by: Dave Ryan

Are you in need of financial resources in order to start or even
maintain your small business? Most of us are. The fist step is to
take a look at the vast number of commercial loan sources that offer
help in this area such as Chase, Citibank, etc. Also, with the Small
Business Administration (SBA), you should be able to arrange a
connection with one of these banks. This is one of many
organizations that specialize in loans to small businesses.

Contrary to the belief that bankers actually look for reasons to
turn down prospective clients in need of a loan, they are in the
business to lend money. This means that every time a banker is
sitting in front of a potential client, they are hoping to make the
deal work just as much, if not more than the client wants it to
work.

A bank’s primary role in the small business lending area is funding
growth. An example of this would be to finance the expansion of
small business with a proven track record. Most banks can offer a
wide variety of loan packages designed to finance expansion of an
already existing small business.

Below are a few examples bank loan packages :

1. Asset Based Financing. Asset Based Financing is a general term
describing a transaction whereby a lender accepts collateral and
assets of a company in exchange for a loan. Most asset based loans
are collateral against other accounts receivable, inventory, or
equipment. Accounts receivable is the most favored of the three
because it can be converted into cash quickly. Banks will only
advance funds on a percentage of receivable or inventory, typically
being around 75% of the receivable and 50% inventory.

2. Line of Credit. A line of credit involves the bank’s setting
aside designated funds for the business to draw against for the cash
it needs. As the line of credit is used, the credit line is reduced
and when payments are made the line is replenished. One major
advantage of a line of credit is that no interest is accrued unless
the funds are actually used.

3. Floor Planning. Floor Planning is another form of asset based
lending in which the borrower’s inventory is used as collateral for
the loan. Car dealerships are a prime example of a business that
often uses floor planning as their primary financial tool.

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