Need capital to keep your business going or to implement new growth initiatives? Well, just run down to your local bank. Wait… banks are still not lending to small businesses.
But, banks may not be your only option.
For decades, there have been many financing programs, some backed by banks but most not, that focus on assets based lending or that focus on the strength of the business – not just the business owner (meaning YOUR credit doesn’t have to score in the stratosphere).
Assets based lending is essentially using the financial asset of a business to secure a loan or advance for working capital, general operating expenses or even capital purchases.
This type of financing is more focused on the business asset generated and how easily or safely the asset(s) can be converted into actual cash.
Accounts Receivable Financing: If your business generates customer invoices, there are finance companies out there that will purchase your receivables, advance your company up to 90% of the invoice amount, collect the money from your customers (saving you the time and hassle), and then refund the difference back to your company.
These companies do not lend based on your credit or your company’s balance sheet but focus mostly on your customers’ strength in payment.
Purchase Order Financing: Does your business have customer orders in hand but not the working capital to complete or fulfill those orders? There are financing companies that will provide capital advances based on these unfinished orders; termed Purchase Orders Financing.
These Purchase Order Financing companies will advance your business cash, based on the amount of the purchase order, to complete the job or order. This means having the needed capital to purchase inventory and supplies or even hire additional needed labor.
Whatever the need, purchase order financing is a great way to use or leverage already acquired business to get the capital your company needs to grow and succeed.
Business Cash Advance: Many businesses, just by their nature like service organizations or retail operation, do not generate business financial assets like the ones mentioned above. But, there are still ways that they can acquire needed working capital to grow their business or to meet immediate expense needs. If your business accepts credit cards as payment from your customers, there are financing companies that will advance your business capital against (and get this) your FUTURE credit card receipts.
Benefits include receiving needed working capital today that can be used for any business or personal need, leveraging your businesses ability to generate future income, low repayment requirements based on a small percentage of your future sales – small enough not to harm your business’s future cash flow needs and these financing companies are more interested in your future sales ability (the strength of your business) than your credit history.
The down side is that some of these products, while they try to be very competitive, can be a bit more expensive than traditional loan products. But, keep this in mind, if you have no other alternative and believe in what you and your business can do with the added capital, then the potential benefits far outweigh the expense.
In business, especially for start up businesses or companies that don’t yet comply with traditional loan underwriting, accessing cash for grow or expansion (or even to just meet current obligations) can be a daunting task. But, instead of being intimidated by this process, let that entrepreneurial spirit kick in. Get creative and find ways to make these sources of capital work for you (that is what running a business is all about).
Further, with our current credit crunch (banks just not lending) these types of financing alternatives may be your business’s only option going forward – regardless of its stage or time in business.
Lastly, while the goal of any businesses is to obtain a needed business loan from traditional financial institutions like banks (it is kind of like validation for all your hard work when your bank approves your business for a loan), it is not always practical to do so – banks are very selective. But, by using these and other types of alternative financing options, many business owners may find that they can leverage these capital sources to grow their business to a point that they do become creditworthy in the eyes of their financial institutions – the irony is that when this point usually comes, the business in question no longer needs outside bank financing.
What will your business do?