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How to Borrow Money for Your Small Business

Many people understand that when they can be in big trouble if they borrow more money than they can pay back. However, it’s not always the same with small business debts. Sometimes borrowing money for small business can be not the best idea.

In this article, you will find different options, including what type of business is more appropriate for taking a loan, what kind of loan is best for your business, and how to make sure your loan is actually helping your business grow.

What Are the Options besides Borrowing?

Before you make your final decision towards borrowing the money, consider other available options. Only a person who is trying to find all possible ways not to take the loan in the first place can be called a responsible borrower. One of the best options to avoid loans and ensure your business is still running steadily is to work with your vendors.

For instance, if you are a bakery owner who caters to corporate clients, you most likely get paid only a month after you cater the event. One of your vendors may be the delivery service that delivers your goods to the clients.

Chances are that you are paying upfront for delivery but have to wait for a month to get paid yourself. In this case, your business can become vulnerable.

Build Continued Relationships

You can solve this problem by signing a contract with your delivery service. Your continued business relationship will let them trust you more easily that you will pay your invoices on time.

At the same time, it gives you the same flexibility that your clients have. In other words, this makes up a very short-term and interest-free business loan that can significantly help your operations.

How Much Can You Afford to Borrow?

If you have already made a decision and are ready to borrow money, it’s significant to think first of all how much you can afford to borrow. You can consider loans online. One of the best options is to find a service that matches your application with lenders from their network based on the information you provided.

The best way to run your business is the same way you run your household. When you think and make decisions with two parts of your brain, you pretty much know you are not willing to spend more than you can afford to repay later. It’s best to use the same approach when running your business.

How Much You Can Get

When you are ready to apply for a business loan, know exactly how much you need to borrow and when you actually need it. Having a reliable business plan for the next couple of years is the biggest key to successful borrowing. So if you don’t have one yet, create it. Figure out what the borrowed money is needed for, and how much all the things will cost.

Having the right financial planning tools will help you understand how much you will need to borrow in order to cover any cash shortfalls in the future.

The last useful tip is to apply for a business loan a few months before you will actually need the money.

What Lender Is Your Best Match?

Usually, the big banks offer small business loans. But many of them have recently restricted their lending, which led to growing amount of alternative lenders. They are the institutions that also offer types of financing such as lines of credit, small loans, and cash advances.

More than that, alternative lenders usually approve loans in less than a week, which is a great advantage for business owners who don’t want to take a bank loan.

The importance of understanding emerging markets as a small business owner

The emerging markets are a land of opportunity for investors and business entrepreneurs. They also represent an area of inherent risk. However, in the competitive marketplace, businesses need to look for ways to reduce costs and increase profit margins – and the emerging market is a good way to achieve this.

The emerging markets are actually much closer than you may think. Although many people still think of the Far East and South America, we now have emerging markets within Eastern Europe and just beyond in Turkey. Africa is also now becoming an exciting new region for many investors.

For business owners, emerging markets are an opportunity to source cheaper labour and products. Both the manufacturing and service industries can make significant savings by outsourcing to emerging markets; as many companies are already doing. Some business owners are taking this one step further by investing in companies overseas that support services; this is a clever way to help cheaper suppliers stay in business while also benefiting from a growing economy.

Africa

One of the most interesting emerging economic regions at the moment is Africa, and this includes the Seychelles. This is a region where the middle class is growing exponentially. It is estimated that the world’s middle class population will nearly double from the 2009 figure of 1.8 billion people to 3.2 billion in 2020 – and many of these middle class people will be in Africa.

In countries such as South Africa and Nigeria, many people are now obtaining college qualifications and going on to run successful businesses. One major change in recent years is that many new businesses are quickly utilizing the benefits of the internet to reach customers overseas.

Nigeria is Africa’s fastest growing country and is becoming a dominant force in the continent; if growth continues it could soon rival South Africa as the largest economy on the continent. Egypt is another of Africa’s growing economies and due to its favorable location, it has great potential to support European businesses.

The Middle East

Many of the Middle Eastern economies are experiencing economic growth, and are actively seeking international trade links. Countries such as the United Arab Emirates have grown to prominence in the luxury markets, and other countries are hotbeds of business and investment opportunity. The growth in technical infrastructure in the region is helping to connect more of the Middle Eastern customer bases to the global digital marketplace. Entrepreneurs such as Ehsan Bayat, who split their time and business between their native countries and the United States, are proof of the growing cooperation between East and West.

Have an escape plan

The emerging markets can be extremely volatile so it is important for businesses to develop a contingency plan when dealing with them. For example, if a new supplier is sourced from a newly emerging economy then a business may be able to purchase products at a lower price to increase profit margins or reduce their prices to undercut the competition. However, the business should be prepared for the worst case scenario; the supplier could suddenly close down or supplies could be temporarily cut off due to unforeseen circumstances.

If risk is managed and plans are in place to cope with worst case scenarios, then the emerging markets can be a land of opportunity that will allow a business to succeed over the competition and ultimately win a larger market share.

The Insurance Needs of Small Business Owners

As a small business owner, it can be hard knowing which insurance you need and which ones can wait. Insurance is not just a luxury for larger companies; it is something that you need to add to your budget too. Therefore, today we are discussing the insurance needs of small business owners.

General Liability Insurance

All businesses must have liability insurance. This will provide protection if you, your employees, or products cause or are accused of causing bodily harm or property damage to another individual.

Property Insurance

Property insurance will protect you in the event that your business establishment or some of the items inside are damaged. It is also suggested that when you get property insurance that you add on business interruption/loss of earnings insurance so you can keep a cash flow if the damage prevents you from operating your business as you normally would.

Business Owner’s Policy

This type of insurance covers everything that you need when first starting out.

  • Business Interruption Insurance
  • Property Insurance
  • Vehicle Coverage
  • Liability Insurance
  • Crime Insurance

Additionally, you can make changes to what your Business Owner’s Policy covers so you can get the specific coverages that you need for your business needs. Usually, by going with this type of insurance you are able to save some money because everything is bundled into a package.

Commercial Auto Insurance

This insurance is to protect your company vehicles. Additionally, if you don’t use company’s vehicles, but your employees use their own vehicles, you want to make sure that you have non-owned auto liability so your company is protected in case your employees don’t have adequate coverage.

Worker’s Compensation

This insurance is needed so employees who are injured on the job are able to have wage replacement and medical benefits. By providing this insurance for employees, it means that they have to give up their rights to sue you. This insurance will protect you from messy legal troubles. You have to make sure that you are compliant with all the laws though and these laws vary from state to state.

Professional Liability Insurance

This insurance will protect you against failure or improperly rendering professional services. It is not something that is covered under general liability insurance so make sure you get this if you are a professional firm that consists of lawyers, accountants, consultants, real estate agents, and others in similar fields.

Closing Thoughts

These are some of the types of insurances that you will need as a small business owner. However, when signing up for different insurances make sure that you are aware of what they are covering. With so many insurance types available during this day in age, you could potentially be signing up for coverages that you don’t need. Therefore, instead of jumping on every insurance type that an agent shoves in your face, take time to see if it is something that is necessarily or one of the insurance types that actually do fall into the “luxury category”. Keep in mind the ones that we covered today are highly recommended, though.