Find the Best Financing Solutions, Merchant Banking Services, and Business Support

Posted by Credit Financing Guru on 8th June 2010

Financing Solutions, Merchant Banking Services, and business support are three key things that you will need to help you start your new business. You will need advice and you will need the financial services that they can provide to help you succeed. You must know why are these things crucial to your new business in order to prosper.

As a new business, you will need to have the ability to provide as many payment options to your customers as possible. You will want to be able to accept checks, credit and debit cards, and gift or smart cards to increase your revenue. But, you will also want to be able to accept these payment methods safely and securely. You must also benefit from the financial advice that merchant banks can give you.

The industry your business is in will determine the kind of merchant you will choose. You will want to check potential merchant websites to see what they offer in terms of specialized services for your industry. Many do offer a wide range of payment processing options tailored to the industries they serve. Match your own business needs to the merchant that offers the most for your industry for the best start possible.

Each of the standard industry specializations needs a different kind of merchant services. Industries such as restaurants, retails stores, hair salons, mail order businesses and online retailers each take payments in different ways. They need to find the most ways to take payments securely in the most ways possible to help grow their business.

Your business will most likely be included in one of the standard industries. You can check for merchant services that offer the most help with common payment solutions for your particular business. You may need point of sale payment terminals to accept credit or debit cards. You may want to be able to accept gift and incentive cards. You may need to process mobile commerce or Internet payments. Good merchant services will allow you to find what you need at competitive pricing, and will keep you educated and current with the newest technology and products for your industry.

Not only will you need a wide range of payment processing options, but much benefit will come from financial activity reporting for the methods you choose. Your merchant services should provide these things. You should also expect good advice for lowering your overall costs of acceptance for the payment types you use.

You may find that your merchant service will provide a client manager assigned to you to help manage your accounts. You may be able to consolidate accounts from several banks into one merchant bank. Having the financial expertise that comes with this is very valuable and may be a path you should consider.

Education concerning risk reduction and data security is a crucial part of what merchant services will offer you. As businesses expand from local to global markets, the latest news and data security alerts become essential. It will be helpful to find the service that includes ongoing information about how to conduct financial transactions securely. You should also want to learn as much as possible about data security standards. These are key components to any excellent merchant service that you should consider as your financial partner.

Financing Solutions, Merchant Banking Services, and business support are crucial elements to your new business. Look for the most resources offered when considering which merchant will become your financial partner to ensure success. You want to have expert financial advice and experienced merchant services to help you succeed.

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Business Financing FAQ:

Question: How do I get financing to start a business?
I want to open a nightclub but don’t have the cash to get started. What’s the best way to get financing without collateral or good personal credit?

Answer: You need to go talk to a bank about getting a business loan. To get one, you need to show them that your idea will work, that it will be profitable and that you know what you’re doing. You need to prepare a business plan to show staff, layout, possible expenses etc. They don’t want to give money to someone who’s going to go bankrupt right away, so be as prepared as possible.

Question: Where can I find a business article about long term financing?
It needs to be recent. I have looked on every business website but have found no good articles.

Answer: Try the Wall Street Journal.

Question: Where is a great place to get alternative financing for a business?

Answer: You have a few options. You can try: a bank, family and friends, loan shark, investors in exchange for a share or interest for the money (search websites online), venture capital, government loan if your business is small, and obviously your own cash by selling your assets.

Question: How to obtain small business financing from bank?
I currently run a small web-based business as an LLC registered in the state of FL. Up until now I have financed my business with money I’ve saved from working as a waiter and the profit it makes, but now I’m looking to expand and need about $5000. Currently my business takes in anywhere from $1500 – $2500 a month and has about a 45% profit margin.

I’m young (a student in college) and have no credit, have never had a credit card and have never taken out a loan for anything. How do I approach the bank to try to get a loan for my business? What is a realistic interest rate and how likely am I to get a loan?

Answer: Any lender will require a business plan that shows that you can pay the loan back. Go to sba.gov , score.org or bplan.com for instructions on how to write a business plan and sample business plans.

Question: What do I categorize business credit card finance charges as?
Are these finance charge on my business credit card tax deductible? Where should I file these charges?

Answer: Credit card finance charges is interest charged for loaned money, so you can categorize it along with other interest payments, such as mortgage interest. In theory you could lump them together in the same ledger, but your accountant might prefer you keep the two separate, i.e., interest paid on short term loans from interest paid on long term loans, even though both are tax deducible.

This is assuming that the credit card is being used for legitimate business expenses, of course.

Question: If buying a laptop for my business, but am financing it for 18 months, is it still tax deductable?
So I’ve read the fine details about using a business laptop as a business expense, and that is fine as this will be 100% used for my business. My question, though, is how do you treat the purchase if it is being financed through a business-owned credit card (say, Best Buy business card), over 18 months? Does it still count as a “purchase” in the same year you start the process of buying it, or only at the 18th month when you actually have paid the entire amount off?

Answer: Even though you are financing it, you can write it all off at the time of purchase, so deduct it all now.

Question: Small business start up financing?
I was wondering if anyone knows of funding sources for women starting a small business. I have heard there are grants and loans available for women but don’t know how or where to access them. Also, any info on small business loans is appreciated.

Answer: I can think of a few resources for you to look at. There is a Yahoo Group with grants and loan programs especially suited for small businesses and real estate. I’m not sure what kind of business you want to do but you could “double dip” by taking advantage of women’s grants/loans as well as real estate grants/loans. If you are getting into commercial real estate, there is also a program to purchase commercial properties with only 1% of the purchase price as down payment instead of the usual 20% or so, which greatly reduces the demands on your cash reserves. Just google 99% financing for commercial real estate.

Question: Where can I license my micro financing business?

Answer: Are you a broker? For commercial loans? In most states, that requires a license. Go to your corporate commissioner or banking superintendent for licensing regulations. Make sure you are bonded, unless you are solely a referral agency and then why should anyone trust giving you confidential data?

Categories: Business Financing
6Jun

Buyout Financing – Everything You Need to Know

Posted by Credit Financing Guru on 23rd February 2010

When companies driven by strategic factors set out to acquire certain businesses/firms, they usually rely on the expert advice of a throng of financial and legal advisers. Financial partners also come in the form of business brokers which handle small- to mid-range transactions. Regional banks are the front runners in identifying possible businesses for acquisition.

Most firms/individuals deal with investment banks to facilitate the buyout financing and handle the nitty-gritty of obtaining controlling shares from the targeted firm. They generally help investors know what to anticipate and craft a profit strategy at the best workable terms.

When the stakes are high, some large companies or individuals hire an investment bank — usually with a breadth of global expertise — to provide a package of services — from conducting valuation (after making due diligence) from a buyout perspective, to compiling information detailing the target company’s worth (including assets and future worth), to providing legal advice on requirements depending on the corporation code (which every country has), to reviewing corporate By-Laws and Articles of Incorporation of the company to be acquired; to acting as broker to raise capital to buy the company (with a bigger acquisition target, the more fund managers there may be to provide capital).

The investment manager may also handle the public relations and investor relations requirements that are usually part and parcel of the buyout financing transaction. In return for its services, the investment bank gets a percentage of the total buyout financing cost apart from regular professional fees plus commissions.

In certain cases, a comprehensive management buyout feasibility study is also presented. This includes market analysis (along with competitive pricing information); current and future competition, facilities & equipment; and historical financial performance report (with future projections and valuation).

To raise management buyout financing on the best possible terms, check out online sites for a reputable firms specializing in structuring buyouts of firms, subsidiaries, divisions and product brands. It can be a long and tedious process, but hiring a competent firm can take care of just about everything, from orchestrating the efforts of, and dealing with, the financial institutions, partners or investors, as well valuation firms, accountants, and legal counsels, to the other professional management buyout advisers who may be part of the transaction.

Buyout financing may utilize the assets of the buyer. Through an investment banking firm, the buyer may trade in his shares of stock to buy out shares from a firm. Or the money may be borrowed based on the business value and assets of the company being acquired. Sometimes, a venture capitalist (a speculator who handles innovative projects, with an eye towards higher rate of return than that given by more traditional investments) is hired to build distribution channels, set up branches and factories, and handle the operating capital.

There is also what is known as leveraged buyout financing (LBO), whereby the interested buyer/investor goes to the open market to accumulate shares to obtain a seat in the targeted firm’s Board. LBO entails finding the right strategic partners to effect the desired transaction.

Buyout financing can be a highly suitable option that can work for you, especially with a good financial partner/advisor which can devise a program that makes the most sense for you and assist you every step of the way.

Buyout Financing FAQ:

Question: Can bank financing be secured to buyout a partner in investment real estate property?
My mother and uncle (her brother) inherited an investment property. This is not a rental property, but the property will have considerable worth upon its sale. If my mother wanted to buyout my uncle’s share today with the intent to sell within 3-6 months, could she secure financing from a bank for this purpose? I assume we’d have to prove to the bank that the property would be profitable (in this case, upon its sale).

Answer: If you are talking about land she will have a tough time. If she can not repay the loan without selling the land she will not get a loan.

Question: Would you be happy or unhappy if a company whose stock you owned was bought by a leveraged buyout specialist?
Here’s the catch, would you be happy if they financed the purchase with junk bonds? I was guessing no, because of course junk bonds carry a high risk of default which could throw the company into lots of debt, right? And if that happened your stock price that you owned would go down if not disappear because of bankruptcy right?

Answer: Usually the bonds are sold to other investors, and the shareholders are bought out with the proceeds. And what happens to the stock is the buyers problem.

Question: What is reverse buyout?

Answer: A reverse buyout is a technique used by a private company to go public without the regulatory requirements of an initial public offering (IPO).

Question: What is the difference between buying and leasing with equipment?
I am buying a dump truck and the finance company wants to lease it to me with a $1 buyout at the end. Why is it a lease instead of a purchase? How will it affect my taxes for my business at the end of the year?

Answer: With leasing you can expense the entire monthly payment. If you buy it, you have to capitalize it and depreciate it. The monthly depreciation may be less than the monthly expense deduction but you may be able to take sec 179 depreciation on it which means you could deduct the entire purchase in the year of purchase, BUT only to the amount of profit. Say your business made $15000 profit after all expenses except the truck. Truck costs 20000. You could take section 179 deprec for $15,000 and depreciate the 5000 balance over the remaining life (3-5 yrs). Talk to a CPA to get exact details.

Question: What is a leveraged buyout?

Answer: A LBO, or leveraged buyout, is a way to take a company private.

Say you have a publicly-traded company. But management believes that the market is seriously under-valuing the company and that the company could be worth more if it were private.

Management, or a consortium of other individuals, then borrow large sums of money from investment banks (this is the “leveraged” part – anything with leveraging involves debt/borrowing) and use it to buy out all current shareholders and retire the shares, thus becoming the sole owners of the company.

Categories: Business Financing
2Feb

Financing a New Business – What You Must Know

Posted by Credit Financing Guru on 22nd February 2010

For anyone planning to put up a business, it is important to keep in mind that as much as possible, you should start it buy using cash or funds of your own in financing a new business. You can do this by starting small or slowly and even while you are still presently employed.

You can start a business by working hard. You can work during evenings and during weekends while keeping up with your current job. This will ensure you that you will still have a job even when the business will not come out as good. Other than that, you also haven’t acquired debt while you are financing a new business.

Sometimes however, other sources of funding might be required depending on what type of business you have. When you try to find out your financial needs, keep in mind that you have to do your planning in an organized way. Do not forget about other factors that might affect your business like disease, calamities or machine breakdown.

In preparation of financing a new business, remember these things: equipment, business license or permit, legal fees, salaries, advertising, office supplies, etc.

What any starting businessman should avoid is to obtain additional financing while on the starting phase. There are two types of financing: debt and equity financing. The first one means that you make a loan from anybody and you are compelled to repay the sum you borrowed. The latter one has something to do with advertising or selling a part of your company to another investor. In other words, you are not forced to repay the funds. Generally, this form of funding is given by venture capital companies.

Most small scale businesses will then to make use of debt financing because equity financing are only interested in lending huge sums of money. So we will talk more of the sources of debt financing as a way of financing a new business.

Here are debt-financing sources:

1. Own Savings. This is the best option for you if you have set aside some amount. You have to remember though, that you must have a separate and sufficient amount for cases of emergency.

2. Your Relatives. Usually, your family and your relatives the easiest people to lend money from. If you will be able to persuade or convince them of your business idea, they may be willing to let you borrow money. You also have to make sure that you have an official loan document which states your interest rate and terms of payment. Just make sure that you will be able to return their money in the agreed length of time even when your business fails.

3. Banks and Lending Investors. There are a lot of local banks that allow you to loan money for putting up a business. This move will involve a presentation of a legal plan that justifies the amount that you are planning to borrow from them.

4. Equity Loans. The interest rates for equity loan are usually low. Just be careful and remember that your home is at stake


Financing a New Business FAQ:

Question: What is the best way to obtain financing for a new business startup?
If you had a business plan but little cash, how do you acquire enough cash for your business?

Answer: You should not start a business if you cannot pay cash for it. If your business fails (and many of the new ones do) and you paid cash, you simply move on. If you borrowed money, you are left with debt you have to pay – possibly for a long time to come.

Also, paying cash will prevent you from making many mistakes you will make if you borrow. It is plain psychology: we think before paying cash and do it much less (or do even not at all) when we borrow.

So, if you truly believe your business plan is sound, save what you can, get an extra job, save more, then and only then start it. As it develops, reinvest part of what you make into it to make it grow.

Question: I need money financing for a new business and because of my ex I can not go to the banks or loan companies.
He’s totally screwed me over. Paying money back isn’t a problem. Any ideas? And I don’t mean debt consolidation etc.

Answer: You need to put together a firm and realistic business plan and use it for financing and/or grants. Do some research online for resources, then take a trip to your local library.

Question: What is the importance of financing for a new business?

Answer: All businesses need money. Start with capital – your own money or your investors. Financing costs interest. You can’t afford too much interest to start with.

Most businesses fail because of undercapitalization. Get enough startup capital to last at least a month and preferably 3-4 months.

You will have to buy things to get going, both goods and services. And you will need working capital to support your business until you start getting income.

So finance your business with capital if at all possible. Finance your long term fixed assets with a term loan if you need to. Get a line of credit so that you can have short term working capital as you need it but resolve to keep that line as low as possible and use it only when you need it.

The line could be at a floating rate related to prime. The equipment long term loan should be at a reasonable fixed rate, like a car loan or other capital equipment loan would be. You should pay that loan off prior to the end of the effective life of that equipment.

Question: Where can I find financing for a new business (I have no credit)? Can do approx 15 to 20 mill a year.
This is a new newspaper like nothing else on the market. Basically for those who ride public transportation.

Answer: What you need is a Venture Capitalist but they aren’t easy to please. You better do your research & homework. Have a Solid business plan before you start contacting them.

Question: Financing Question on opening a new business?
We have decided to start a small business. I favor a 75% debt (mixed short and long term) 25% equity financing plan, while my husband favors a 80% equity (some preferred, but mostly common stock) 20% debt (long term) structure. We will be opening a small chain of pet grooming shops including building, land and equipment, and pet products for resale. I have come to you for advice in settling the financing tradeoff struggle.

Answer: I would suggest speaking with a business consultant/accountant/lawyer in your area. I would ask for referrals from other business owners or check the phone book and web.

You will need to look at cash flow projections and credit ratings to determine how much debt your business can carry and how much equity you can raise.

Question: What is the best way to get financing for a new business venture?

Answer: To get a loan, you need to write a business plan. Go to the SBA website for instructions on how to write a business plan and sample business plans.

Go to the SCORE website and in the upper left hand corner, enter your zip code. On the next screen, you will get information on the nearest SCORE chapter. Call them and arrange for a free meeting with a SCORE counselor to discuss you business plan.

SCORE is a nonprofit association dedicated to entrepreneur education and the formation, growth and success of small business nationwide. SCORE is a resource partner with the U.S. Small Business Administration (SBA).

SCORE has 389 chapters in locations throughout the United States and its territories, with 10,500 volunteers nationwide. Both working and retired executives and business owners donate time and expertise as business counselors.

Question: What kind of company do I need to contact for financing for construction on a new business in the Caribbean?

Answer: Depends. If you have enough money to cover 30%-35% of construction cost, you can get bank financing for the rest. If not, you need to arrange equity investment first.

Question: How does one get financed for a new business idea?
I am looking for financing for an independent music label, but cannot seem to find resources for financing. I am looking for start-up finances, but all I can find are resources for small businesses that have already been active.

Answer: To get started, I suggest contacting the Small Business Administration Financing Page (SBA). Entrepreneur also offers a great site dedicated to money & finance. The SBA site has sample plans and instructions on how to write a business plan. Then, take the business plan to a bank.

Categories: Business Financing
2Feb

How Does Owner Financing Work? Your Ultimate Guide

Posted by Credit Financing Guru on 6th February 2010

Financing a business venture sets the profitable idea to work. Without any means of financing, a great concept would never really be called a business until some form of financing is guaranteed.

Owner financing is one of the riskiest types of business financing. “How does owner financing work?” an entrepreneur may ask. Owner financing or seller financing is a form of financing where the original business owner or the property seller partly funds or shoulders the cost of the sale.

The usual setup is that the buyer would usually pay off the amount of the sale to the seller slowly over time. In such way, there would still be shared ownership of the business where the seller and the buyer would continue to share control management of the business. In effect, co-laboring for the business-on-sale becomes somehow inevitable where responsibilities, business operations’ costs and expenditures are still shared.

In this setup, there is a tendency for a troubled sale because during the process, the buyer may mismanage the business and just run around and hide from payments. Should this take place, the only recourse of the owner financing party or the property seller is to foreclose on the note and repossess the business. This leaves the seller to further complication as he would be left to look for another buyer and begin with the sale again.

Some business owners yield to owner financing mainly because there are certain businesses which are difficult to sell. In a way, shouldering the note or part of the purchase price of the business may be an attractive component for a potential buyer.

The owner financing setup, in fact could be a godsend opportunity to a small-time entrepreneur as the seller usually requires relaxed qualification standards and more lenient terms toward the sale of the property. Oftentimes, the sale terms are even more relaxed than those offered by loan firms or banks. Usually, this setup allows adjusted payment schedules, interest rate negotiation, loan period stretch and mostly everything palatable to the potential buyer’s preferred terms.

On one hand, a seller should always be covered and must be able to protect his interest. One option is that the seller may require the buyer to secure a more extensive loan. This way, the business-on-sale would not be the only collateral available for foreclosure in case of default in payment. In effect, should there be “more costs” on the buyer’s end; he would be more diligent in payment. Furthermore, he would be more determined in making the business work and speeding up the payment to completely acquire rights to the business.

Owner financing is jump started by having the buyer pay a sort of down payment. The business or assets attached to it acts as a collateral for the note. For the security, information of a “third party” acting as witness to the sale, a lien on the property is usually filed to the secretary of state’s office where the extent or coverage of the business is declared. If at some point, the buyer defaults on the note, the owner financing party or the seller should be the first in line to step back in and take over the business.

Owner Financing FAQ:

Question: How does owner financing affect your credit oppose to financing your home through a bank?
I bought my house by financing through the owner (Owner financing) because my credit was not great. I have never had anything repossessed or any major credit problems. Yet my credit is not all that great. I am wondering if it has to do with not financing my house through a mortgage company.

Answer: Chances are that private lenders do not report your loan and payment history to the credit bureaus.

Question: How long does it take to close with owner financing when the owner has a mortgage?
In other words, what time-consuming activities have to happen before closing, when the owner providing the financing is already satisfied of the property’s value and condition, so there is no need for additional inspection, appraisal, etc.?

Answer: If you want title insurance (and you do) that could take a couple of weeks. Other than that this could be done in a few days. Just schedule a closing with title company.

Question: What are the pros and cons of owner financing a home?
I have a home that I am interested in selling and am looking at various ways to entice buyers in this tough market. One option told to me was owner financing the property. What are the pros and cons as a person that would be financing my property? Also, what would be the difference if I still have a small mortgage on my property?

Answer: Pros: you will have lots of buyers to choose from, you can make a good profit, you have the right to foreclose and take back the home if payments are not made as the promissory note states
Cons: You will need to screen all of those buyers, Profit is long term, You will have to go through the legal process to foreclose if necessary
This is in my state of Texas, you should find out what the rules are where you are. Many investors in my area have become quite wealthy with owner financing. One reason is that when the owner forecloses, they lose all equity in the home and the financier can then sell the property again, keeping the last person’s equity. Not saying this is right or wrong, just a fact.

Question: Where should I look for an owner financing option as a buyer?
I am ready to buy and make 150,000 payment on a house. My credit is bad, should I look for an owner financing option as a buyer? What are my options?

Answer: This is a searchable field in the MLS, an agent can give you a list of owners willing to carry paper.

Question: Can someone explain to me what owner financing is?
Can someone explain to me what owner financing is? Please provide examples, with numbers. I get confused when % and this “balloon” thing is mentioned.

Answer: Owner financing is when the seller will hold title to the property instead of the mortgage co. A balloon payment means after so many years, usually 5 years, the balance has to be paid. This means you then have to go to a bank or mortgage broker to finance the remaining balance. In most cases, the balance of the mortgage is about the same because you pay about 70% of the interest of the first 15 years of the life of the mortgage. You’d be better off going to a Bank for your financing because in 5 years interest rates might be higher than where they are now. Make sure it’s a fixed rate open end mortgage which means you can pay down the mortgage anytime.

Question: What are the pros and cons of 100% Owner Financing?
Is it the same as a 30 yr fixed rate home loan? Is the interest rate usually higher? There is a house I am interested in but I don’t want to call and be an idiot not knowing how Owner Financing works?

Answer: The terms and conditions are whatever you and the seller decide AND put in writing. The rate can be higher but that just depends on what you agree to. You can do a 30 yr fixed with a balloon after 5 years if you wish and then at that point you can refinance with a conventional mortgage. You can do 5,6,7,8+% interest. Whatever you want to do. Negotiate the best deal for yourself. They are offering to finance it because they probably have tried to sell it conventionally and in this slow market were unsuccessful. I would recommend getting either a good Real Estate attorney or a quality title company who will assist you in getting things documented. Things can go sour on a handshake because it is not in writing.

Question: How could I structure owner financing on this deal?
I may be getting a property under contract very soon for the deed. If I do, then I have the option to do owner financing. I don’t really understand how to structure owner financing deals which is holding me back from trying to get the deed versus doing a regular lease option.

Answer: Owner financing and lease option are two separate and totally different things. Also buyer and tenant are not the same.

Owner financing is where you would hold the note and the buyer would pay you instead of them paying directly to a mortgage company. Lease option is where they have a one to two year lease with you and can either purchase or not purchase the property. In both cases this would be a Buyer/Seller transaction because you are selling the property. If you were renting out the property than it would be landlord/tenant.

Question: What is owner financing all about? How does it work?

Answer: The owner takes back a mortgage and acts like the bank. It is a transaction that most, if not all, attorneys advise against doing.

Categories: Business Financing
2Feb

Business Funding – Overcoming Financial Obstacles With Invoice Financing

Posted by Credit Financing Guru on 31st January 2010

Coming up with ideas to grow a small to mid-sized business is the easy part. Coming up with funding ideas is where the challenge lies. There are many obstacles that can prevent small and mid-sized businesses from accessing working capital in a timely manner or at all.

There is an innovative solution that offers an alternative to traditional financing methods that can help owners overcome these obstacles so they can get the cash they need fast in order to compete and grow.

Through an online auction platform, owners can sell their accounts receivable and, for a small fee, receive the funds in as little as 24 hours. By selling your outstanding invoices in this online auction marketplace, here are some of the obstacles you will overcome:

1) One common funding obstacle is credit rating. A small to mid-sized company that has been open for a couple of years, may not have established the appropriate credit rating needed for traditional financing. The receivables auction platform referenced above doesn’t rely solely on credit ratings to determine approval for membership.

It takes into account a variety of factors, including the customers. In fact, when selling your receivables via auction, you can actually leverage the credit rating of your larger, investment-grade customers to obtain the best cost of capital.

2) Another obstacle can be the restrictions placed on the owner by other funding methods. The receivables auction platform does not require an all-asset lien, where the seller is forced to pledge all accounts receivable for sale. The seller has the flexibility to pick and choose which invoices and how many he wants to post to an auction and sell.

Also, there are no restrictive covenants attached that dictate and set limits on the kinds of decisions the owner can make. In this online receivables auction marketplace the seller maintains complete control of the transaction. The Seller has the flexibility to decide when and how he taps into his accounts receivable for working capital and how he conducts business.

3) One of the toughest obstacles for small and mid-sized businesses to overcome is the lengthy amount of time it can take to convert accounts receivable to working capital can have a hard time overcoming. Traditional financing methods can leave small to mid-sized business owners waiting months for approval but, with this type of invoice financing -selling receivable in an auction platform – they control the clock.

They decide when they want to sell invoices and how frequently. For instance, if they know there is a huge sale on bulk inventory next week, they can post the necessary invoices and set the auction length for 3 days. Once the auction closes, funds are electronically deposited into the seller’s account within 24 hours. By selling these outstanding invoices on the real-time auction platform, they receive the cash advance in plenty of time to take advantage of the sale.

It doesn’t always have to be complicated for a small to mid-sized firm to gain quick and efficient access to the funding necessary to grow the business. Auctioning accounts receivable in a real-time, transparent, marketplace helps business owners overcome the obstacles they often encounter with other traditional financing methods.

With invoice financing, business funding becomes easier for businesses as they can quickly sell their accounts receivables to fund their working capital requirements easily and quickly. To know more about this innovative way of fund raising, visit http://www.receivablesxchange.com

Business Financing FAQ:

Question: Where can I get financing to purchase a business?
I want to purchase a business but I’m not sure where to go for financing. I need between 50k and 75k to purchase it and I was told that there are not many lenders that will finance that small of amount.

Answer: That’s a reasonably normal size small business loan for any local bank. What they’ll want to see is how much cash equity you and your partners are putting into the deal and how they’ll get their money back if the business fails.

Question: Financing question for small business?
Small business, LLC open for just under 2 years. Looking to refinance our loan we took to start the business and the banks are saying no go, almost seems they want us to go Ch 7 or 13.. Any idea’s on where to turn or what to do, loan was a personal type loan.

Answer: Hire an accountant to organize and update your financial and tax records. Then, consult an attorney specializing in business law as to your options; you may decide to negotiate with your suppliers and landlord before asking to re-negotiate the terms of your loan.

Question: Need a small business loan, can you help?
I am a new business owner and have need of finances upfront to get the building completed, and update equipment to expand our ability to get customers what they want/need. I am a young woman with no significant credit established. I have tried a few options that have proved unsuccessful or I am on a waiting list to be reviewed so I need your help. Do you know where I could possibly get some financial assistance

Answer: Go to your local SBA and ask for help! Talk to them about loans, put together a great business plan to take to banks and get all the tax advice you can get. They are a great resource and may know of some nontraditional financing that may work for you. I’d hate to give you false hope, but with no credit history and having already jumped the gun, you may be in some trouble.

Question: I have very good credit, but no assets. How can I get small business loan, or other type of financing?
I’m interested in purchasing a convenience store for sale that has been in business for many years. I would probably need a loan for about $200K. I have about 20% cash to put down.

Answer: There are SBA(.gov) loan programs in that range, but there are requirements in addition to the profitability of the business (must be verified however, with schedule C’s preferably). I think you need a net worth of a certain amount as well as collateral to cover all or 90%+ of the loan value. You can read more at the SBA’s website. There is a non profit called SCORE that is made up of retired business execs that can help you with a business plan and your loan apps, too. Of course, if you meet the collateral requirement, a home equity line is another option. Remember that the principal of the loan is not subtracted from your net income, so you can write off the interest and take depreciation on most of the assets (tangible and intangible are depreciated at different rates) but the principal of the loan comes out of your paycheck after taxes. This is one reason it is very difficult to make acquisitions with business loans unless there is massive growth potential.

You may be better off looking for something in the $40,000-$60,000 price range than taking out such a risky loan. You also MUST talk to an accountant about depreciation rates on the business’ assets, as this is one of the only ways to make an acquisition profitable post-tax.

Question: Can I take out a loan under my business without my personal credit being checked?
I want to open a business but I have real bad credit and cannot get a loan to finance my business. If I were to open an LLC or Corporation can I apply for bank loans under the company without my personal credit being checked?

Answer: No. After all, how can the lender check to see if it will be repaid?

Question: Do I really need quickbooks for my new small retail business?
I am in the process of putting together my business plan for a new retail business. I have been planning for my initial expenses and am wondering if I really need quickbooks. I am a fairly intelligent person with a college degree. Although the degree is not in finance, I did take accounting courses. Is it necessary to use a program like this or should I be able to do my own basic accounting with a little self training? Of course, I will have an accountant who will do my quarterly reports and tax filing.

Answer: For $140 and a PC its not a big expense for it. It will do all your invoices as well as accounting, keep track of customers, late payments, provide reports for sales tax purposes, etc. etc. It does a lot more than just accounting.

Question: Besides family and friends, how do you get financed for your business?

Answer: A new business is difficult to finance through a bank without real property to put up as collateral. Check with the SBA Small Business Administration to see if your situation has any govt assists available.

Question: What steps are necessary to actually start a small business?
Include education and finances.

Answer: Lets start from the top. You will begin with identifying something that you are interested in, a passion, a hobby that could become a money earner. Having identified that, then you want to learn all you can about it through informal learning, college education, apprenticeship, etc. Before you take the final plunge to hang your shingles and start the business, you will need to come up with some sort of business plan that will do market research on the demand for your product or service; sniff out your competition; address your marketing strategy; analyze your start up costs and operational costs; forecast your revenue; address your staffing needs; where and how your products/services will be produced and delivered; address the legal status and licensing requirements of your business.

The above covers the whole gamut of the overall steps, but depending on your location, other baby steps might be required. As you navigate the process, you will find it necessary to engage other professionals to assist you along the way. Do not make the classic mistake of trying to do it all by yourself.

Categories: Business Financing
1Jan

Debt-Free Business Financing With No Loss of Ownership Or Control

Posted by Credit Financing Guru on 23rd October 2009

There is a form of business financing that is debt-free, with no loss of ownership or control. It is very quick and still readily available. It is the only form of finance that grows as fast as invoices. There is no minimum time in business or collateral requirement. The client’s personal or company credit is usually not important. Prior liens are usually not a problem, so long as they’re disclosed up front. (Factors don’t like surprises. A deal that could have worked will probably die if the factor’s due diligence turns up undisclosed liens.)

This form of finance is called factoring. Say your company (the client) provides a product or service to a customer, then issues an invoice for those goods or services. The customer frequently takes 30-90 days to pay the invoice. Rather than wait, the client can sell the invoice to a third party, called a factor. The factor will verify that the invoice is valid and that the customer has the willingness and the ability to pay.

The factor will pay for the invoice in two parts. Initially, he will pay the client an advance of typically 70-80% of the face value of the invoice. This usually takes less than 48 hours. When the customer pays, the factor will deduct a fee, and refund the balance to the client. This fee is mostly affected by the time the invoice is outstanding.

There are numerous advantages to factoring for a client company. The most obvious one is that cash flow improves immediately. Factors also provide other benefits as part of their normal business, such as handling collections and tracking accounts receivable. A factor can provide quality assurance when they verify that the customer received the product. Another benefit is that a factor will verify a customers’ credit before advancing funds. If you’re looking to do business with a new customer, but the factor won’t fund their invoices, you will want to be very careful about the terms you offer them.

Factoring rates tend to be higher than bank rates, but when considering costs it’s important to consider the benefits as well. Having cash on hand to bid more work or take advantage of supplier discounts can make a huge difference. The objective is to make more money by factoring than you would if you didn’t factor.

Factoring has changed a great deal over the last ten years. There are 5-10 times as many funding sources now as there were then, so rates and terms are much more competitive. There are factors for invoice volumes of $500/month to over $10 million/month. There are factors of all sizes who specialize in the construction and medical industries.

Because there are so many funding sources, your best bet is to use an independent broker. Most brokers don’t charge any client fees. They are paid referral fees by the funding sources because the funding sources are wonderful people (many of them are very nice, actually) and because it’s less expensive for them than advertising. There is very little difference in referral fee rates between different funding sources, so finding the best match between the needs of the client and the funding source is the primary concern.

Mike Curtin, Owner, MSC Funding

Business Financing FAQ:

Question: What are some alternative forms of financing for a small business?
During these tough times, it’s getting harder and harder to achieve traditional funding from banks. As a small business owner myself (a janitorial and cleaning service) I wanted to know what alternative funding sources are available for us?

Answer: There are many sources of alternative funding for small business. They all vary, depending on who your clients are, but I will list a few with a description for each.

The first option, factoring, is a practice wherein one company purchases a debt or invoice from another company. It refers to the acquisition of accounts receivable, which are discounted in order to allow the buyer to make a profit upon collection of monies owed.

PO Funding covers the supplier expenses associated with a specific purchase order. It enables you to make sales that exceed your current financial capabilities and provides a solid platform for growth. When used properly, purchase order financing can help you grow your company by enabling you to accept larger orders.

A Merchant Cash Advance, otherwise known as credit-card-receivable funding, is an increasingly popular solution for small businesses looking for a flexible form of business capital. As use of credit cards grows as a form of payment at a greater variety of businesses, more small business operators are able to tap into a previously unrecognized form of capital: their credit card receipts.

Question: Rental Business: Re-financing a 4-Plex.?
I am a landlord. I have two 4-plexes and one triplex in Ontario, Canada. I wanted to ask about re-financing a residential 4-Plex: Is it reasonable to expect to be able to refinance it up to 75% or 65%? Right now mortgage is about 50% of value. Please note: I only bought it 12 months ago. Also, although I am an engineer, I do NOT have a regular day job, just the income properties and being a landlord. Also my credit score is very good – above 750.

Answer: You should be able to with 50% equity and a 750 credit score.

Question: How can I finance a small business with proven profit potential in today’s credit market with no credit score?
I have no credit score because I have never borrowed money. I had struggled many years because of my obligations to my terminally child. My home is paid for and because of my age it will stay that way. I am in a “green” business with a good market for my product which involves turning a waste product into a marketable product.

Answer: There are two really manageable options that I can think of right off:
1. family and friends. To make the financing more palpable to them, go look at the website for virgin money. They make up loan papers and even emails to potential lenders from your list of friends and family, and make everything upfront and legal. the money is electronically transferred from your account and deposited into theirs so that you only have to make your payment and there are no hurt feelings.
2. there are a couple of websites available where you ask for private loans from strangers. You put up your information and the amount you need to finance your business, and anywhere from one to thousands of people bid for parcels of your loan. one person can fund 1000 dollars while another person can fund 100. It’s the same as above, the website takes a monthly payment from you’re account, and distributes it.

Question: Why is it important to separate business and personal finances?

Answer: If you do not separate than if your business owes money then they can come after your personal finances and property. You don’t want your house to be taken because your business is in trouble.

Question: Are banks still giving loans to start a small business?
I am thinking of going into business for myself but I don’t want to go through the whole process of putting together a business plan if I cannot get financing.

Answer: As an aspiring entrepreneur you have to realize the road ahead is going to be tough. While one of the hardest things that you have to do to start your small business is to get the funding that you need to start up. Most small-business owners are lucky enough to have enough resources such as surplus funds in their savings accounts to start their businesses. But for the majority of those business owners just like you and I, we require some help and assistance.

With the recent recession and the economy heading towards a downward spiral, getting the loan that you need to start your small business is going to be a very difficult road for you. But thanks to Uncle Sam there is a better choice out there for you. Look into applying for a small business loan grant from the government. The benefits of getting a grant from the government is the fact that it never has to be paid back unlike a normal loan from major banks such as Bank of America Wells Fargo etc.

Question: What is the purpose and usefulness of accounting and finance professional bodies to small business owners?

Answer: Accounting professionals can help small business owners to set up accounting systems that can help make their financial information more organized and readable by outside entities. This can be useful if a small business owner needs to create financial statements to get a loan at a bank. Accounting professionals can also help small business owners complete their tax returns.

Question: How do I get large finance to buy a business?
I want to purchase a skip business and need to know how to raise the finances.

Answer: With great difficulty nowadays. Banks don’t want to lend even to good companies! As a start up you will not appeal to them. You may get finance as long as you are making a size-able financial contribution yourself. No lender will risk their money unless you risk yours too.

Question: What do I need to start a small business?
A coworker and I are thinking about opening up a small clothing store but don’t exactly know where to start or what it takes. We know it takes finances and are currently working on finding grants and other means but what else would we need?

Answer: It totally depends on what you are starting with. If you have product but not a lot of finances and you really want to get established as a clothing line, then you need to start small. You can sell your product on the internet, but you will be able to build a reputation for the product quicker if you sell locally. To actually start a store you are going to need a minimum of $200,000 start-up, that’s just what it usually comes out to after all the expenses are paid. There are very few grants for “stores.” There are grants available for clothing designers, training, etc., but the statistics of a store crashing and burning within the first five years is so high that there just aren’t many companies that are willing to give grants to start-up stores unless it is a franchise. Your best bet if you have a product is to partner with a local store or boutique that you can pay a commission for allowing you to park your product in their store. The commission is based on sales so you don’t lose anything. Then, as you get a reputation and following for the clothing you’ll have more availability for expanding.

Categories: Business Financing
10Oct