New Financing Alternative for Retailers and Restaurant Owners

Lets face it, running any business is hard. Managing customer service, staffing issues, inventories, advertising and other day-to-day operations in an extremely competitive industry, can really take its toll on an owner. Not to mention the added stress of not being able to access working capital when it is required. With almost 90% of small businesses not being able to obtain financing from a traditional bank, most small businesses owners risk their own personal investment or the investment of friends and family members. Many business owners have discovered merchant cash advances as a source of funding. This type of financing certainly has its place, but it is not the only option for retailer and restaurant owners. There is a fairly new loan program available that can provide small business owners with up to $100,000 in working capital per location. Like a merchant cash advance, you need to accept credit cards but the loan is not tied to your credit card sales. The credit card receipts are utilized to confirm the cash flow of the business. Repayment is reported on your credit rating so it provides you with an excellent tool to build your business credit rating. Within two weeks of working with this loan company they have approved and funded three loans for our customers. All were approved in two days and funded within 7 days after approval. Our customers are delighted and we are very thankful to offer such a valuable service to our customers. We have very fondly been calling this loan our fast cash business loan because, for us, it sums up exactly what it is. If you would like more information on this small business loan please call us at 1-888-600-6039 or visit our web page at http://www.spotlightfinancial.biz/Fast_Cash_Business_Loan.php

Managing Cash Flows is Vital to Your Company’s Success.

A business can be profitable and still go under due to poor cash flows. What a profound statement. Even though your business is showing a profit it can be difficult to pay suppliers and make payroll on time. This difficulty is typically caused by a delay or fluctuation in revenues. Cash flow shortages are usually caused by slower paying customers, seasonal sales, or your company suddenly experiences growth.

When customers do not pay with cash on delivery (COD) a gap is created between the receiving of the revenues and the payment of expenses. Payroll, rent, utilities, suppliers etc. all need to be paid on time. Lets say in one month you sell $100K worth of product with a profit of $20K. The $80K in expenses needs to be paid right away but your customer does not pay for 30 days. This creates a gap in cash flows. You need to pay out $80K before you see the $100K in revenue. You are profitable but do not have the cash on hand to pay your bills. This is why profitable companies can still go under. When your company experiences growth this gap in cash becomes far more difficult to manage because your costs are increasing faster then the revenues coming in.

Good management and planning for this shortage in cash flow is vital to your company’s success. At a minimum, a one-year cash flow analysis needs to be completed and reviewed on a monthly basis. The gaps in cash flow must be identified with a plan to overcome these gaps. The ideal situation would be for a company to keep a cash reserve to draw against when a cash flow gap is created. Unfortunately this is not a viable option for many companies. Some businesses have the luxury of a generous line of credit with a bank to overcome these cash shortages. In today’s tough lending environment these generous line of credits are difficult to come by. Although this situation sounds grim there is another viable alternative called  Accounts Receivable Funding.

Accounts Receivable Funding or Factoring is a type of financing that is tied directly to your accounts receivables. Qualifying for factoring is much easier than traditional bank financing. A bank will focus on your company’s financial history and cash flow while a factor will focus on the creditworthiness of your customers. This is because a factor ties financing directly to your accounts receivable or invoices. These invoices are a “promise to pay” from your customer. If you customer has good credit then a factor is happy to lend you money against it.

Factoring invoices is an excellent financial tool to help maintain proper cash flow in your organization. When you sell your product or service a factor will generally advance you in cash up to 90% of the value of the invoice. Now you have closed the cash flow gap and are able to meet payroll, pay expenses and pay suppliers on time. When your customer finally pays the invoice the remaining amount of the invoice will be forwarded to you minus a fee. As your organization grows, so does your funding.

There is a cost for this type of financing so you need to carefully weigh the reduction in profit to the benefit of being able to make your payments on time. You need to also include the benefit of the redirection of your time. Instead of trying to juggle customer payments with paying bills you can concentrate on running and growing your business.

If you investigate this type of financing, don’t forget to shop around. Fees for factoring can range significantly. To see how factoring can help your organization there is a cash flow calculator at https://www.spotlightfinancial.biz/Factor_Invoice.php

 Simply model your company’s current cash flow situation, add the cost of factoring to your cost of goods, lower your collection days and watch how your cash flow improves.

Creative Financing for New Businesses

 It can be very difficult for businesses with less than two years of operation to obtain business credit. With the vast majority of businesses failing within the first two years of operations banks are not aggressive with lending monies to new businesses. In fact in the United States 90% of small businesses cannot obtain financing from a traditional bank. All businesses, at one time or another, need to access operating capital to grow or to overcome seasonal revenue fluctuations. It is no surprise that many businesses fail due to cash flow issues. If you can’t get financing from a traditional bank where does the money come from? A lot of businesses owners will tap into personal savings, put there home ownership at risk or get family and friends to invest. This does not have to be the case.
    There are ways to start or operate new businesses and access working capital without a bank loan, personal investment or the investment from family and friends. These financing methods include acquiring equipment with a lease, merchant cash advances, invoice factoring, and purchase order financing.
    If a new business is unable to get the capital to purchase equipment they can lease. Equipment leasing is a viable way of securing much needed equipment, computers or vehicles. There are leasing programs available for start up companies and for individuals with marginal credit. Leasing is extremely flexible and payment plans can be tailored to protect your cash flow. If your credit rating is strong you can lease equipment with a 90day deferral payment so that you can use the equipment to finish the job before you even need to make a payment. Leasing equipment generally requires a lower credit score than borrowing money for the equipment.
    One of the toughest industries to secure a small business loan is for a new business operating in retail or as a restaurant. These types of companies usually have very little in the way of assets to secure financing and are classed as higher risk. Both restaurants and retail locations accept credit cards. This provides for a method of accessing unsecured cash called a merchant cash advance. This is not a loan but rather a sale of future credit card receipts at a discounted rate. 
    If a new business receives a large purchase order they can use that purchase order to obtain the funding needed to purchase the supplies to fill the contract. Purchase order financing can provide 100% of the funding needed to get your product out the door. Typically this type of financing would be for import/export or distribution companies where a product is purchased and resold at a profit, however some lenders will look at covering labor and associated costs. It all depends on how credit worthy the customer is and what type of industry they are in. 
    If you supply your product or service to other businesses and they don't pay you for 30 to 90 days it can become almost impossible to manage your cash flows. Once you add in growth to this situation cash flow management becomes even more difficult.  Due to the delayed payments, your costs increase faster than the revenues coming in. Lets look at a simple example.  You own a staffing agency and you land a new large customer that will double your sales. This new customer will pay you 60 days after your temps complete the work. Your sales just doubled and so did your costs. Payroll can’t wait for 60 days, because your employees need to get paid on time or they will go elsewhere. Cost immediately double but you do not see an increase in revenue for 60 days. This is a major hit in your cash flows and you need access to working capital immediately or you won’t be able to make payroll. The solution to your problem could be in factoring the invoices. With invoice factoring you can receive cash within 24 hours of your temps completing their work. Now there are no cash flow issues.  Factoring is easy to qualify for, if your customer has good credit, and set up correctly it can be a tremendous cash flow tool. 
    At one time or another almost all companies will need to access additional working capital to enable growth or to survive revenue fluctuations. For most small business owners this may seem like an impossible task because banks turn down the majority of their financial requests. It is extremely important for business owners to know where to turn when a bank says no. Their company’s survival depends on it.