Business Loans: Six Steps

Six Steps to Successfully Getting Business Loans

1. Decide how much money you need and for what purpose. Coming to a clear understanding of the purpose of your loan is key in selecting the kinds of business lenders you will need to approach since many commercial lenders specialize in certain areas. Some of your options would be working capital, inventory, equipment, expansion and new facilities financing.

2. Determine what collateral you will use for the loan you are seeking some of you options are your cash flow, inventory, equipment, receivables, commercial property, a new contract and personal guarantees. While you may not have to come up with 100 percent collateral coverage all lenders will want some kind of guarantee so start lining up your collateral.

3. Pull your company’s business credit report and examine it very closely for accuracy and any errors, the last thing you want is for something unexpected to prevent you from obtaining your loan. Also pull your own personal credit report and those you of your top management team or key officers and partners and do the same kind of through review as you did with your business credit report.

4. Prepare a good business plans detailing your business operations, how you will use the funds you receive, and what kind of profits your use of these funds will create. The profits your use of the business loan will create is key to any business plan or funding request, because it is from those profits that the loan will be repaid.

5. Develop a list of lenders specific to your loan needs your list could include commercial banks, commercial finance firms, specialty lenders, private lenders, and government loan programs. In selecting lenders keep in mind that while commercial banks have very strict lending guidelines there are many different kinds of commercial lenders who will lend to companies that banks will not.

6. Select those lenders you want to work with and prepare and submit your loan requests to them then give them plenty of time to make a decision on your loan request. The last thing you ever want to do is to try and rush a lender into making a fast loan decision on a loan request, or you won’t like the fast decision you get I promise.

In your search for a business loan there are many factors that are beyond your control, but these steps are six factors that you can control as you look for business financing. In troubled economic times like those we are experiencing now you may have to look a little longer for the business loan your company needs, but it will be worth the effort when you get the money you need to operate and grow your business.

TELECOM

Idea Cellular's key metrics

Beginning of operations in Mumbai, Kolkata will expand margins

Idea Cellular seems to be well on the road to recovery, with its fairly sound performance in the December quarter reinforcing its strengthening footprint as a pan-India player.

A marginal increase in ARPU (average revenue per user) too should be heartening, indicative of the peaking out of competitive intensity that ate into the margins of players across the industry over the past 18 months.

Revenues for the quarter increased by 25.6 per cent over the same period last fiscal to Rs 3,956 crore, while net profits expanded by 42.8 per cent to Rs 243 crore.

Sequentially too, revenues and profits have grown at a healthy pace.

Key metrics improve

Over the past year, the company has steadily moved into newer circles and now has country-wide operations. Despite expanding operations, Idea has managed to keep its operating margins steady at 24 per cent levels. While it is expanding margins in its 13 established service areas of operation, it has managed to continuously reduce losses in nine new circles. With lucrative areas such as Mumbai, Tamil Nadu and Kolkata being among the newer geographies, there is sufficient scope for Idea to cut losses in these areas and expand margins further.

After many quarters of falling ARPUs, Idea has witnessed a marginal increase on this front, accompanied by a slight increase in minutes of usage. Realisations per minute have remained steady at around 42 paisa levels, which compares favourably with many top peers. The expansion to newer service areas has also allowed the company to continuously reduce its cost per minute.

The ushering in of mobile number portability would pose a challenge to the company in retaining subscribers. Recent data from Haryana, where it was first introduced suggests a net outflow of subscribers. It remains to be seen if there would be a proportionate loss of revenues subsequently as over the past few years, subscriber growth has outstripped revenue growth for players across the industry.

Idea has a revenue market share of 12.8 per cent and would hope for minimum erosion on this front.

Over the next few months the company is set to launch 3G services. This may offer sufficient scope to increase realisations as the 11 service areas where it has won spectrum account for 80 per cent of its existing revenues and would allow for a focussed customer mining.

Philips buys Preethi

Philips buys Preethi to grow in South India:

                

Philips has agreed to buy South Indian home appliances brand Preethi for over Rs 350 crore in one of the largest M&A transactions in the intensely-competitive home appliances market in the country. The deal involves the purchase of the Preethi brand along with manufacturing facilities and after-sales divisions. Maya Appliances, which makes and owns the Preethi brand name, will continue to function as a separate company.

Preethi mixers are a popular brand in the South and Philips will get access to a large market with dedicated plants and after-sales service. The Indian mixer market is estimated to be around Rs 1,400 crore and around 4.8 million units are sold every year. Preethi alone sells around 1.6 million units. Preethi, which has been trying to expand in the north and west, will be able to do so, riding on Philips’ dealer network.

The deal is expected to close by the first quarter of next fiscal. Maya Appliances reported sales of Rs 300 crore for the year ended March, 2010 and plans to touch Rs 400 crore this fiscal. Preethi was established in 1978 and 850 employees work on the brand. The brand has seen double-digit revenue growth for several years.

Since launching Their first products over 30 years ago, Preethi has grown into one of the most successful and trusted kitchen appliance brands in India. 

Now Maya Appliances have an even brighter future with Philips. The combined strength two organisations will benefit both their customers and employees.

To capture growth in kitchen appliances, Philips need to intimately understand local consumer needs and deliver the right solutions. By building on Preethi’s unique local knowledge, heritage of quality and substantial distributor and dealer network, They are well positioned to drive growth in one of the world’s most dynamic kitchen appliance markets.

Philips will also use Preethi’s manufacturing facility to make some other products. The brand was manufactured from seven locations - four in Himachal Pradesh and three in Tamil Nadu - and is now planning to set up one more near Chennai with an investment of Rs 30 crore.

FDI in India

FDI to flow into new areas:

India will become a global leader in education, R&D, innovation and a producer of high value-added goods and services by 2020, attracting foreign capital in new areas of growth, international consultancy firm Ernst & Young has said in its latest report. 

In order to take India to the next level, collaboration in infrastructure, education and healthcare between corporations and government will be important.

India will see foreign direct investment (FDI) in sectors other than low-cost sectors such as BPO units. The findings are based on a survey of more than 500 global business leaders late last year.

Between 2003 and 2010, the number of FDI projects increased by 7% and jobs created by FDI increased by 4% annually,” the report said. FDI as a share of GDP grew from 0.03% in 1991 to 3.5% in 2008 before falling in 2009 due to the global financial crisis.

Most multinationals are also expecting to expand their operations in India to capitalise on over 8% GDP growth. FDI will be more in states, which has, better infrastructure and transparency.

According to the survey 60% of the respondents think China is India’s main competitor as far as attracting foreign funds is concerned.

TELECOM

Telephone user base: 764 million

• The number of telephone subscribers in India increased to 764.76 million at the end of November 2010 compared with 742.12 million in October 2010, thereby registering a growth rate of 3.05 per cent.

• The overall tele-density in India reaches 64.34, the Telecom Regulatory Authority of India said. Wireless subscriber base increased from 706.69 million to 729.57 million registering a growth of 3.24 per cent. Wireless tele-density stands at 61.38.

• Wire line subscriber base declined from 35.43 million in October to 35.19 million at the end of November. BSNL/MTNL, two PSU operators, hold 83.12 per cent of the wire line market share. Overall wire line tele-density is 2.96.

• Total broadband subscriber base has increased from 10.52 million to 10.71 million, a growth of 1.80 per cent.

HUL: Recent scenario

 

HUL recent scenario

HUL takes cut in margins to persist with ad spend

Offered the choice of cutting back on its advertising spends to deal with rising input costs, Hindustan Unilever (HUL) seems to have decided to sacrifice its profit margins instead. The company's net profits for the quarter ended December 31, 2010 have declined by about 1.7 per cent compared to the same period last year, dented mainly by spiralling costs for soap, detergent and personal product inputs.

The company's sales expanded by a healthy 11.6 per cent this quarter. The company has been successful at driving a higher sales trajectory (growth was 9.7 per cent in the preceding six months of this fiscal), by persisting with fairly high spending on advertising and promotions.

Ad spends up some more

The company's ad spend to sales ratio, already high at about 14.05 per cent of sales in December 2009 has inched up even further to 14.8 per cent to Rs 743 crore in the latest December quarter. That ratio is high even by FMCG industry standards and arms HUL, which already dwarfs its competitors with its size, with a huge war-chest to pump into brand building efforts. HUL's smaller rivals in soaps, detergents and other categories are already beginning to economise to some extent, on ad spend to deal with escalating raw material costs.

Cost squeeze

Rising costs of input such as palm oil, LAB and packaging material have taken a bite out of HUL's profit margins in the latest quarter. A breakup of the numbers shows that the company has had to contend with multiple pressure points on its costs. 

Input costs as a proportion of sales climbed from 48.9 per cent to 51.1 per cent year on year, even as depreciation and ‘other expenditure' too rose.

Price increases

HUL has already begun to take selective price increases on categories such as soaps, detergents and personal products to pass on higher input costs to consumers, in the preceding quarter.

However, the sharp year on year slide in segment margins on soaps and detergents shows that price-lines in this large category are yet to compensate fully for higher costs.

That HUL continues to invest heavily in nascent categories is also evident from negative segment margins in processed foods and ice creams, even as their sales grew at a healthy clip.

Thanks to its unrelenting brand building effort, the overall picture on HUL's topline remains encouraging.

Not only have total sales grown at nearly 12 per cent year on year, individual categories such as personal products (20 per cent sales growth), beverages (9 per cent), processed foods (18.5 per cent), ice creams (31 per cent) displayed very strong growth.

Market shares

This could be a sign that HUL's persistence with ad spends is helping it protect or even expand market shares in its key categories.

As per current scenario, Promotion creates value for HUL...

Cinepolis: 300 multiplex screens

Cinepolis to set up 300 multiplex screens:

Mexican firm Cinepolis, the world's fourth largest multiplex operator, has signed up with a series of Indian mall developers to roll out some 300 screens entailing an investment of Rs 900 crore.

Cinepolis, which operates around 25,000 multiplex screens across 10 countries, is looking at new geographies such as India and Brazil to drive its growth.

The company is targeting 40 large cities including Bangalore, Mangalore, Bhopal and Jaipur to roll-out its multiplex screens.

Their business model is to be inside the new shopping malls.  

India has a lot of potential. There are 1.2 billion people buying about four billion tickets and we have close to 1,000 movies being produced every year. There is a lot of opportunity for more and better screens in the country.

The company plans to roll out between 50-80 multiplex screens in the current year.

Investment plans

Cinepolis has earmarked about $7,00,000 (about Rs 3.15 crore) to invest into each multiplex screen. Currently, the foreign direct investment in film exhibition is permitted up to 100 per cent through the automatic route.

Cinepolis, which entered the Indian market in 2007, has been rather slow in ramping up its operations. The slowdown in real estate sector did delay their plans by a year. However, things are now looking up and the confidence is coming back. New projects are getting announced and cinepolis should be back to growth days next year. Last year, the company opened its first five screen multiplex in Amritsar.

The company expects to roll out two of the large multiplexes in Pune and Thane this year. The 15-screen cinema in Magarpatta City in Pune and the 14-screen multiplex in the Viva City Mall, Thane, will be the largest cinemas in the country this year.