How to Raise Finance for a New Business Venture

Many banks in the United Kingdom are holding onto to their assets and frankly are afraid to lend to people so they will be unable to start new business ventures. The venture capital firms in the United Kingdom are out there operating as an alternative for capital raising when it comes to the banks, The agreements that some venture capitalists have you sign are complicated and in fact make some people feel very confused about the process. The only option many people have then it to borrow against assets that they already have in their name.

A banker may be willing to suggest that you re-mortgage your home as a way of raising capital. A person who already has a business established may take the advice that they go out and get a second mortgage on their business/commercial property. It can be smart to take a look at your company’s sales receipts before you go out and request a re-mortgage associated with that business venture.

A third type of asset that you can possibly use as collateral in order to get a small business loan in the United Kingdom would be any income protection insurance plan that you have or some sort of individual retirement or savings plan that you have. The truth of the matter is that if you and your family members truly believe in the concept of your business then they should have no problem with the concept of how you go forward and re-mortgage your home. If you are working with a bank that has known you for a long time, then it may only take a month or so to process your request to re-mortgage your home.

There are websites out there that allow you to apply for a small business loan in the United Kingdom with no collateral down and you do not have to provide your tax return in the process. It does not sound like the loans would be that easy to get in this market, so you want to do your research on any organization that you apply with.

A start-up does take a work and financing, but there are ways to make sure that you secure the funding. A lot of people currently applying for loans are doing so in order to focus on debt consolidation so you would hope that private lenders would like to hear from a small business person with good credit. You can even secure financing for a rental property if you are willing to re-mortgage your first home under the right circumstances.

Acquiring an Insurance Company

If you want to get rich then entrepreneurship is the best path to take to achieve that goal. While it is possible to make a lot of money when you work a job, you income will always be capped at the yearly amount your company is willing to pay you. When you have your own business, however, your income potential is limited only by how hard you are willing to work and your ability to generate business. A good industry to get into for those interested in making money is the insurance business. You don’t have to start your own company either. Here are a few tips for acquiring an insurance company.

Before you start the process of acquiring an insurance company, it is important that you have knowledge and experience with the type of insurance that is being sold. For example, if you want to invest in a company that sells health insurance, then you should know the ins and outs of the industry, how it is sold, how the plans are put together and so on. This will better assist you in evaluating the packages the company offers. If you have no experience, then you should get training and even work as an agent for a few years before you make the investment.

Acquiring an insurance company will require a large capital investment. Therefore, you need to figure out how you are going to get the money to purchase the company. You can get a loan from a bank but the bank will want to see the company’s financials to ensure that it is solvent and that you will be able to pay the money back. If you are not able to get a traditional loan then you may need to bring on investors. You should look into angel investors and venture capitalists who may be interested in getting into the insurance business with you.

Acquiring an insurance company is really not that different from buying other types of companies. You want to look over their financial statements and marketing plans to evaluate the growth potential of a company. If the company is not making money now, how do you hope to change things so that it will be profitable in the future? Be realistic. The last thing you want to do is to buy an insurance company and have it go bust because you couldn’t get it out of the red. Do you due diligence and make sure the company is worth buying.

SBA Loans and the New Small Business Bill

Near the end of September 2010, President Barack Obama signed a Small Business Bill into effect. The new bill set aside $30 billion for small business lending. The law also includes $12 billion in tax breaks for small companies. This bill was signed into effect as a response to the 9.6 unemployment dissent in America. President Obama and the administration signed the bill to demonstrate an effort to decrease the unemployment levels in the United States. President Obama hopes that the loan will create as many as 500,000 new jobs within the next couple of years.

Small Business Jobs Act 2010 Changes

The Small Business Jobs Act includes the Recovery Act Loans Extension that provides $14 billion in lending support. Small Business Administration (SBA) Recovery loans will be extended under the law with a 90% guarantee and reduced fees. At the time that the bill was signed, 1,400 small businesses were waiting for funding. Since the signing of the Recovery Act, 70,000 Recovery loans have been supported. Over $680 million dollars have created $30 billion in lending support.

The bill supports higher loan limits, and the maximum loan sizes increased in the pre-established loan programs. The new bill also increases the 7(a) and 504 loan limits from $2 million to $5 million. Manufacturers may receive up to $5.5 million. The 7(a) loan program is one of the most flexible loan programs offered for start ups and existing small businesses. Most of these loans are gained through commercial lending institutions. The 7(a) loan program includes an Export Loan program and a Rural Lender Advantage program. Some businesses will be able to refinance and incorporate their commercial real estate mortgages into the 504 loan program. However, this only applies to owner occupied units.

Microloan limits increased from $35,000 to $50,000. These loans are designed to help entrepreneurs with large start-up companies and small businesses owners in underserved communities. The new bill also increases small business eligibility for SBA loans. They make this possible by increasing the “alternate size standard” to small businesses with less than $15 million in net worth. This also applies to those businesses with less than $5 million in average net income. The law also increases the amount of Small Business Administration (SBA) Express loans from $350,000 to $1 million. Working Capital and Commercial Real Estate Refinancing received temporary enhancements to assist small business owners.

Tax Cuts

The tax cuts include the following:

– More Deductions for Start Ups
– Deductions for Cell Phones provided by the Employer
– Self Employed Health Insurance Deductions
– Penalty limitations for small business tax reporting errors
– Accelerated or Bonus Depreciation
– Provisions for up to Five Years of Net Operating Losses
– Up to $500,000 for Small Business Expenses: The Highest Expense Ever

Fees Associated with the SBA Loans

Fees are assessed to offset the costs of the SBA loan to the taxpayer. Lenders are charged a guaranty fee and servicing fee for each approved loan loan. The fees are a percentage of the amount loaned to the borrower. The lender may charge the guaranty fee upfront. However, the borrower is not responsible for the lender’s annual fee.

ARC Loans

ARC Loans are small business loans that do not carry any associated fees. In the past, the fees for loans were between 1% and 3.5% of the total cost of the loan. ARC loans offer 100% guaranty from the SBA to the lender. No fees are required to be paid to SBA. Many of these loans are provided over a six month period. The repayment of the principal of the loan may be deferred for 12 months after the final disbursement of the loan. Repayment may last as long as five years. The best candidates for this type of loan are companies that have been profitable in the past, but are currently struggling. These companies may have begun to miss payments recently because of financial hardship. These funds may be used to make payroll, buy inventory or improve core operations.

7(a) Loans

Lenders will be charged an annual fee of 0.55 percent of the guaranteed portion of 7(a) loan. The fee will only be assessed to the balance of the loan and not the entire loan amount.

504 Loans

Borrowers will pay an annual fee of 0.749 percent on the outstanding balance of the 504 loan. This amount increased from 0.389 percent. Loan interest rates may not exceed 4.75% and may be as little as 2.25% when negotiated through a bank.

How Long is the SBA Loan Process?

Since the Small Business Administration is a guarantor and not a lender, the amount of time required to approve the loan will vary. The Small Business Administration attempts to reach its decision within seven to 21 business days from the receipt of the application. To accelerate the process, applicants should have several components of their application in place.

The length of time it takes for the SBA to respond to the application depends on the loan program your business elects to apply to. A business plan with financial statements is required for all loan programs. Earnings projections and collateral offerings must be established. In general, the SBA microloan is the least time consuming application and will be approved the fastest. The maximum loan amount was increased to $50,000. The funds cannot be used to buy property or pay debt.

Top Five SBA Loan Lenders

The banks have sorted SBA lending by region. Some of the most prominent banks involved in lending are the following:

Wells Fargo Bank

Wells Fargo managed a No. 1 ranking between October 1, 2009 and September 30, 2010 for the Small Business Administration 7(a) loan. The bank issued 91 SBA loans with a total value of $31.9 million. The bank was the second leader in terms of ARC loans. The bank issued 23 loans for a combined value $710,100.

JPMorgan Chase Bank

Chase Bank issued 33 ARC loans with a total value of $935,100. They ranked No. 1 in this category of loans issued.

Mortgage Capital Development Corporation

This particular bank issued the most 504 SBA loans. Businesses may use these loans for real estate purchases, property constructions and upgrades.

TMC Development

This bank issued 71 SBA loans for a combined value of $54.1 million. Nearly, 56 of these loans were 504 loans. The loans had a total combined value of $48.9 million.

Capital Access Group

Capital Access Group issued 51, 504 loans for combined value of $37 million.

Rates of Top Five SBA Loan Lenders

Wells Fargo

Typically, 3.5% of the SBA amount is due at the time of the loan. However, the fee may be financed. An origination fee may include bank fees. A fixed or variable interest rate will be negotiated by the bank for the Wells Fargo portion of the loan.

Chase Bank

A guaranty fee of 1% to 3.5% of the guaranteed amount must be paid by the lenders. The lender must also pay the annual fees of 0.25%. The lender may pass the guaranty fees onto the lender, but not the annual fees.

Mortgage Capital Development Corporation

This bank charges 0.389% of the balance of the loan for fees.

TMC Development

Most 504 loan programs will pay up to 90%. Therefore, most borrowers only have to make a 10% down payment. This bank offers a 4.39% interest rate to those seeking a loan. The fees are typically 1% or less.

Capital Access Group

Businesses may get up to 90% financing with a SBA loan. The interest rates are 4.40%. The fees are typically 1% or less.

Copyright (c) 2010 Trey Markel