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The Five Steps to Follow to Being Approved for a Business Loan

It always seems that businesses fail because they become stagnant and unable to grow due to the lack of funds. If this has happened to your business, take heart knowing you’re not alone. The latest business statistics and trends show that the faster a company grows, the more under-financed it will become. This is why it is to so important for a new business owner to find money when they need it most and also why it is so difficult.

Lenders, and more so banks, run thorough checks of your personal credit history before approving you for a loan. It also plays an imminent role in the status of your business loan. They want to help but that doesn’t mean they can. Here are five ways you can help persuade him into giving you that business loan:

  • Develop a solid business plan – If you can go to the bank with anything you can to show to persuade them to give you a loan, then a well thought out business plan is the way to go. It is basically a complete and well presented description of your business and all of its ideas for success. Banks look mainly at the executive summary so make sure that section is in order. If the lender thinks there is something to your plan based on that summary, they’ll read on.
  • Invest your own personal money – Nothing shows a bank how serious you are about your business that investing a chunk of your own money into the company. Any time a bank or lender sees an owner with a quarter equity stake in a business, they tend to approve the financing.
  • Rent instead of buying – Another thing bankers love to see are businesses rent their business space as opposed to buying the property outright. The reason behind this thinking is that the bank would prefer you spend money on items that can generate potential income such as inventory and equipment as opposed to a building. A building also can be a drain to your finances due to maintenance and upkeep.
  • Review your credit report – Going over your own credit report is a vital step to showing a bank you mean business. Try to do this before you start the application process. I’m sure by now you are aware that banks use personal credit history when deciding if you a good or bad risk for a loan. It helps to know beforehand what they’ll find. If your report has an error on it, you have enough time to contact the credit reporting agency and ask for a correction. Sometimes your report will show a legitimate late payment on it. If that’s the case, write a letter of explanation about how it happened and what you’ve done to rectify the situation. It may not help but it can go a long way in lessening the impact of anything negative your report may show.
  • Utilize local banks – Many new business owners make the mistake of trying to get a loan from a big bank because a big bank has more money to give out in loans. That is never the case. You are much better off applying for a loan with some of the smaller community banks. They are more inclined to finance businesses in their local area and they can give you much more personal attention for you to sell them on your idea.

Economics, Government Intervention, and Personal Responsibility

So it begins. Preparation for a recession that was generally considered highly unlikely last summer is now considered by most economists to be more than likely. Of course, a recession was always likely, because recession and growth are two fundamental components of the economic cycle. The word recession carries a huge emotional burden, much like the words cancer and bankruptcy. What we don’t understand we fear. But the word recession can be used in the same paragraph as the words optimism and health. Let’s explore what this could mean to us as individuals and business owners, because our personal responsibilities and our economic responsibilities are potentially in conflict during this time.

Our young country and economy have done a generally admirable job of understanding and ultimately managing the economic cycle, particularly when one considers how much the world has changed in 250 years. Yes, we failed to mitigate the economic meltdown that led to the Great Depression in the early 20th century. Until then, corrections had been allowed to go deep enough to rid the system of all excesses of the prior growth period, and that had been a successful formula. The increasingly global nature of economics by the 1920s introduced new risk, and global poverty was the result. Our country’s economic and financial management skills improved dramatically as a result of those lessons, and we can be reasonably sure that history will not repeat itself.

Since the end of World War II we have been in an era of economic management that allows the economy to experience the necessary booms and busts (i.e., growth and correction), but with controls. Each upswing of the economic cycle is associated with some form of speculation that eventually builds to excess. In the 1980s it was junk bonds, in the 1990s it was tech stocks, and in the 2000s it has been real estate. What will it be next? Watch emerging market equities and resources like alternative energy — good candidates for our next phase of excessive growth. Though the roots of the next phase of excess are being planted now, first we must deal with the necessary correction phase, which given the recent rounds of government intervention, will likely be preceded by one more uptick in growth.

The tax rebate and spending program just announced is generally responsible. Theoretical debates aside (Democrats want more unemployment and safety net benefits, Republicans want to lock in Bush’s tax cuts beyond 2010), getting consumers to spend more freely will have a positive impact on the contracting economy, which will delay and soften the oncoming recession. But from another perspective, the individual responsibility to save and prepare for the future, this approach smacks of immoderation. Which one is correct? Both perspectives are correct.

In an ideal world, consumers would all have paid off credit card debt, increased home equity, and put money into retirement savings and short-term liquidity accounts during the past six years of economic growth. That type of fiscal prudence at the individual level would have reduced the economic growth we experienced and it would have reduced some excess in the system.

The US government will provide incentives for consumers to spend more money, starting in May when US citizens below certain income levels receive their rebates. The mere anticipation of the rebates will motivate many people to spend now, so the benefits of economic stimulation will begin almost immediately.

How do individuals reconcile the need to demonstrate fiscal responsibility with the overall economy’s need for spending? Depending on your perspective, this may seem a moot point. Those who have been mindful of future recessions are savings minded. Those who have not started taking savings seriously are not likely to begin now. But this is a serious personal philosophical question with which serious people should grapple.

Start by understanding that all debt is not bad. The savings-minded have a tendency to be debt averse. Extreme debt aversion is what prolonged the Great Depression long past the point when the economy should have recovered. As long as the debt incurred provides greater return than savings alone would yield, debt is an intelligent choice. Debt is bad when it fuels consumption that has no long-term benefit. Even with the housing market continuing its correction, housing remains an intelligent debt. This correction will end, the next growth cycle will begin, and smart investments in real estate will continue to pay off.

Recent economic anxiety and fear of changing government administration in 2009 has caused businesses to batten the hatches, slightly increasing unemployment for the first time in a few years. But an interesting trifecta — the government’s new financial incentives for business to invest in infrastructure, the weak dollar creating export growth, and the emerging baby-boomer retirement wave — should contribute to earnings growth for American workers.

This adds up to one more opportunity to improve individual financial positions without the cumulative effect of short-term contraction of the economy. If individuals were not spending so much money servicing credit card debt, those dollars would be available for consumption that has no long-term economic benefit, giving individuals rewards such as vacations while providing the economy with cash flow. Now is a very good time to invest in homes, commercial real estate, and reasonable-return infrastructure for businesses. It is time to pay down short-term debt in order to be financially healthy when the correction occurs. If increased wages pan out, consumers will have money to both spend and save. The discipline is to ensure that saving is a well-considered part of that equation.

(c) 2008. Andrea M. HIll.

A Guide to Business Opportunities in the UK

Companies are often looking for opportunities to develop their business further. In any business area it is important that you have the right human resources and the strategic backing of the people within the region you are moving into.

More than 330,000 new companies are registered in the UK every year, and they join over two million existing businesses of many different sizes. Every year hundreds of firms, from high-tech start-ups to global brand leading businesses, receive substantial advice and support in locating to the UK.

In the North East of England, a regional development company leads one of the biggest and most extensive partnerships in the country for supporting inward investors. Partners include UK Trade and Investment, the North East Chamber of Commerce, CBI North East and the region’s five universities which are Northumbria University, University of Newcastle, Sunderland University, University of Durham and Teesside University.

With five universities in the region it adds up to a lot of academic expertise as well as a lot of business based expertise. How do businesses go forward with all of this? First you will have to decide if the North east is somewhere your business could fit and how you could go about registering a business in the UK. We’ve done some research so that you can access all of this when looking for business opportunities in the UK [http://www.investnortheastengland.com/page/business.cfm].

Business Culture

The UK has an open and business-friendly culture that is highly tuned to the demands of international markets. UK businesses are responding to global changes and increasing worldwide competition by facing outwards and adapting new ideas and thinking quickly. This knowledge-driven approach, backed by huge public investments in education, training and business support, is a high priority in regions like North East England. This makes it an ideal place to relocate or find new business opportunities that are UK based [http://www.investnortheastengland.com/page/business/culture.cfm].

Forming a company

Companies House co-ordinates the administration of businesses in the UK. It is where new companies must be registered. Detailed guidance on the requirements for forming a company is available at the Companies House website. There are four types of registered company: private company limited by shares; private company limited by guarantee; private unlimited company; public company limited by shares. The overwhelming majority of overseas businesses are established in the UK as either private or public companies limited by shares.

Expertise and support organisations place North East England in a unique position to support companies in the commercialisation of research and getting new products to market through research and development expertise.