In an interesting read for SMB owners and executives, USNews takes a walk through various options for financing your small business. It’s interesting that in today’s environment where many different products and alternatives to the traditional bank or credit union exist, still 31% of SMBs are unable to obtain financing that fits their needs.
The article highlights the main types of financing that help companies to achieve their capital needs. These include Business Lines of Credit, Equipment Loans, Invoice Financing, Merchant Cash Advance, Commercial Mortgages and Franchise Loans. We would add Purchase Order Financing to that list as well; PO financing allows a company to fill an order with little or no money down by paying your suppliers for the goods you need to fill orders. We would also add that some of these products come with very high rates or upfront fees and you ought to very carefully assess what the real cost to you will be.
Which one would be best for your business?
Another important feature of the SMB lending ecosystem is the SBA guarantee. The Small Business Administration serves as a guarantor of loans extended to small businesses, which allows for companies to borrow at significantly reduced rates. It’s a great deal if you can get it. The downside is the extended application period that such a loan takes to underwrite as well as the limited number of lenders that have access to the program. If time is an issue or your company doesn’t fit squarely into the requirements then such a deal is not a fit for your company.
As we have discussed ad nauseum, the lending environment for SMBs has continued to diversify and the traditional banking relationship is often not the best place for a company to obtain financing. The alternative lending space continues to grow and offers different options that have typically far more flexible offerings as well as much higher approval rates.
The important things for you to do to prepare for the application process with any lender are to really think about how much money you will need in the short and long term to continue to run and grow your business. Applying for a loan takes time away from what you do best; running your business. If you fail to plan ahead and have to go through the process time and time again, the advantages of taking on debt that allows your company to function at its highest level become somewhat muted. Organize your books, have your financials up to date and ready to share and be ready to tell your story. Remember, you are selling yourself and your company to a lender so prepare as if this were a sales call about a huge opportunity for your company.
Payplant provides growth financing for entrepreneurs, by entrepreneurs. Its Pay Me NowTM digital invoice-financing service provides cash to businesses when their customers pay too slowly. Payplant helps businesses with PO and Invoice Financing, Asset Based Lending, Term Loans and Customer Financing products. Payplant works with companies that don’t currently qualify for traditional bank financing, have grown too quickly for their current lender or are at the point in their evolution where an influx of working capital can elevate their business to achieve rapid growth. Payplant delivers fast and reliable funding, at very attractive rates and is completely on demand. For more information, visit www.payplant.com.