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.