Tag: finance

How to improve your chances of getting approved for a business loan

Running a business requires a lot, and it can be challenging. But, one thing all business owners want is to see their business grow. To see the business succeed, which can help generate sustainable profit that is stable enough to keep the business afloat, meet customer needs and have the financial capacity to pay healthy salaries to all their employees.

The journey to get to a point where your business brings in more than it takes out is not one without challenges. It requires effort and, most importantly, money. But the amount of money you need may not be easily accessible.

This puts business owners in a desperate position, where they need to seek financial assistance to put towards working capital, purchases of equipment, inventory, operation expenses and more. This is where a business loan comes in and can be helpful. It’s designed to provide you, as a business owner, the funds you need to start working towards your business goals.

With that said, business loans are not simply readily available to every business owner. There are specific criteria that lenders need you to meet before being pre-selected for a loan.

To ensure that you meet these requirements, below we’ll answer your most burning question, “what do banks look for when applying for a business loan?” We will also discuss tips to help you increase your chances of loan approval. This guide will have you prepared for the process in no time.

Check your business’s credit score

One of the first things lenders will do when considering providing credit to anyone is to perform a credit history check. The same applies when seeking business finance; they may require both your business and personal credit reports. The reason for this is because they need to learn about your repayment history. The minimum credit score required to qualify for the loan is dependent on each lender’s loan policy.

So, the first thing you’d need to do is check your credit history to find out where you stand. Read through the reports to ensure that there are no errors that you may need to rectify or dispute. Doing this will help you improve your credit score before you start the loan application process.

Have consistent cash flow

Lenders won’t have much confidence in your ability to pay back the loan if your balance sheet is inconsistent and has a lot of negative balance days. A consistent cash flow paints a clear picture of your ability to repay the loan while also covering all of your business expenses.

Have all of your financial statements ready

A registered credit provider wants to see all of your business financial statements, including past and current ones. It’s therefore vital to carefully study them to ensure that everything is accurate and aligns with the past and current business performance. Moreover, you should have a clear understanding of what the numbers on the statement mean. You need to be able to answer any questions related to your business, such as turnover, profit margins, cash flow forecasts and more.

Avoid getting multiple quotes from several lenders

Connecting with different lenders to get a quote sounds like a sensible thing to do. However, this could hurt your credit score, particularly if you don’t already have a great rating. This is because some lenders make a hard inquiry when checking your credit score.

Unlike a soft inquiry, a hard inquiry plays a huge role in your credit rating and can only be removed after two years. A hard inquiry refers to an action where lenders ask for your credit report file to thoroughly go through your credit history to determine exactly how much of a risk you pose as a borrower.

Your best option is to choose a lender that has your best interest in mind. You can assess this in their processes. For example, WesBank offers business asset finance to businesses looking to secure commercial vehicles. But their approach to this is specifically customised to meet your needs. They ensure to get structured terms that take your requirements into account. Overall, this provides you with a clear idea of how they navigate lending for businesses.

While you can explore different lenders through research to learn about their offering and what options align with what you need, you will need to narrow them down to a considerable few to ensure that you do not risk a fall on your credit score.

Have collateral leverage

Lenders are taking a risk by offering you credit, and to build their trust for worst-case scenarios, you may have to offer up collateral.

Collateral is any valuable business asset that can be sold to the lender to pay up the loan if or when the worst-case situation reveals itself. It could be anything from business equipment, inventory, vehicles, account receivables or a personal house. But you must completely understand what you’re getting yourself into when you offer collateral. If you default on loan repayment, you’re risking losing an asset.

Final thoughts

We hope that the above guide will help you maximise your chances of getting approved for a business loan. Once your documents are in order, consult lenders and discuss your options. When you’re ready to apply for a business loan, ensure that you know how the whole process works from start to completion. Additionally, learn about the repayment terms and conditions, specifically how long your term is to adequately prepare for the repayments. Try not to default on your repayments; otherwise, you risk losing assets you’ve put up as collateral.

Russia to ratify BRICS bank deal by March

Russia is set to ratify an agreement on the creation of a bank for the BRICS bloc of large emerging economies this month or in March, the country’s finance minister said.

The establishment of the development bank, aimed at providing funds for infrastructure projects, has been slow in coming with prolonged disagreement over funding and management of the institution.

Finance Minister Anton Siluanov said Russia was running ahead of the other BRICS nations.

“We are ahead of everyone. Our ratification is possible for the end of February or at the latest March,” Siluanov told reporters on the sidelines of a meeting of G20 finance chiefs on Tuesday.

Russia is expected to commit $2 billion to the fund.

The group has struggled to take coordinated action after an exodus of capital from Brazil, Russia, India, China and South Africa prompted by a scaling back of U.S. monetary stimulus.

Siluanov said discussions between BRICS countries took place at deputy level at the summit because not all of the finance ministers were there. He said terms of reference for the bank as well as the board of directors and executives were being discussed.

Source: Reuters

The US stockmarket is rigged says acclaimed author

wallThe US stock market is rigged in favour of high-speed electronic trading firms, which use their advantages to extract billions from investors, according to the acclaimed author Michael Lewis.

In his new book Flash Boys: A Wall Street Revolt, Lewis says that firms are using their speed advantage to profit at the expense of other market participants to the tune of tens of billions of dollars.

“They are able to identify your desire to buy shares in Microsoft and buy them in front of you and sell them back to you at a higher price,” Lewis, whose book is available on Monday, said on the television program 60 Minutes on Sunday.

“This speed advantage that the faster traders have is milliseconds, some of it is fractions of milliseconds,” said Lewis, whose books include The Big Short and Moneyball.

High-frequency trading (HFT) is a practice carried out by many banks and proprietary trading firms using sophisticated computer programs to send thousands of orders into the market in an instant, executing a small portion of them when opportunities arise to capitalise on price imbalances, or to make markets. HFT makes up more than half of all US trading volume.

The trading methods and technology that make HFT possible are all legal, and the stock exchanges HFT firms trade on are highly regulated.

Proponents of HFT argue that the presence of such firms makes it easier for all market participants to find buyers and sellers for their trades, and that the speed at which HFT firms can detect and take advantage of pricing imbalances between different markets and assets leads to smaller bid-ask spreads.

But Brad Katsuyama, former head trader in New York for the Royal Bank of Canada and a major figure in Lewis’s book, said he was finding that when he would send a large stock order to the market, it would only be partially filled, and then he would have to pay a higher price for the rest of the order.

With the help of new hire Ronan Ryan, Katsuyama realised that his orders travelled along fibre optic lines and hit the closest exchange first, where high frequency traders would get a glimpse, and then use their speed advantage to beat him to the other 12 US public exchanges and 45 private trading venues. HFT algorithms could then buy the shares Katsuyama wanted, and then sell them to him at a slightly higher price.

Katsuyama and Ryan created a system in which RBC would send its orders first to the exchange that was the furthest away, and last to the exchange that was closest, with the goal of arriving at all places nearly simultaneously, cutting out HFT.

“Essentially, our fill rates went to 100 percent. We couldn’t believe it when we actually figured it out,” Katsuyama told 60 Minutes.

Katsuyama said he decided to start a new trading platform, called IEX, for the Investors’ Exchange, employing similar tactics to those he used at RBC.

“It almost felt like a sense of obligation to say we found a problem that is affecting millions and millions of people – people are blindly losing money they didn’t even know they were entitled to. It’s a hole in the bottom of the bucket,” he said.

IEX has attracted the investment of David Einhorn, the billionaire owner of hedge fund Greenlight Capital, and an endorsement from Goldman Sachs. The investors in IEX are fund companies and individuals, not banks.

“We are selling trust, we are selling transparency, and to think that trust is actually a differentiator in a service business, is actually a crazy thought, right?” said Katsuyama.

Earlier this month, New York state’s Attorney General Eric Schneiderman said he believes US stock exchanges and other platforms provide HFT firms with unfair advantages.

Source: The Guardian