Alternate Financing

ALTERNATE FINANCING TECHNIQUES TO CAPITALIZE ANY SMALL BUSINESS
(Excerpts) by Theodore Greenspan

SHOPPING FOR THE BEST LOANS

There can be wide differences in the terms of your loan between various lenders. People are intimidated by lending institutions. Consequently, they don't shop for the best loans; this is a mistake. When you go to buy a car, do you only look at one model or do you investigate five or more from several manufacturers? Once you settle on the model, should you shop at one dealership or numerous dealerships to get the best deal? This same logic should apply to finding the best loans.

GIVE YOURSELF THE BROADEST SELECTION OF LENDERS, TERMS, AND FINAL OFFERS BEFORE YOU ACCEPT MONEY FROM ANY INSTITUTION. Select your lender from a position of strength. There can be a huge disparity between final terms of various lenders. Don't think that because you have limited cash and collateral, and a limited credit history that you are going to have to go begging to find a lender, and accept anyone's terms to get financing. If you think this, IT'S TIME TO RE-THINK!

When applying for secured and unsecured lines of credit, higher lines of credit, additional credit cards, etc., remember the following:

1) The terms that the lender demands prior to giving you the loan often change between the time you apply for the loan and the time they give you final approval.

2) If you have gone to only a couple of lending institutions and are unhappy with the final terms of the loan, (for instance, they ask for additional collateral or higher points), it is difficult for you to go to other lending institutions and get the best terms.

When the new lender checks your credit rating, they will find other recent inquiries on file, even if it is within days of your last loan request. Experience shows that future lenders may think that the other institutions to which you applied turned you down or made higher demands because they know something about your credit or liabilities that the current potential lender doesn't.

For example: You have alimony payments or child support payments that you are not reporting at this time (liabilities such as these do not appear on most credit reports). You may discover that the terms for future loans have become far more stringent.

3) GIVE YOURSELF SEVERAL CHOICES BEFORE YOU ACCEPT A LOAN.

To put yourself in the best position to select the best loan(s) or credit card(s) for your purpose, you are better off making numerous requests for several small loans or higher credit lines simultaneously, (the same day), from multiple lending institutions. Then, and only then, will you have the ability to choose the best lending terms to meet your needs.

4) SHOP FOR YOUR LOAN THE SMART WAY - BY TELEPHONE AND MAIL.

Many prospective borrowers contact multiple lending institutions by phone, (often as many as ten or more), and request the loan application be sent to their homes. Once they receive these documents, they can discuss the terms of the loan by phone with the various lenders and decide to which institutions they wish to submit applications. (Note: Lending institutions do not look favorably on loans to finance start-up businesses; they usually see applications for small loans such as home improvements vacations, etc.). Once again, these applications should be submitted simultaneously (the same day). By following this simple technique, you are in an excellent position to secure financing for many small loans, often for several times the amount of cash you actually require. Now you have given yourself the ability to handpick the best loan(s) and terms for you. People assume that there is no room for negotiating with lenders. Wrong! There's no harm -- and everything to gain -- in asking for fewer points, a lower interest rate, less collateral, etc.

.....Regardless of how you choose to finance the loan, remember to make sure there is no prepayment penalty. Stretch out the payments for as long as possible to bring down the cost of your monthly payments, but leave the door open to pay it off early.

.....As an interim financing step, multiple credit cards are often used to finance all or part of small start-up businesses. Depending on the amount of start-up capital required, new entrepreneurs will often use multiple credit cards -- partially with their own cards and the balance from other participants. Often the entrepreneur has taken on a partner who has paid their share of the investment with a credit card. Just as often we learn that one or more financial backers has loaned them part of the investment with the use of their credit cards.

AGAIN... The use of credit cards is a short-term step to speed up the process of getting a business up and running, at which time these cards can be paid off using other financing sources that become available once your equipment is on location, and generating cash....

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