Small Business Owner Musts: Knowing Your Financing Options

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As a business owner, your cash flow is like your pulse. At all times it should be kept strong through a knowledge of responsible spending as well as a cohesive plan for obtaining capital should the need for expansion, wage payments, or other pursuits that require liquid cash arise. The economic climate of the last few years has been a tough one for many businesses; bad credit, devalued property and assets and increased requirements on the part of banks have made small business lending into one of the most hard-hit parts of the financing world. The ability to easily apply for credit from banks used to allow small business who wished to grow the option to access capital at will. Today, when a business owner goes to those same banks, they are much more likely to be turned away.

An additional problem that faces many business owners goes beyond the increased lending requirements that they face. High risk industries as designated by banks include some of the most vital sectors of the business world and many of the small business that communities rely on, including automotive and logistics businesses, medical businesses and private practices, beauty salons and liquor stores, to name a few. These businesses will by default have an even more difficult time applying for credit due to the nature of their business models. What is the take away from all of this? Small business owners need to have a plan in place that includes alternatives to small business loans from banks. Alternative providers of credit have become an increasingly important part of the small business world. An increased volume of businesses that need financing yet are unable to successfully apply for bank loans has bred many new options designed to fill the void created and ensure that these important job creators are kept moving forwards. Merchant cash advances are an alternative financial product that allows business owners to use their sales history to prove their ability to repay, even if their credit has been damaged in the past due to unexpected losses of revenue or other reasons. These options are also unsecured, meaning they do not require collateral from business owners. No liens on property are possessed by the funding organization. With higher risk and no collateral comes a higher price for capital, however, when deployed correctly, with a company that values long-term relationship building, these products can revitalize businesses paralyzed by the limits of their cash flows and lender restrictions.

Business owners who want to keep this option open should avoid a few things. One thing that will draw the negative attention of these funding groups is a high number of bounced payments on bank statements, so if you plan on seeking capital within the next three months, it is important to ensure that you do not overdraw your account. Businesses must manage their overhead costs, including their rent for their premises. Another major red flag that can prevent a business from accessing alternative financing is delinquent rent payments. Ensuring that you have a plan for the use of the capital you are seeking is not only the smart thing to do, but it will help your business when applying and allow you to not waste time once you receive a liquid capital infusion.

Photo Credit to Tony on Flickr

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