Unless funds are readily available to you, chances are you will at some point in your role as a car wash business owner, have to consider taking out a corporate or business loan for your operations. It could be used to help you start out on daily operational assistance, to expand your equipment and operations or to add new branches.
Bank lending has been somewhat contracted over the last ten years of economic turmoil. But, there has been a noticeable uplift in the 1st quarter of 2013. The banks want to lend and borrowers need to borrow to expand their operations. The difference now is all parties are acting more cautious, conservative and responsible. For example, a silver lining for all concerned parties.
Types Of Corporate Loans
There are several types of loans that are relevant to you as a car wash business owner. The majority of them have to be secured or backed up by some sort of collateral. However, an exception to this is the unsecured loan wherein the lenders may extend loans based mainly on the creditworthiness of the business. Although the product names may differ from one lender to the next, the purpose each loan type serves is similar.
- Small Business Administration (SBA) Loans are government-backed loans to small businesses from private sector lenders such as risk adverse banks. In the event of a default, the government guarantees up to 85 percent of the loan value. Their interest rates average between 5.8 to 8.5 percent.
- Start-up loans are loans to small businesses from private sector lenders such as banks, credit unions and alternative lenders.
- If you are looking at buying into a car wash franchise concept, there are franchise start up loans offers. This specialized financing is based on the condition that you can bring in 10 to 30 percent of the total capital.
- Suppose you are looking at acquiring an existing business, there is the option of business acquisition loans.
- There are also loans that finance the purchase of equipment known as equipment financing loans which uses the equipment as security.
- Working capital loans are usually short term. Moreover, we can use them to help tide over temporary issues faced by the business in financing its everyday operations.
Where To Apply For Corporate Loans
Depending on your circumstances and purpose for the loans, the various organizations you can approach for your corporate loan needs are as follows:
- the government in the form of SBA loans via private sector lenders;
- direct from private sector lenders such as banks – larger national ones or the smaller community banks;
- credit unions and alternative lenders
If you do not have a credit rating or a track record to qualify for the standard business line of credit, you may want to opt for the more costly alternative lenders. For example, non-banks or separate subsidiaries of banks and their asset backed loans. For these loans, you will have to have collateral in the form of real estate; accounts receivable; equipment or intellectual property. In turn, they will extend amounts of up to 50 to 65 percent of your collateral value.
Supporting Documents for Getting Corporate Loan
When it comes to applying for the loans, solid supporting corporate loan documentation is crucial. Before they lend, they will want to see your business plans, accounts and other financial information that shows them your business is strong and growing, that you have the right business insurance policies in place, that you have quality customers that pay promptly, and your leases and equipment will meet the immediate and future needs of the business.
Lenders are in the business to lend and they know your business needs the funds to help it grow, expand and be profitable. Further, with the slight uplifting of the economic cloud, the likelihood of you getting the corporate loan is very promising. Be clear about the strengths and weaknesses of your case. Then, provide strong documentation to back you up. In addition, make sure you shop around for the lending source that will give you the best terms for your resources, in their corporate loan agreement.
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