What determines your borrowing?
What is a good business loan; What is not a good business loan? How can you determine your borrowing as a business owner? Are your executive decisions leading your company in the right, or the wrong directions?
Since ancient texts, you hear stories about the merchant and the lender. The good, the bad and the ugly. Some borrow and grow their companies. While others borrow, which leads to the destruction of their business.
So what determines the good or bad loan? A lot of it is actually luck, luck that you worked for. As scripture has it, “You reap what you sow”. Sometimes you may have a perfect plan, a perfect business loan, and something out of your control happens and ruins everything. It may be rare, but it does happen.
In reality rates & terms aren’t everything, it starts with the executive decisions. The person(s) who owns, or runs the business makes the plans that workout or not. The high- risk, and low- risk decisions.
To take the EIDL business loan for example. Dirt cheap interest, over 30 years. Still had about a 25% default ratio according to Google and other sources. Point being, the business owner needs to make the money work.
Finding a good broker
Finding a good broker is essential while borrowing business capital outside of a bank. Especially with 100’s of private funders. Each 1 serves a different purpose in what type of program, and business they will fund. A business owner of any industry would not be able to find the right matching lender on their own. You need a marketplace and a knowledgable broker to get you the best deal. Many factors come in to play while approving fast capital with revenue being main, and current debts being another. A good broker takes you to the right investor to get you the best offers.
So what is a good deal?
In short, a good deal is where a merchant gets enough capital to bridge the gap they need to take their business moving up the alphabet. Low costing capital is always ideal, but if there are factors involved that makes the money more expensive, it’s not exactly a bad deal.
For example, a business owner may only have $50,000 approved at a high factor rate, and a short term. It may be a retail store during the holidays, and the $50,000 may be for inventory purchase. If they took that 1 available deal, and the $50,000 investment turns into $90,000, and the payback was $70,000, then you took a good deal.
The best deals are determined by what you actually qualify for. The best case scenario will come from a good broker. Now a good deal is determined by the success or failure the working capital will bring a company in the end. Which are the executive decisions made by the merchant.