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Finance

What are the Advantages And Disadvantages of Business Loans?

There are a number of different paths available to you if your business needs some money. You could look to reinvest the profits of the business. Or you could try to find an investor or business partner who will inject some cash into the enterprise.

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There are a number of different paths available to you if your business needs some money. You could look to reinvest the profits of the business. Or you could try to find an investor or business partner who will inject some cash into the enterprise. But what we’re going to look at today are business loans. These are common forms of financing for businesses. But before jumping in and applying for a business loan from a bank, you need to learn more about what’s good and bad about this kind of financing.

Below, you will find plenty of information about the advantages and disadvantages associated with taking out a loan for your business.

Advantages:

Banks Don’t Try to Influence How the Money is Spent

Unlike investors, a bank is never going to interfere with how your business is run. If you find an investor, you will have to work alongside them. And unless they’re a silent partner, they will expect to have a say in how their money is spent by the business. On the other hand, banks don’t care what you do with the money as long as you’re going to be able to pay it back with added interest. What happens in between now and then is entirely up to you. So, if you want to retain full control over your business and how it grows and expands, a business loan is usually the best option.

They’re Convenient and Easy to Access

It’s easy to get in contact with your bank and talk to them about the possibility of taking out a business loan. This convenience and ease of access is something that can be really good for businesses. Most business owners don’t have time to waste. And waiting for profits to grow in order to reinvest them can take a long time. The same applies to looking for investors. It’s a long process, and it can drag out for a long time. Of course, loan applications can take a long time to be analysed and accepted, but they are easier to deal with than the majority of the alternative options.

Reasonable Interest Rates

The interest rates attached to most business loans are very good. Banks are competing for customers, so they are obligated to offer a deal which is at least in line with what their competitors are offering. Of course, the interest rates are still going to allow enough room for the banks to see a healthy return on their profits. But the rate you get is often better than most personal loan options. On top of that, the interest you pay is often tax deductible. You will have to check with your local authority to see whether or not this is the case for your business, though.

The Profits Will be All Yours

Most business owners take out a business loan because they want to expand their business or push it in a new direction. This means that they want to make it more profitable. If you get this money from an investor, they will expect a return on any money you make. The performance of the business will be directly linked to how much they get in return. That’s not the case when you take out a loan, though. The returns are fixed, meaning that you will pay the same amount of money back to the bank no matter how big or small your profits become as a result of your investment.

Disadvantages:

Not All Businesses Will Qualify for a Loan

There are lots of strict rules and conditions that banks have in place when it comes to approving or rejecting business loan applications. Not all business will meet the criteria laid out by the banks. So, you will need to know how the banks analyse applications before you go ahead with your application. You don’t want to waste time on an application if there is no chance of it being accepted by a particular bank. Dealing with a rejection can be difficult to bounce back from too. You can be left wondering where you should turn next to get the money your business needs.

They’re Often Secured Against Assets

Many bank loans are secured against an asset owned by the business. The risk of this is that the asset can be seized by the lender if you fail to make the repayments on the loan you take out. Of course, you will probably think that this won’t become a problem for you. But that’s what everyone says when they take out a secured loan. It only becomes a problem when your business’s profits are not as healthy as you had hoped for and you’re no longer able to make those repayments on time. Think about this carefully before taking out a loan.

You Might Not be Granted All of the Money You Requested

Another thing banks do when responding to loan applications is only grant some of the money that’s requested. They might think that a business doesn’t need all the money that it is asking to lend. It’s not uncommon for banks to approve a loan on the condition that only 70% or 80% of the money is given. This can be frustrating for business owners who already have fully costed plans in place. It can force them back to the drawing board in an effort to cut costs and find ways to carry out their plans in a way that is more affordable. In truth, it’s a headache many business owners could do without.

Conclusion:

In conclusion, you need to make sure that your business is always careful when it comes to borrowing money. Loans can be great solutions for businesses that don’t want the hassle that often comes with finding an investor or business partner. However, ensuring that you will be able to pay back the amount that you borrow is essential because your assets could be taken from you as collateral if you fail to make the repayments.

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Finance

Making Money With Short Term Rentals

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Investors love investing in real estate as it usually outperforms other investment types like shares and managed funds. There are many ways to make a profit for your business with real estate too including ‘flipping’. This term refers to purchasing a revenue-generating asset and then shortly thereafter selling it again for a profit. In the US, the two asset classes mostly used for flipping are initial public offerings and real estate.

The longer-term real estate investing strategy that’s prevalent is buying homes to rent out on long term tenancies. It’s not just businesses that invest in rental properties, as a retirement strategy workers also look to have one or two investment properties in their portfolio for the weekly income and the long term capital gain on resale.

What’s also caught the attention of businesses and workers alike is the option to make money from short term rentals. Generating more income with short term rentals and by listing these properties on Airbnb is disrupting the accommodation sector and anyone with a home can do it. AirBnB is a disrupter and it has changed the way we travel. Staying in a spare room for a night or two, rather than a hotel is now accepted as the norm among all types of holidaymakers.

If you want to know how you can earn money with short term rentals, here is a quick guide.

What Is Airbnb?

Airbnb is an online marketplace for lodging around the world. It is popular among travelers who want to save money on accommodation. Because hotel rates are getting expensive, solo and group travelers are looking for more affordable options. Property rental listings on Airbnb can be a whole apartment, one room, or villas. Users can input the location and dates of arrival and departure to look for available properties.

The company started in 2008, and since then, it has reached worldwide popularity. Not only travelers are using this app, but also business-minded individuals take advantage of Airbnb’s technology to generate more money.

In the United States, there was a 45 percent increase in year-to-year bookings. Airbnb attracts millions of users worldwide, which comprises of frequent travelers and individuals who travel for work. About 700,000 companies are now using Airbnb for work-related purposes.

Earning Money with Short Term Rentals

You do not need to buy a property to list it on Airbnb. You can go for short term rentals to gain a more significant profit from daily or weekly rentals. Some people are already doing this strategy for years now, and you can also do the same if you find a property in a prime location.

Because this venture requires capital in the form of deposits, you need to be ready. Some property owners require bigger deposits, especially if the unit or apartment has appliances and furniture. Ensure that you have enough money to cover for deposits to get the business rolling. Once the apartment is ready for occupancy, you need to create an Airbnb account and list the property.

Other considerations you need to know:

  • Property Maintenance
  • Property Rating
  • Security
  • Facilities

Studying the market and how the business works can help you optimize the trade. Create a checklist to go through the essentials every time before a guest checks in. Besides, you can also connect with other people who do this business in different areas.

Technology opened up more profit opportunities for people. In hospitality, even you, who do not have much experience in property rentals, can earn money. Listing your extra room in the apartment can be a good start, but you can always experiment with making more profit. By short term rental, you can get access to excellent properties that can be listed on Airbnb.

Continue exploring the real estate market and make sure to learn new knowledge from experienced individuals. Who knows, you might gain financial freedom by being successful with this Airbnb venture. Check how other hosts present the properties, so you can have an idea of how to operate yours.

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Finance

Home Appraisal Tips for a Successful Refinancing

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The appraisal value for your home significantly impacts a refinancing application. New paint, upgraded flooring, renewed fixtures, and proper sanitation also contribute towards a satisfactory appraisal. Refinancing a home requires several necessary measures. However, the appraisal of the estate is perhaps the most significant.

If a real estate appraiser provides an assessment on the equity in your home, it can make – or break – the chance to refinance mortgage. You need the value to suit your refinancing targets, and what better way to achieve that than to improve your home?

What is a Home Appraisal?

An appraisal is a qualified and accredited professional assessment on the value of a property given by a third party. The appraiser will get paid by appraising your home with no incurred risk on whether you can refinance a mortgage or not because of the value they provide.

In a refinancing deal, an appraisal safeguards the lender by guaranteeing that it does not loan the applicant more than the value of the property. If the estate is subsequently foreclosed for any cause, the borrower will want to resell it and get their money back.

Tips to get a high-end appraisal:

The cost that the appraiser assigns your property mainly relies on the latest selling values of similar houses. However, you can definitely make sure that your property is appraised to its maximum value.

Having your house appraised is like meeting a potential partner. Although you do not know what the person likes and how they will judge you, dressing well improves your chances. Your estate must be clean and organized, tidy, and comfortable to examine. Pets should be kept in place, and the scent blocked. You will not want to rush the appraiser before inspecting everything.

Appraisers are especially particular about:

  • External and internal condition
  • Overall room number
  • Features, including layout design and functionality
  • Kitchen and bathroom upgrades, walls, roofing, and home systems (air conditioning, plumbing, and electrical) throughout the past 15 years that have made the house updated, usable and livable for current standards
  • State and condition of the house’s structures
  • External facilities, including garages, stairs, and balconies location

It’s also wise to emphasize characteristics that might not be readily noticeable, which might contribute to the value of the property. If there are any upgrades that are not seen, it would be good to let the appraiser know.

After securing a reasonable appraisal, you have achieved a significant step toward refinancing your loan. You can now proceed to the next steps with your mortgage lender. If you have received a good value, use a resource such as the Consumer Financial Protection Bureau’s Mortgage Calculator to check interest rates on refinanced loans with the same pricing for your house. Coming equipped with these statistics will provide you more negotiating power once you face your lender. It will also help you feel confident in asking for the rate that you deserve.

Knowing how appraisals work will provide you with the strongest shot of getting an appraiser to award the maximum value for your estate. Appraisals may not always arrive with the ideals that applicants aim for, and they are a subjective method with room for human error. You can appeal if you have a low rating, but you will only survive with reliable information to back you up.

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Finance

Commercial Loans: Options and Benefits for Start-ups

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Running a business requires working capital to hire staff, buy equipment, and cover for utility bills.

For start-up firms, having a huge capital is not always guaranteed, and commercial loans provide funding to get the business rolling. The problem is, not a lot of business owners are confident and educated enough to borrow money from lenders.

In case you are wondering how the commercial loan works, here is a guide to help you understand how the process, options, and why your business needs it.

What are Commercial Loans?

A commercial loan is a type of financial assistance that helps businesses address everyday costs and begin the next stage in their business journey. Most of these loans have fixed rates and monthly payments but require collateral that should be equal or greater than the loan amount.

The most common types of financing options are:

Small Business Administration Loans

SBA loans are similar to traditional loans but with longer terms and lower interest rates. The only downside is, borrowers need to wait for long to get the funding. Loan terms can be a minimum of 5 to a maximum of 15 or 30 years.

Business Line of Credit

This type of commercial loan gives a borrower more flexibility in borrowing money. The lender will provide a pool of funding that you can draw from whenever you need it. You will only pay the interest of the money you take out.

Traditional Term Loans

Traditional term loans are the most basic of all, wherein a business owner borrows a specific amount and payback with interest. Lenders charge rates depending on the creditworthiness of a business.

Benefits of Commercial Loans

Capital Availability

Easy access to funds can help you focus on improving your services and gaining more clients. Loans provide a breathing space for you to focus on your business and not think about money. As you work on expanding your reach, hiring talented people, and boosting marketing, you can expect growth.

Commercial loans provide credits up to $25 million and help you increase working capital and create more jobs. Also, long-term loans are easier to pay back while you are still building your business.

Build Credit

If you are planning to apply for a large-scale loan in the future, starting with short-term loans can help you build a business credit card. Start-ups usually don’t qualify for larger loans because of the risks involved and lack of credit history. Try going low first to build up your report and increase the loan amount eventually.

Go After a Business Opportunity

Got a new idea to grow your business but lacks funding? Consult a financial advisor to know your options and get a low-interest commercial loan. Weigh your options carefully and go directly to a reliable lender for secure loans.

Taking risks is part of running a business. If you believe in what you are selling or providing to customers, then consider commercial loans to take your business to a new level. Contact North Avenue Capital to learn your options for business and industry loan programs.

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