Benefits of a business loan

There was a time not too long ago when people and businesses prided themselves on the fact that they didn't owe money to anybody. Even the idea of using credit was looked at with suspicion and distaste. That was then; this is now. Virtually every area of society, be it government, industry, personal, religious, or recreational, is built upon credit. Even the US monetary system is based not on gold or silver, but on a promise, which is a good thing, because our gold reserves couldn't begin to cover the promises our currency has already made. We have truly arrived at the point where credit is King, and businesses that reject the use of credit as a viable tool will be left behind their competition, if they can even keep their doors open.

A business hoping to thrive in modern society has to learn how to most effectively utilize and leverage credit, not just for the purchase of capital equipment, but also for the maintenance of sufficient working capital. The latter allows your business to not only maintain its current production levels, but to remain sufficiently competitive to grow and expand. In order to utilize credit most effectively, you need to start thinking of it in the same way your banker does.

Say you have $100,000 in immediately liquid funds, but you estimate that the cost of expanding your operation sufficiently to meet your committed orders will almost eliminate those funds. You certainly don't want to pass on the orders, because you know that once a customer takes his or her business elsewhere, it's unlikely to come back anytime soon. By the same token, you know that if you spend your liquid reserves, you'll likely find yourself sweating bullets as you get closer to scheduled payables such as payroll and utilities. The logical and economically prudent solution is to take out a loan or line of credit sufficient to cover your capital expenditures, leaving your cash on hand to cover scheduled and incidental expenses. You repay the loan, either out of receivables that come in or, as a last resort, out of your on-hand reserve.

For many years, the standard method of repayment of business loans was no different than that applied to simple personal loans: the borrower establishes a payment schedule and makes regular payments until the principal and agreed-upon interest charges are repaid. And in some cases, this procedure works just fine. But what about the business whose receivables are random in schedule and amount, such as a retailer or small-scale service provider? There may well be days when meeting a fixed payment amount poses a genuine hardship, while at other times it is quite feasible to accelerate a payment schedule or significantly increase the amount of the payment. A few companies, such as NewLogic Business Loans, have responded to business need for flexibility in meeting their commitments.

Naturally, NewLogic offers an industry-standard Weekday Fixed Payment Plan, where repayment is effected via regularly scheduled, fixed amount payments. However, for those businesses that need more flexibility, NewLogic offers what we call a Processor Powered Payment Plan. With this plan, the amount of the regular payment is based upon a percentage of daily receipts, rather than a fixed amount. On lean days, the payment would be lower than the standard fixed amount, while on days when sales are especially good, the payment amount could be substantially higher, albeit at the same percentage of total receipts. If a prolonged period of lower-than-normal receipts makes extension of a loan necessary, that can also be taken care of quickly and painlessly. The Processor Powered Payment Plan has proven to be significantly less stress-inducing to many business owners, offering them the benefits of the line of credit they need to succeed, while eliminating much of the stress that is so often a part of indebtedness.

Perhaps you're still not entirely convinced, and are considering other alternatives for funding your business. For instance, we are seeing an increase in the number of "Angel Investors," who provide startup capital to new businesses or additional working capital to existing businesses - typically with the expectation of a percentage of ownership equity in return. While an Angel Investor might be a godsend to a business that is unable to obtain capital via more conventional means, the Angel/Owner relationship does introduce a whole additional layer of variables to the business, some of which have left quite a few owners - and Angels - chafing.

It is essential, for example, to ensure that the owner and Angel both share the same perspective as to the company's mission. A business owner, who began a business based upon a set of high ideals, or to serve a greater purpose, would likely find him or herself at odds with an Angel who is concerned only with a return on his or her investment (ROI). This brings us to another rather delicate point that simply must be addressed. While venture capitalists operate under fairly rigid guidelines for ethics, practices, and financial viability, no such regulatory mechanism exists to date for the Angel Investors. As a result, there isn't any infallible method for determining whether an Angel is truly a blessing or just another scammer, looking to take advantage of a business situation with little concern for the other parties involved. This is in no way intended to denigrate Angel Investors as a group, only to advise the business owner to enter any agreement with eyes wide open, and to avail him or herself of the benefit of advice from experienced professional counsel. (Here is a good link describing both the pros and cons of working with ANGEL INVESTORS: http://www.go4funding.com/Articles/Angel-Investors/The-pros-and-cons-of-using-angel-investors-for-your-new-business.aspx ) For many small business owners, a flexible loan agreement such as New Logic offers really is the best choice.

For more information about NewLogic Business Loans in general, and the Weekday Fixed Payment Plan and Processor Powered Payment Plan, or to see if their services might be a good fit for your company, go to http://www.newlogicbusinessloans.com.

THIS IS NOT INVESTMENT, TAX OR LEGAL ADVICE. Consult with a financial advisor, accountant or attorney before making important decisions in these areas.

THIS IS NOT INVESTMENT, TAX OR LEGAL ADVICE. Consult with a financial advisor, accountant or attorney before making important decisions in these areas.