Tips And Guide For Debt And Loan Management

There are so many online business loans provider today, with its own different loan and payment rules. But as a client you should choose a Business Loans service that can maximize your advantage. The most important consideration is its reputation; a good lending service would not require any payment during application process. Another important factor is low interest rate with APR approximately at 6%. The last one; is the ease of application process. Some business loan services even do not require documents for loan up to $350,000, all you need to do is to fill some forms and supply contact information.
Even with all of these advantages and ease in application process, you should still need to pay your debt regularly to avoid any unnecessary legal cases.

A good credit counseling service should be able to assist you to control your debt effectively. However you should be wary of frauds that sometimes pretend to be a legitimate credit counseling service. These people can quickly take away your fund and leave you in deeper trouble. A detailed examination should be able differs between a good counselor service and fraudster.

In the past, credit counseling was mainly run by an establishment called National Foundation for Credit Counseling, which worked along with its nonprofit affiliates called Consumer Credit Counseling Service. They will try to negotiate a lower interest rates and more manageable payment plans for those who has bad debt situation. Luckily, you are now able to find Consumer Credit Counseling Service in almost every big or medium-sized city, even some of the smaller towns.

Credit counseling services are a highly competitive industry. An increase of consumer debt back in 1990s has allowed many competitors backed up with multi-million dollar of investment. Just be sure you choose the right one.

Going out of business, although unpleasant, is not the worst thing in the world. If your business debts are so bad that keeping the doors open is too difficult, closing up shop may be more a relief than a failure.
When shutting down a business, remember to do the wrong thing. You may be tempted to do the right thing, namely, borrow from yourself to pay off your business creditors (even though we already told you not to!). For instance, you might be tempted to take out a second mortgage to pay off everyone and close the doors with nothing owed. It would feel good. It would be dumb.
First, you will be unemployed. You do not know where you will be working or how much you will be making. Taking on additional debt at this point is the complete antithesis of everything we have been trying to teach you in this blog. There are other ways to solve money problems besides incurring additional debt. Second, you will be trading unsecured debt for secured debt. If you fail to pay some vendors, there is not a whole lot they can do. They surely cannot repossess your house. But if you pay them by refinancing your house, and then cannot pay the new mortgage, the bank can take your home. Never trade unsecured debt for secured debt. You may have to go to the court of last resort. Although it is not our favorite solution, bankruptcy is one way to close a business, wipe out the debts (at least legally), and start over.

You may be tempted to dip into your personal pocket to help out your business. Maybe you want to use your credit cards to finance your business during a rough stretch, or you are being asked to personally guarantee a business loan. Although we understand the desire to do this, we do not recommend this course of action. Yet we also know that it is commonplace. Indeed, both of your authors have broken this rule and mixed personal and business debt in order to keep their respective businesses going. If you do mix these debts, the important thing is to keep the debt manageable.
Caren made the mixing mistake. She helped found a nonprofit AIDS awareness organization and ran it for six years. Every time fund-raising slowed down, Caren took an advance on her credit cards to keep the organization afloat. After 10 years, it finally folded, and Caren was $40,000 in debt and unemployed. She was forced to file for bankruptcy.
One great way to keep your business and personal money lives separate is to incorporate your business. Although expensive (roughly $2,500 for attorney and state filing fees), incorporation has tremendous financial advantages. The main one is that once you incorporate, you are personally off the hook insofar as liability goes. A disgruntled customer could sue your corporation, but not you. A creditor could legally go after the business, but not you personally. Incorporating protects your personal assets, your home, and your spouse’s income from your creditors. To learn more about incorporation, visit bizfilings.com, the largest Internet provider of incorporation services.

Several different types of business loans may be right for you:

1. Accounts receivable financing. This revolving line of credit is based upon your accounts receivable. Depending upon how much you are owed and the likelihood of repayment, this type of loan can speed cash flow to meet current obligations. As cash needs vary, the borrower is able to increase or reduce the loan amount without renegotiations, and the ability to borrow grows directly with accounts receivable. A typical program enables a client to borrow a predetermined percentage of accounts receivable, usually 80 percent. You would then receive periodic advances, upon request, deposited directly into your bank account. Interest is charged only on the amount funds advanced to you.
2. Purchase order financing. Say that you have a purchase order for $50,000 worth of widgets, but you need capital to service the account and get everything shipped. Using this method of financing, a borrower can obtain advances on designated purchase orders that can be repaid directly by the borrower’s customer. This method of borrowing can be particularly convenient for large projects or when you only need to borrow money occasionally (only when you receive unusually large orders, for example).
3. Inventory loans. These funds are usually short-term and are used to take advantage of attractive purchasing opportunities or to support seasonal increases in inventory.
4. Fixed asset loans. These loans are based upon fixed assets (such as machinery you own) and can be used to acquire additional equipment and to improve a company’s financial position by increasing working capital, consolidating debt, and reducing monthly payments.
5. SBA loans. The federal Small Business Administration guarantees loans made by banks to small businesses. What is great is that these loans are fairly easy to get and have very favorable repayment terms. Because the federal government guarantees these loans, banks like to make them. You can contact the SBA at www.sbaonline.gov or 1-800-827-5722.
6. Personal loans. Mom and dad or other relatives may lend you money.

It’s highly ironic: One way to get your business out of debt is to go into more debt. Sometimes business owners just need a short-term infusion of cash to get things moving again or maybe a longterm note or a line of credit might help.
Then again, a loan may be nothing more than a bandage. Take Stephen, for example. He ran a consignment furniture store and got into the bad habit of not paying some consignors after he was paid. He ended up $10,000 in the hole, so he took out a loan and solved the short-term crisis, but he never changed his ways. He was finally forced out of business a few years later. Make sure that your loan will not fortify bad business practices, but will instead enable you to get through an unusual money crunch.

• Assign someone the task of contacting all Account Receivables over 30 days old (or if you are a sole proprietor, you must prioritize this task for yourself). Get a specific date as to when the debt will be paid and call again on that day if the money is not received. You must remember this: a vow is just a vow. Begin with a friendly reminder but get increasingly aggressive as time goes by. Once an AR is more than 60 days old, you have a real problem.
• Add interest. Institute a new policy of at least 10 percent interest on all AR over 30 days old.
• Stop all shipments. Inform your repeat customers that all outstanding balances must be made current before any new product will be sent out.
  Hire a professional. As a penultimate resort, hire a lawyer or a collection agency to commence collection activities.
• Sell the debt. The money owed to you is a commodity and can be sold like one. Collection agencies buy bad debt every day, for a sharply discounted price. Expect bidding to begin at 50 percent of what you are owed.

When you allow someone to buy your product “net 30” (that is, payable 30 days after the purchase), you are essentially lending that person money. Permitting these people extra time beyond 30 days to pay for a purchase is a commonplace, yet easily correctable, mistake. Would your bank allow you an extra 60 days to pay your loan? Of course not. Your business should be run the same way.
Always remember that accounts receivable (AR) are the lifeblood of your business, representing your business’s cash flow and liquidity. Getting your receivables current, therefore, has two advantages:

• It will bring in immediate cash.
• It will make your business look better to potential lenders.

Robyn runs a day-care business out of her home. She loves her kids and loves what she does. She is also always strapped for cash. Does she need a new recipe or another business? No. Robyn’s problem has a far simpler solution. Robyn has not raised her prices in 10 years.
Because you are your own boss, you set the prices. When is the last time you raised your prices? Although you should be concerned that you will drive away clients if you do, it is still worth a shot. If your fears are valid, you can always lower your prices again. But if your fears are ungrounded, you will be giving yourself a well-deserved raise.
Azriela coached a professional who was very concerned about “inflicting” higher prices on her clients until she was able to see that it was also for their benefit. The woman was burning out and was unable to give her clients the service they deserved because she was taking on too many clients in order to pay the bills. By raising her prices, she was able to say no to some new clients and better serve her existing ones. You will never know until you try. People who buy apartment houses for a living are always looking to purchase units where rents are too low for the area because they can raise rents upon completion of the sale. Such units are quite easy to find. If many landlords are charging too little, you certainly could be as well.

Here is a revolutionary concept: You may want to get a job or start a second business. Stay with us here. Your probable problem is that you do not have enough income to cover your expenses. Finding a new recipe for your existing business is one way to create income. Another way is to create a second source of income. The idea here is to create enough additional revenue to cover your overhead. A new income stream means more money for your business. Although we understand that you want to work for yourself, taking a job for a short-term infusion of cash is a way to keep the business afloat. It is not a sell-out if it allows you to keep the dream alive. By the same token, starting another business is also a way to bring in more money.
Azriela is a good example of this strategy. Besides a successful writing career—she writes books and has a nationally syndicated column, three online biweekly newsletters, and an entrepreneurial coaching practice (four recipes)—she is also a professional speaker. She does not rely solely on one occupation to bring in the money. You may want to consider the same thing.
A smart stock investor knows not to buy just one stock. That stock may go up, but it may go down. Having more than one stock ensures that when one stock does go down, the likelihood of taking a big financial hit is remote. Diversification is a good tool to use to adapt to changing financial situations. As a savvy entrepreneur, you may want to do the same thing. Think in terms of multiple income sources instead of just one. This way of doing business has multiple advantages. All businesses have cycles. When one of your businesses is slow, it is unlikely that another will be as well. Instead of suffering a cash crisis, you are still able to keep money coming in.
Large businesses do the same thing. Amazon.com began selling books online. Now it sells CDs and gifts, conducts auctions, and has an interest in a pharmacy business.