixed-use. In some cases, you can even apply for many types of loans.

 

2. Liability-Free

Generally, business borrowers do not need to have collateral or a specific revenue to apply for a loan. The lack of requirements is an advantage to a small business that just started and has limited income or no assets to put up as collateral. Hence, aspiring business owners can easily enter the corporate world quickly and get their businesses running.

 

3. Retain Full Ownership

When you get financing from investors or partnerships, you must relinquish a portion of the business. Although the arrangement may be helpful initially, problems may arise as the company expands. You have to consult partners on significant decisions and how the business operates, but a loan allows you to keep full ownership of your business.

 

4. Improve Business Credit

If you repay the loan on time, you will boost your business’s credit score. A good credit score makes it easier to get more loans at favorable terms in the future. For example, companies with good credit scores tend to get lower interest rates for their loans and can easily avoid accrued interest.

 

5. Access Funds Quickly 

Business expansion requires significant capital to hire new employees and operate the business. You can choose to wait for business profits to increase before reinvesting them. However, if you have projects that should start soon, you may take out a loan. The loan allows you to buy new equipment and finance new product development before your competitors do it first.

 

6. Take Advantage of Low-Interest Rates

Lenders often provide low-interest rates on business loans to get customers. As competition in the lending business becomes stiffer, business borrowers can negotiate for the best deals. Also, business loans are likely to come with lower interest rates than any personal loan. 

 

7. Nurture Relationships With a Specific Lender

When you nurture relationships with your lender, you increase your chances of getting a loan in the future. The lender will have worked with you and knows how you handle money. The next time you go to get a loan, you can always refer back to the previous loan that you repaid on time.

 

8. Overcome Liquidity Problems

Businesses require working capital to operate effectively. However, small businesses often face challenges that make it difficult to meet utilities and payroll requirements. Since these challenging times are temporary, the business can get through the hard times with the help of a small business loan.

 

9. Refinance Debt

If your business already has a loan, the mounting debt may interfere with your ability to pay bills and sustain business operations. A small business loan can help refinance your debt and give you time to pay off any loans. The new loan may have a lower monthly payment and interest rates.

 

10. Reduce Tax Payments

Sometimes, your tax obligations may be lower if you take out a small business loan. For example, you can claim deductibles on the interest you pay on loans. The best approach is to consult a tax expert to know how taking a loan can impact your taxes.

Taking a loan for your small business is easy if you use the right lender. Huntington Coast Capital provides lending solutions for small and medium businesses that need quick cash. Contact us for more information. 

Asset Based Loans – How To Figure The True Cost

Asset Based Loans – How To Figure The True Cost

Asset Based Loan

Understanding the cost of an asset based loan when contemplating the business loan options available in the marketplace is critical to making an informed decision. Most all business owners need capital from time to time to meet the needs of a growing business. They self-fund operations for as long as they can and if they hit their growth goals, they often require additional capital to get there.

The problem is that fast growing companies are often not profitable and have little in the way of retained earnings. This due to the fact that every dollar going in to the business is going back out to meet working capital needs. This is where asset based business loans are a dependable source of capital.

However, the analysis is much different. Your typical business loan is an SBA loan with a 10-year amortization and fixed monthly payments. This type of term loan is great for fixed costs and long term assets such as equipment, real estate, etc. But what if your needs are revolving in nature?

For example, our typical client comes to us because he has a big order that they can not fulfill on their own. Here’s a breakdown of a common scenario we secure funding for:

  • $1,000,000 loan request to cover the cost of goods and pay suppliers
  • The company has a 30% margin or can make $1,300,000 upon the sale to their customer (if they can get a hold of $1,000,000 to fulfill the order!)
  • They have a verifiable purchase order from their credit-worthy customer
  • They are expecting the total business cycle to be 60 days from the time of the order to shipment to the customer to being paid by the customer
  • Cost of the revolving credit (in this case purchase order financing, a form of asset based lending) is 2% of the loan amount per month
  • Simple equation: $1,000,000 x 4% equals $40,000 (cost of capital), $1,000,000 carrying a 30% margin equals $300,000 profit
  • Net profit on the transaction after the funding cost is $300,000 minus $40,000 or $260,000.

The question becomes, would you spend $40,000 to make $260,000? The answer for almost everyone is yes! As seen, figuring the cost of an asset based loan is much different than a typical business loan. The review consists mainly of looking at the return on capital versus “interest rate” which so many people are obsessed with.

We have actually had clients say that this cost of capital is “too expensive” on an annualized basis. If the business loan revolves every 60 days, the cost is $40,000 multiplied by 6 (60 days divided in to 360 days for the year) the cost is $240,000 in annualized capital cost. However, we need to remember the profit the company stands to make with this type of asset based loan. The net profit per turn was $260,000. If we multiply that by 6 we get $1,560,000 income on an annualized basis.

So, the question becomes, would you spend $240,000 to make $1,560,000? The answer is a resounding, YES, of course!

If your business could grow using a creative asset based business loan, we would like to hear from you and discuss the options.

To your success!

Patrick Zazueta | Huntington Coast Capital, Inc.
714-719-8966