photo credit: striatic
Finding proper business financing is not easy at the best of times for most small and medium sized business owners and managers.
There are a number of reasons that collectively explain why the business financing market can be so difficult to understand and navigate.
But probably the single biggest reason is the lack of useful information about how the business financing market actually works.
Business financing information and education sources predominantly come in two forms: 1) Text books; 2) Major bank advertising. Read the rest of this entry »
photo credit: Photo Mojo
Do you own a growing business that needs financing? If you are like most business owners, whenever your business needs money you head over to the bank. Unfortunately, as most small business owners soon find out, most banks do not lend money to businesses unless they have significant collateral and a history of successful operations. This presents quite a challenge for business owners.
When banks are not an option, small business owners turn to what is known as the alternative financing funding market. Although the financing options discussed in this article fall under the alternative financing category, they are actually quite widely used and should be considered mainstream. Most major companies (including public companies) have used this alternative financing at one time or another during their growth history.
Most of the tools described in this article can only be used by businesses that are already in operation, and whose main requirement is working capital. Although startups can benefit from these tools, the companies will need to be in operation for a little while and have a growing list of clients.
General Invoice Factoring
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photo credit: gurms
What are you going to use for money to keep your business operating when your bank says “NO” to your loan request? You say “Oh my bank won’t say NO to me. I have been a customer of theirs for twenty years”.
Ask thousands of small and medium sized businesses people that said the same thing. One day they left their bank stunned from what their banker said, “NO” to their loan request. They no longer had a line of credit, purchase order loan or any bank financial assistance that had once provided the funds to keep their businesses operating.
Do you think the recent decisions of Congress are going to fix this problem for you? I don’t think so, certainly not in time to save your cash starved business. Those recent financial decisions by Congress are to bail out some of the world’s largest financial institution to hopefully save America’s entire economic system. Until that is fixed, money for the small business owner is likely to dry up completely. Read the rest of this entry »
photo credit: Unhindered by Talent
The credit markets have been tightening for the last year and personal credit has become more and more elusive. Now, more than ever, we are starting to see a tightening on business credit and loans offered by banks. Banks are tightening their standards and dropping more liberal business loan programs as well.
Just a few months ago, BofA offered an express business line of credit program that even entrepreneurs in business just a month or two could qualify for with the right credit scores. They pulled the program in the last quarter. American Express for years has offered a Business Line of Credit program that entrepreneurs could apply for in addition to their American Express credit cards. The line of credit was competitive in the industry with interest rates and most small business owners with an American Express credit card were getting approved. The program was pulled in the last quarter. Read the rest of this entry »
photo credit: Geoff604
Trying to run your own business enterprise, calls for numerous fiscal challenges. High leverage, fiscal losses, low net worth, bad credit record, or no credit record in the least could impact your ability to qualify for a commercial loan. Whether you are facing a leveraged buyout, restructuring, or a turnaround position, there’s a poor credit business loan out there for you that guarantees the viability of your business enterprise.
Even if you’re a budding Bill Gates, your business concern battles to make ends meet, within the 1st 2 years of inception. Tenured businesses may likewise battle just every bit easily when the times are hard. A business enterprise relies strongly on the economic system and additional outside factors. When those factors are experiencing a depression, it filters down to the business; thereby impacting or challenging the business’s credit. Read the rest of this entry »
photo credit: Dennis Wong
Qualifying for a small business acquisition loan can be quite an ordeal to say the least.
If the business being sold is very profitable, the selling price will likely reflect a significant amount of goodwill which can be very difficult to finance.
If the business being sold is not making money, lenders can be difficult to find even if the underlying assets being acquired are worth substantially more than the purchase price. Read the rest of this entry »
photo credit: mockney_piers
But as companies confront a tight credit market coupled with lower than expected results, many CFOs are viewing asset based lending as a viable option in the financing tool kit. Even successful companies with strong banking relationships can quickly fall out of favor with lenders and lose access to unsecured financing, especially if they’ve shown recent losses. A few bad quarterly results doesn’t necessarily mean that a company is in bad shape, but stringent bank underwriting parameters can cause existing loans to be called and prevent the firm from qualifying for new financing. A company facing such a scenario can use asset based lending (ABL) arrangements as bridge loans to pay off banks and provide liquidity until bank financing is achievable.
What is asset based lending?
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photo credit: box of lettuce
Small business loans are sought after by many small companies for a variety of reasons, but many do not know which type of financing they need, or where to start. There are many reasons why company would want a small business loan. These reasons could include:
- Working capital
- Purchasing real estate
- Renovating, or construction on, an existing building
- Purchasing inventory
- Taking advantage of business opportunities
- Purchasing equipment or furniture
When most business owners think of business loans, they immediately look to commercial banks to meet their business financing needs. There is nothing wrong with this since banks do provide some of best and least expensive types of financing to small businesses. The only problem is that many do not realize how difficult it is to get approved for a bank loan or line of credit. Small business bank loans have much more strict approval criteria than other forms of business financing. Expect to be able to show good revenue, great personal/business credit scores, significant time in business, assets to secure the loan amount (in some cases), and the most important part is convincing the banker they can trust you with their money. Some call this the 5 C’s: Read the rest of this entry »
