Like many areas of the country, your city’s lending climate for businesses is probably a mixed bag. On the positive side, many successful businesses looking to expand their companies can find traditional financing options available to them.
However, on the negative side, available credit will probably be less than formerly available. From credit scores and collateral to airtight documentation regarding your transportation business’s good health, you’ll probably feel a bit raked-over-the-coals when you apply for a bank loan.
Back to the positives, lending options outside the traditional banking industry are available: Both SBA-backed loans and seller financing help many business owners finance their endeavors.
Before you apply for a traditional bank loan, you should prepare by putting together a portfolio that includes thorough documentation. The lender will especially be interested in documentation that verifies your transportation business’s estimated value and projects future profitability.
Why are they such sticklers about that kind of thing? Like any private-sector company, banks need to be able to make a profit in order to stay afloat; they need to be assured that you’ll be able to repay the loan, or it simply doesn’t make sense on their end.
Unfortunately, many businesses today lack the ability to provide the proof that they will be able to repay the loan. This situation is partly due to rising interest rates resulting from higher levels of regulation, leading to lower credit scores.
The transportation-industry-specific business brokers at The Tenney Group, with brokers located throughout the United States, can provide accurate business valuations and expert guidance in helping your business increase its value while improving available credit and the likelihood of being able to achieve traditional financing. If you’re open to non-traditional methods, though, there are a couple other possibilities available.
Small Business Administration (SBA) programs are part of the federal government’s initiatives to help the business economy. Rather than making its own loans, though, the SBA guarantees bank loans, encouraging banks to lend the funds without assuming all the risk.
Programs such as the Community Advantage and Small Loan Advantage are allowing the SBA to offer guarantees on funding up to $250,000. Their user-friendly application process can get your transportation business loan approval in 24 hours! By streamlining the lending process, this arrangement benefits both small business owners like you, who need to borrow money, and community banks that would otherwise be hesitant to lend.
Today’s economic climate is making an unusual source of funding increasingly common: the seller. Business owners are finding sellers in this tough market increasingly willing to help them acquire the funding needed for a merger or acquisition.
Not only does this arrangement allow the seller to more easily secure a buyer who might not otherwise be able to attain the needed funding, but it also increases the buyer’s confidence in the business’s health. The trade-off for buyers is that the sale price may be increased, when seller financing is included, but many are willing to make that concession.
Photo credits: Top © Stefan Richter / Fotolia. Middle © Sonya Etchison / Fotolia. Bottom © Gerald Bernard / Fotolia.
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