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Money loans are a common practice when it comes to businesses of any size. There are many different ways of going about these loans, one of the most common of which is hard financing.
What is hard financing?
Hard financing is one of the many ways in which businesses can borrow money. They must do so by providing proof that they will be able to pay the loan back usually through collateral of a solid form. For example, a business can use their high valued property as collateral to prove to the lender that if they are not able to pay back, the loaner can sell the guarantee for an equal or higher value. Another kind of hard financing is equipment financing.
What is equipment financing?
What is equipment financing? Well, in simple words, it is quite similar to hard funding, equipment financing uses equipment as collateral. A common practice is when finding ways to source financing for medical equipment. As medical equipment is usually highly-priced, it works well against guarantee for taking out loans.
However, there are a few tips to keep in mind while making sure you qualify for hard financing.
1. File Your Tax Returns
Generally, when a loaner is deciding whether to lend someone money, they will ask to see taxed returns to calculate and deduce whether the person they are loaning money to will be able to pay back. It gives the loner a sense of how the money is spending and whether there will be enough left over to pay back a loan.
2. Have a Personal Financial Statement
Many loaners will also want to do a background screening where they want to check whether the individual seeking the loan has any previous debt due. It gives the loaner insight into how much cash flow goes towards paying back another debt and whether it will be risky for them to loan money to the individual.
3. Having Property with Good Resale Value
Since real estate can be used as collateral, having a good market resale value adds to the list of things that a loaner might look in. It is for a loaner to make sure they will get their money back if the individual is unable to repay the loan. If the individual can not repay the loan, their property will be up for auction for the amount they loaned. This way, the loaner does not lose money.
4. Having a Worthy Cause
To be able to qualify for hard financing, an individual must have a worthy cause with which to attract potential loaners. When asking people to lend money towards a particular purpose, the individuals must have a good enough reason to ask for money. Having a long term plan panned out, and a decent business idea and structure can aid in securing a loan.
5. Being Organized is Key
A loaner will notice if someone is unprepared. It will make them doubt whether they are lending money to the right person. What is essential is making sure the loaner knows an individual or individuals are organized, know what they are talking about, and have a solid plan of action. If there is a lack of organization, the loaner may notice and think twice about investing a portion of their money to someone who seems like they will not be able to pay it back.
6. Having a Decent Amount of Experience Helps
Loaners will take notice of whether or not someone asking for a loan has ample experience in their field. They will take note on how long the person has worked, or where. They may also require individuals asking for the loan to share references. It allows the loaner to get a feel of whether they are loaning their money to someone who will work hard to make sure they pay it back. If the individual seeking the loan does not seem like a hard worker, the loaner may feel they are not worth the risk.
7. Stay in Contact with the Loaner
Loaners want to make sure they are giving their money to a secure person. They will want to make sure the person who wants the loan will respond to them at a favourable rate and provide them with necessary feedback and details. It does not matter if the collateral you have signed over is worth more than the loan; the idea is to ensure the loaner knows they have handed their money over to someone trustworthy. It can also help when looking for references for future hard financing if needed.