When to Take Out a Small Business Loan
One of the most significant challenges facing small businesses today is not knowing how to acquire a small business loan when it is needed, and when the right time is to take out a loan. Fortunately, there are many banks today that are looking to provide a variety of loans to small companies, and there are several situations when taking out a loan is the best decision that a small business owner could make.
One situation when taking out a loan from a bank would be if the business is looking to expand and needs more space or equipment to do so. While most people would think that it would be a better idea to wait until the expansion of equipment could be purchased with cash, using financing from a bank is often the best option. This will allow the Small Business Loan to expand while receiving a relatively low interest rate on the loan. Any additional cash could be used to reinvest in other business needs.
Another time that it would be a good idea to take out a loan would be when a business needs a line of credit. Many businesses are able to attract customers by offering competitive repayment terms that range from giving customers up to 90 days to make a payment. While this may increase sales, it can be a drain on cash because a customer may not make a payment for a long time after a product or service has been sold. With a line of credit, a business will be able to borrow money whenever they need to. Then, when they receive money from their customers, they will be able to pay down the loan balance. Banks typically will provide funds to a borrower equal to seventy or eighty percent of the business's accounts receivable balance.
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Considering a Small Business Loan?
In these tough economic times, many families, as well as businesses are struggling to make ends meet. Owning your own business may seem like an unattainable goal, but it is still a possibility, even in this economic climate. Opening your own business is rewarding, and gives you the flexibility to make your own schedule and be your own boss. With a little hard work and a smart business plan, owning a small business is a plausible option for many.
Whether you are a current or aspiring business owner, you may want to consider a small business loan. Of course, terms vary, but in general, these loans can be used for a variety of purposes, including the following ones: building a brand new business, expanding a current one, or buying supplies. Such loans are available from a variety of sources. The federal government, namely the Small Business Administration, has several programs that offer loans. Additionally, many states and communities have programs that supplement the funds offered at the federal level. Another option is your local bank. You may choose to rely on one of these sources, two or more of them combined, or find another fund altogether.
Regardless of which source you choose, there are certain requirements you will need to meet before you are approved. First of all, you are going to need a solid business plan. No one is going to lend you money if you do not have a clear breakdown of how the money you acquire through the loan will be used. A good credit score is another plus. If you have a poor credit rating, you may need to consider finding a cosigner to increase your chances of getting your loan approved. Whether you are building a business from scratch or simply want to expand one you already have, a small business loan can provide the capital you need.
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When to Consider a Small Business Loan
When should a business owner consider a small business loan? There are many circumstances under which a business loan may be in order. Sometimes there is a need to create more capital as a long-term solution or even to start up an endeavor. Sometimes a business owner may want to expand his or her business. There may also be a need to get rid of some debt in order to avoid suffering any losses when profits are not covering the losses.
One of the primary reasons for seeking a loan is when the owner wants to expand the business. Sometimes loans are easier to obtain in this situation because it is usually a successful business that needs to expand. Facilities may no longer be able to accommodate or the owner may want to open up the business in a new location. In either case, the owner needs to be able to show that the business will continue to be successful.
A small business loan owner may also seek a loan when more capital is needed for a small endeavor that may not be well-established. In this case, the loan may not be as easy to obtain as the owner may not have proven a stable or loyal client or customer base. However, if able to obtain the loan, then the endeavor may be able to continue operations with extra resources.
Another reason that one may seek a small business loan is to pay off debts such as payments for materials and resources needed to conduct business. In this case, the owner may be in danger of having his or her line of credit destroyed. However, this type of loan may be difficult because this can be a sign of an unsuccessful business endeavor but, if granted can buy the business some time.
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Merchant Store Loan Alternative : Alternatives to Traditional Business Loans
If you have applied for and been turned down for a traditional bank small business loan, you are not alone. There was a time when getting a small business loan was much easier than it is now. Today, it is next to impossible to get bank loans without a near perfect credit history.
What's the Alternative?
The merchant store loan alternative offers small businesses a way to get cash for capital now. The interest rate is much higher than the bank, but the terms to pay back is much more flexible than a bank.
How Does a merchant cash advance loan work?
Rather than looking strictly at your credit and FICO score like a bank does, a cash advance looks at how much the business makes. Typically, you need to have at least several past months of having a minimum of $5000 in credit card transactions.
Repayment of a Merchant Cash Advance
A bank loan requires you to pay a specific amount each month, but this is not how a cash advance loan works. Instead, the loan is paid back through a percentage of each future debit and credit card payment your customers make. Some months you'll pay less and some more depending on the sale volume for the month with Merchant Store Loan Alternative.
The Flexibility is Attractive
While the merchant cash loan has a higher interest rate, it is the flexibility of the repayment that makes it easier for most to manage. In addition, loan funds are typically made available to merchants much faster than a bank loan would be.
The merchant advance is becoming very popular as more businesses seek ways of getting capital to continue to grow as a business. The banks may never get back to lending small business loans to very many businesses, but there are alternatives available that has helped many companies.
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What is the Best Merchant Store Loan Alternative?
Every small business owner knows how difficult it is to obtain financing in the current economic climate. If you are in this position, you may have tried several banks without success, and be uncertain how to proceed with merchant store loan alternative. However, there are other potential sources of funding you can explore, depending on the type of business you run.
If your business is mainly concerned with supplying other businesses, who may not always pay on time, thus impeding your cash flow, one possible source of funding is asset-based lending, or factoring. The factoring company takes on your receivables or invoices, paying you a percentage up front and taking responsibility for collecting the payments. Another possibility is to approach the specialized companies which offer non-bank loans to small businesses. The repayments are not fixed amounts, but are based on a percentage of your monthly revenue, and in addition the company takes a small stake in your business.
Probably the best known merchant store loan alternative is the merchant cash advance. You can apply for one of these if you have a business merchant account, and the funds are provided as advances on future credit card sales. No collateral is required, and it does not show up on your credit report.
These advances can work out very expensive, so should not be used without careful thought. However, many businesses find the cost is outweighed by the benefits, the greatest one being that you only make repayments when you have money coming in. If you have a lean month, no payment is taken. In addition, if you go out of business before repaying the advance, the lender stands the loss.
During the current recession, the merchant cash advance has become the most popular avenue of funding for small businesses. The important thing is to weigh up the cost against the alternatives, and use the advances only for short-term funding. If used correctly, they can be an excellent way of overcoming a cash flow crisis, and keeping your business going until you can qualify for cheaper financing.
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Alternative to Normal Small Business Loans
If you are a new business and need more capital, you may have a harsh reality when the bank denies your loan even with semi-good credit. Banks and credit unions have made getting business loans harder than ever with more criteria needed in order to be approved.
This has left new business owners unable to continue with their small business loan dreams due to lack of cash. However, a merchant store loan alternative may be just what is needed to get the capital to continue business owner's dream.
A merchant advance is a loan that is easier to qualify for since it is not as strict about credit as it is how much the business currently makes and what the projected sales are. The loan is paid through future sales and whenever a credit card or debit card is run, the lender gets a percentage to help pay the loan off.
The interest is higher than a traditional small business loan, but since the loan payments are based on sales, it can be a better option, in many cases. Often the only thing standing in the way of a bank loan is a credit score, but with a merchant advance loan, this problem is removed.
While the interest may be higher on an alternative loan, for many small businesses, it is the best way to obtain the capital needed. A bank loan, while having less overall interest on the loan, is not flexible in the repayment. Flexibility is what small businesses need and why this type of loan has gained in popularity.
If you are just getting started in your business and have been denied a small business loan, do not feel bad, the majority are not approved. The almost impossibility of obtaining a traditional small business loan has left the door wide open for alternative solutions such as a merchant cash advance loan.
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The Advantages of a Merchant Cash Advance
Often, growing companies need a cash injection to fund their expansion, or to have some extra capital to work with. Regrettably, for many companies, it is impossible to access the cash for all their business purposes. Normal funding methods involve a great deal of admin before your request will even be looked at. Assessing your application can take even longer. Ultimately, there is a good chance that your request for financial assistance will be turned down for unclear, bureaucratic reasons.
Fortunately, a good substitute method exists for acquiring business funds. Merchant cash advance allows you to get hold of anything from $2500-$250000, based on your company's profile. If your business receives more than $5000 worth of credit card payments from clients on a monthly basis, then you might be eligible to obtain 100-200% of the monthly value of your credit card transactions as an unsecured business loan. Normally, a small percentage (of approximately 10-25%) of your company's credit card takings each day is used to pay back the merchant cash advance.
Only basic documentation is required to submit your funding application. There is no need to be worried if you have a bad credit rating that restricts you from getting a loan from other sources to fund your business goals. You might be able to receive up to $250000 in as quickly as two days, and be allowed to access that cash in less than three days.
This type of unsecured business loan has meant that numerous companies, both big and small, have been able to get the funds they need to enhance and grow their businesses. Neither application charges nor personal collateral are a pre requisite to get loan approval. Unlike repaying a standard loan, you are not required to make any fixed repayments that place extra pressure on you.
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Possible Benefits of Merchant Cash Advance
If you have a new business and struggling with cash flow as many start-up companies do, you may have considered a bank loan. Traditional loans tend to take a long time to process and many new business owners would not be approved due to past credit problems.
An alternative to bank loans is a merchant cash advance, which can greatly help new businesses that need more money to put into the business. This type of advance works by the lender giving you a lump sum amount with an agreement that the loan is paid back via a percentage of credit card and debit card purchases made in the future.
Many retail establishments use the merchant cash advance option. It is important to realize that these loans do carry a higher interest rate than a traditional bank loan. However, since it is paid back from future transactions, it often makes it easier for a business to pay.
The payments and percentage paid to the lender changes each month as the sales of the business changes. If one month sales are $5000 and the next month sales gross $10,000, the higher sales month will have a higher loan payment.
Because the cash advance offers such flexibility, it makes it much more convenient for some businesses. A bank loan is a set payment that doesn't fluctuate with the business as a cash advance loan does. This is another reason it us typically quite an attractive option for many newer businesses.
Another important benefit is the loan is processed faster than a bank loan. This means that access to the cash is accessible sooner.
The amount of the loan is normally based on the sales the business has on a monthly basis. Once the lender has access to this information, they will make a determination on the amount of cash you are eligible to borrow.
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The Benefits of a Merchant Cash Advance
Frequently, expanding businesses require an extra injection of cash to finance their growth, or for extra working capital. Nonetheless, much of the time it is not possible to access the money for all these business requirements. Standard methods of funding involve a lot of paperwork before your application will even be considered. Processing your request can occupy even more time. In the end, there is a high probability that your funding request will be declined for dubious, technical reasons.
Happily, there is an excellent alternative available for obtaining business capital. Merchant cash advance is a straightforward concept that enables you to acquire funds ranging from $2500.00 to $250,000.00, depending on the profile of your business. If your company takes over $5000.00 in credit card payments from your customers every month, then you could reasonably expect to receive funds from 100% to 200% of your monthly credit card turnover in an unsecured loan for your company. Typically, a modest portion (of about 10% to 25%) of your credit card processing is used each day for repaying the merchant cash advance.
Merchant cash advance only require basic documents to process your application. You do not need to be concerned if your poor credit score is restricting you from receiving the funds you require to finance your business objectives. You could be approved for as much as $250,000.00 in as quick a time as 48 hours, and be able to access that money in under seventy two hours.
These unsecured business loans have helped several large and small companies obtain the funding they require to improve or expand their business. No personal collateral or application charges are necessary to be approved for a loan. In contrast to normal loan repayments, you do not need to make fixed payments which place additional burdens on you.
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Equipment Leasing : Should You Purchase or Lease Your Company Equipment?
Every business uses equipment of some kind in their operations. From computers and copiers to expensive vehicles, equipment is essential to getting most jobs done.
The more important specialized equipment is to your business, the more important the issue of buying or choosing equipment leasing. There are many factors that go into deciding which is more important to your operations. Each of the following factors will have more importance based on the degree your company operations relies on specialized equipment.
Credit and Cash
The first issue for any business is managing its available cash and credit. This is especially the case for expanding businesses. Purchasing equipment can consume cash and credit lines. Depending on the total amount to be invested in equipment leasing, this can be one of the most important issues to consider. In most cases, leases require less of a company's cash flow and credit resources than purchases.
Efficiency and Maintenance
When equipment is leased, it is usually for a specified number of months or years. At the end of the lease, the equipment is returned and, if desired, replaced with newer equipment. New equipment can mean improvements in efficiency and reliability. When equipment is purchased, it generally means it is used for a number of years before replacing it. This can result in increased costs in maintenance. Older equipment can result in substantial down time. Often, the equipment a company uses is impacted by changes in technology. In such cases, a lease can bring several advantages over purchased equipment.
Tax Issues
An advantage of purchased equipment is the depreciation that can be claimed. Depending on the specific case and tax laws in effect, the tax savings can be significant. On the other hand, only part of the monthly payment on equipment purchase financing can be deducted. In most case, lease payments are totally deductible.
Each business must explore the relative merits of purchase versus lease for their own situation. In most cases, the larger the expenditure on equipment, the more practical is the equipment leasing option.
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