All dream to expand their business, earn trillions of dollars, be more profitable and have high growth in business. But is it possible without precise investment of resources, both financial & non financial. We tend to get caught up in day to day activities so much that we forget to foresee what lies ahead for our business. Lack of skilled manpower, outdated technology, changing customer behaviour all seem relevant issues, but do we really focus on them. We tend to overlook all this for the want of funds is a major issue. Next, we do not know what the right time to find investments for our small business.
We get confused over how to approach, whom to approach, what should be the amount etc. The below specified points help to identify the high time to look for funds.
- Absence of online presence: In this techno world, it’s rare to find a business without any online presence. Whatever be your target segment or marketing strategies, you are restricting your business growth if not available online. About 60 % of people search online for various options available even if they tend to buy from a local corner store. And if you are not there, you have missed the opportunity. Think again!
No need to have a big website with heavy data and graphics, just a small social media presence or listing of business directories will surely help. Create a facebook page for your business, promote it, start some promotional campaigns, have a twitter handle, list yourself on Google brand listings. All this will definitely help you increase your market visibility.
- Slowdown in workflows: the complicated workflows and administrative activities at times consume considerable time and business productivity gets affected. We know there are limits to resources, but we need to streamline the processes, introduce automation in our workflows, stop being manual. Upgrade and expand!
Just basic accounting software, CRM software, or upgrading your existing software will boost the productivity, this way you can save and dedicate more time to business.
- Obsolete machinery and equipment: it always takes time to reach a break-even point, but an extended time gap definitely points out to outdated machinery. If the regular breakouts result in missing customer deadlines, it makes sense to invest in new equipment. Get funds and boost sales!
Updated equipment is the need of the hour, if you don’t act now, you may increase chances of a slowdown, something you don’t want. With the availability of loans with no credit check, just go and grab a good deal for your equipment.
- Physical space constraints: The staff has increased, you need more space for production, storage and display; all these suggest that business is growing. But we all get so accustomed to our place that we deny the change required. The very idea of new premises, new location, and funds haunts us and we tend to overlook it. Consider different options and decide!
Moving or expanding the office space not just involves funds, but the increased rent/mortgage fees, insurance premium, interiors; utility connections all have to be considered. Also, don’t forget to inform your customers and prospects about new location.
- Lack of innovation: the innovation curve is moving ahead drastically, you may just think about an idea and there you have competitors offering that product. Until you have something new and different to offer why would customers come to you. Innovate and win!
Innovation not always requires large scale R&D, or high tech products; it could be anything that helps and satisfies the consumer demands and needs. If innovation is crucial for your business, just seek out funds with no peripherals and materialise your ideas.
Beside these there could be various reasons propelling you to make investments and grow your business. Don’t ignore or put off these signals, move ahead and get financial solutions be it merchant cash advance or preferably loans with no credit checks.
Payday loans are termed as short term loans used to get away a tough situation. Needless to say, they may turn out to be more dangerous for your business at times. So before diving in the morass, think twice about the costs and risks of the loans with no credit check.
As the name suggests, payday loans are meant for smaller duration, typically about two weeks or so. They are helpful in case of immediate cash crunch. The payday lenders ask for post-dated check with some fee, against the loan. The check is paid when the borrower has funds. In case of shortage of funds on the due date, the loan is rolled over or extended with additional fee.
Getting a payday loan is easy, as borrowers don’t require good credit scores, preferably credit history is not considered by the payday lenders. This is the reason payday loans are loans with no credit check; and are popular among small businesses. Due to higher annual percentage rates, payday loans are exceptionally expensive.
The main drawback is the high costs involved, in the form of fee component. They are of great help in short term wherein might help is evading the rough condition. Suppose you want to buy some component for the manufacturing, so that you can continue the normal business. But for a long term source of funds, they can be quite risky and will drown you I loans of payday lenders. Not just the higher interest rates, but also the regular bounced checks will degrade your credit scores. The banks, vendors and payday lenders all will worsen the situation for you.
Moreover, looking at the potential of the payday loan market, banks have also plunged into the system. Though they are no better than the traditional payday lenders, they result in steep risks. The banks have the liberty to access the checking accounts and collect the funds. You may ponder over the ways to utilise the money and it’s gone in the hands of the banks. But if you could negotiate on the fee structure and other terms, it would be beneficial in the long run.
The borrowers can consider some other ways to get the loans without credit check be it emergency cash fund, build a strong market base, credit card, unsecured loans, part time jobs, overdraft facility, peer lending services etc.
If loans are not paid on due dates these payday lenders can send legal notice and damage your credibility. The payday lenders have the opinion that their loans with no credit check are economical as compared to bounced check fees and overdraft fees. They believe payday loans are an easy and fast way to get money for small businesses.
An ideal business situation with enough cash to buy the goods, market them and sell with a favourable profit margin exists only in stories. On the contrary, the typical economy always has a cash crunch for some sections of the businesses. Inventory, natural disasters, business expansion all requires funds. However, where to get the cash from? The credit history is corrupted, no collaterals to attach; how to get a small business loan? A Merchant Cash Advance is the only way out.
Merchant Cash Advances come with quick access to cash but you have to pay for convenience. Unlike the regular loans Merchant Cash Advance are reimbursed on daily basis, based on the sales percentage. The higher sales help repay the advance faster. They are quick to get, doesn’t require collaterals and adjust to business conditions. If the sales are low, so are your repayments. They give flexibility to manage the business slowdown.
However, the compounded annual rate of the Merchant Cash Advance might run in extraordinary high numbers. The increased sales level increases the return rates as you plan to repay early. This early repayments have no benefits for the business owners as in case of other borrowing methods, where the early repayments result in interest savings. Strong sales are required for a steady flow of funds. The industry does not fall under the purview of federal regulations, as Merchant Cash Advances are transactions and not loans. The vicious cycle of a Merchant Cash Advance can affect the cash flow until you look out for other financing options.
The business of online lenders has flourished to counter the Merchant Cash Advances. They offer lower annual rate and better repayment terms. They might offer schemes for repeat clients with reduced fees for subsequent loans. They can also forgo the least credit score criteria sometimes.
Based on your criteria, the situation and options available choose wisely the best funding possibilities for your business.
Business owners have faced the dilemma of getting a bank loan over the years. The governments are trying their bit, but are unable to improve the lending market. All want the economy to be back on track, but what is the underlying reasons hindering this much-anticipated thought.
Research studies point out that small businesses lack the collateral security, and bank will not give damn loan without collateral. The basic dynamics of lending markets. About 60% of small business loan applications are rejected for lack of collaterals and again another 20% are termed as marginal borrowers.
Small businesses face collateral crunch, and need nor even think of approaching a bank for a loan. The only way out is to turn to private money lenders, factoring agencies, merchant cash advance loans, unsecured loans. However, all this has come with a hefty price tag.
Apart from being able to secure a small business loan, the premium rates are skyrocketing. Quite higher than the normal credit card rates. All this backfires the business owners and they have to sell products at discounted rates to be able to pay back the loan amounts.
In cases where the business owners are able to pledge some collateral, they are mostly their owned house properties. The experts caution them as this involves risk & dilutes the thin line between business and personal belongings.
If the businesses have some equipment, merchandise, physical or intellectual properties, they can be used as collaterals. Again, how many of the small businesses aspiring for loans have these collaterals? What should they focus on: building businesses or building assets? Doing business is important, but the credit worthiness also matters.
The stakeholders need to review the dynamics of the lending market as the situations may worsen with times to come.
The financial crisis has led banks struggle to maintain their breakeven, leave alone the profit margins. This led to hesitation in the case of lending to small businesses or merchant cash advances. Banks find small businesses less credit worthy due to recession. Banks have become risk averse because of increased regulations and legislations. The small community based banks have consolidated into strong big banks.
All these are the major obstacles a small business faces while approaching banks for cash advances or loans. The Federal Reserve data points the general income of the typical household has decreased of the last few years and so has the collaterals owned by the small businesses. The net effect is lower credit scores for the loan seekers.
The loans distributed to the small businesses are risky because of its dependency on the overall economic environment. The increased regulations have worsened the conditions for small business loans. Though the governments carry out their policies favouring the small businesses, but on ground nothing seems to change.
The banks are becoming cautious and raising the capital reserves, increasing deposits and holdings. They are doing everything to protect their liquidity ratios, and decreasing loan segments for small businesses. Even if banks underwrite loans or cash advances, the transaction costs levied are too high without any guarantee to loan processing. The banks have stopped loans for the smaller amounts; a common feature of small business loans. This leads to a gap in the demand and supply of the small business loan market.
Until recent community, banks played a key role in lending to small businesses, but the number of banks has reduced considerably owning to mergers and amalgamations. The options available to small loans have decreased drastically.
The product of these situations is the frustrated small business owner, who wanders from place to place to approve his loan application. The technology acts as a facilitator both for lenders and for borrowers with respect to risk and transaction costs. The experts recommend small businesses to develop a strong, mutually beneficial relation with lenders; wherein they can seek loans and build credibility in long run.
Researches point out that one out of four credit hunting small businesses try to fetch credit from online finances. Moreover, the online financing is a fastest growing segment of the financial market; specifically for small business loans . The question arises why are majority of small businesses
Convenience is the key
The idea behind moving towards online lenders is just to save money; in fact, these small business loans are more expensive than the usual methods of credit through banks or other lenders. Generally, the online creditors charge almost double the interest rate of traditional small business loans.
The businesses are able to raise credit even with lower credit scores, all thanks to the decision-making algorithms used by the online lenders. However, in reality the internet-based creditors approve less number of loan applications as compared to traditional community, regional or large banks.
The new loan offerings are custom made to the requirements of the small businesses; they generally require short-term loans to manage cash crunches. No longer would you find a small business seeking a loan for major business procurement or related aspects.
Online lenders, lend money in small amounts and for the smaller duration thereby mitigating the risks associated. They may also offer loan/advances against account receivables.
Another benefit associated is a smooth application process. The online finances have simplified processes to loan application, decision making and final disbursement of loans. Thus, the number of small business loans bought through online mechanism is larger as compared to traditional banks. They operate swiftly and decide the fate of a small business loan application within hours, leave alone days or weeks used in banks.
Thus, online lending is increasingly becoming popular for the time factor and not the money. They provide ease and comfort of obtaining small business loans in accordance to the loan requirements.
Well, whether you a start-up, store owner, entrepreneur or planning to be one; let me warn you, the life ahead is no longer that rosy it seems from outside. No one ever tells you the truth about the future, one has to go out explore for himself. Small business owners are regularly confronted with various threats to the very purpose of their existence and moreover difficulties faced in securing finance.
Getting finance is a cumbersome task for majority of small businesses despite the government and industry backing. Though the options are available for them but still businesses are rejected for small business loans. There is a constant struggle between banks & small businesses.
The various researches point out that despite the positive economic landscape, still small businesses find it tough to reduce their operating costs and foresee exigencies. All this leads to lack of growth and cash flow crunch for the businesses. But when they apply for small business loan; they are denied. This creates a vicious cycle of slowdown; they start downsizing both manpower and operations, pull in individual funds and increase the risks associated.
But the basic question is, why they are rejected? A bank provides loan based on the business’s credit score and majority of small business owners are unaware of their ratings, leave alone interpretation of the credit score. Their indifference to creditworthiness leads to long term damage to their business, when they pull in individual funds to manage the short term credit crunches. The industry associations have developed systematic mechanisms to generate business credit scores for the small businesses; banks use it to evaluate your loan applications.
The score includes the historical payment cycle of the small business loans availed and the personal capacity of the owners while determining the current scores. It is an ongoing process to build your credit score and timely payments to suppliers help build your score strong.
Once the small business owner is able to anticipate his credit worthiness, he is better positioned to succeed. If you know your scores well, you can project your growth rate better and chances of being rejected get nullified. Moreover the small business loan application process becomes smooth and fast.
You need to take charge of the situation, understand the market mechanism, create synergy and easily get your small business loan approved. And with your small business loan, not only your business grows but the whole economy thrives.
Wikipedia states that a merchant cash advance was originally structured, as a lump-sum payment to a business in exchange for an agreed-upon percentage of future card based sales. The cash advances are not exactly loans but a portion of future card sales, sold to third party beforehand. The companies working in this periphery are gazing the clients of the small business factoring companies. They operate in a fairly largest unorganised market and their interest rates are quite high compared to others in the lending market.
These have a diversified distribution channel and this can be attributed to their growth. The small businesses on lookout for credit, find MCA a better option as it provides greater flexibility to them. The sales volume determines in the payments to MCA and offers elasticity in cash flow management in case of seasonal businesses. The credit process is faster and serves borrowers by giving faster access to business capital.
Merchant cash advances initially started with the factoring the credit card sales. The size of sales of small operators is small and so is the loan amount. This way the risk associated with the invested was manageable for most MCAs. The insurgence of technology in banking and finance led to changes in payments also. Apart from credit card sales, merchants have cash and debit card sales too. And this led to a crowded market for any substantial growth. The new domain to explore is the B2B and B2G transactions.
The documentation process with MCAs is simpler which makes on board easy for merchants. Apart from regular card payments the merchants have moved to refinancing of the larger factoring clients. Their business mechanism helps generate regular flow of funds, even when you are trapped in debt. They do not care about the other lien holders and related issues, just need the comfortable daily account balance to finance your business. They help businesses generate funds external to their credit worthiness.
The major concern for any merchant going in for MCAs is that they don’t abide by the laws and regulations. The MCAs are backed by the large private equity funds and have a bigger risk appetite.
While conversing with your friends, business partners and lenders, you unknowingly touch on this topic; I need a loan, more specifically a small business loan. People respond in different ways, as to what might happen with loan, why you need it etc. You face it every time, if you run a small business.
Depending on your current business circumstances, there could be various reasons as to why you need a loan. Your small business requires a rise, or you need working capital; the list of purposes is endless. Getting a small business loan is not that relaxing but more important is actual reason of asking for a small business loan.
Here we jot down major points which require you to indulge in probing for a small business loan.
• You wish to expand the office space: The cubicles are all filled, new people are looking for place to sit & work; in a retail store you may need place to fit in more goods for display. All this points out that business is expanding; revenues will increase. But you may not have funds to grab this opportunity, as costs involved are significant. Before pampering your business with a loan, just measure whether the profits from proposed expansion, will cover the loan costs and maintain profit margin? You may use revenue forecast methods or other available research techniques to know the impact on business.
• Want equipment for business: You need certain machinery for manufacturing or improving service quality of your goods and services; and you need funds to buy that. What is the actual requirement of the equipment, its future value and utility, all needs to be considered. The pricey machinery could also act as collateral in future for business loan. But make a balance between the actual need of equipment and good to have it situation.
• Require product inventory: Inventory is an expense if they churn out ratio is low. In case of dynamic tech industry, the products may soon become obsolete with no buyers for it. Same is the case with season based business, you need to purchase enormous inventory and stay with it during off seasons. All this again needs funds, so always calculate the debt cost with the projected sales margin and then jump in for a loan.
• A business opportunity knocks your door: Your business got a new client or a big order, but you lack resources to complete it. Determine the real return on investment, the pros and cons of loan and then take a decision based on numbers, not on your feel good factor.
• Thinking of future: You will expand the business in few years down the line & would require large scale finance for it. So why not start building your credit worthiness from now. A strong credit history with on time repayment will build the credibility of your business. Here again do consider that whether the amount of debt can be paid back on time, otherwise you may tarnish the market reliability of your business.
Regardless of your reasons to go for small business loan, if the loan is able to improve the business in both long & short run; just go for it! Be confident in your abilities and succeed in business.