Securing credit for a new business is challenging. You need an established credit history to qualify for some loans. It’s more complicated than showing your business plan to your local banker, and then if they like it enough, they will lend you money.
You need authorization from an underwriter for most loans, and they can mandate strict requirements before the lender will consider forking over cash to a new business. If you qualify, lines of credit can help a new business keep its money flowing while establishing itself.
How It Works
A line of credit functions similarly to a credit card cash advance. You’re approved for a certain amount of funds, which allows you to withdraw that cash for all your business needs. Unlike a credit card, it is not as simple as going to the ATM and getting a cash advance. You need to go to your lender to withdraw the funds.
You can use this type of credit for a variety of purchases. However, you have to use something other than lines of credit for larger purchases for the company because of higher interest rates.
How To Qualify
Unlike a credit card, you must meet stricter cash flow, collateral and credit standards with this loan type. The lender will base your creditworthiness on your or the business’s credit.
Most lenders will require a business operating period of at least two years to qualify for a line of credit. A newer company may need to find an alternative to this loan program for a little while until it’s more established.
If you choose to use your credit history along with personal collateral, you may qualify for lines of credit despite your business’s time in operation. Receiving credit approval may require that you sign your home or other collateral over to the bank, so their risks are limited.
How It’s Kept
Even after you get a line of credit, your lender will continually determine if you’re still eligible. The bank outlines stipulations they require to keep your line of credit in your contract.
These requirements can include a variety of things. The bank will look into timely payments, the business’s cash flow, and how you use the credit line.
Obtaining a credit line for your business can help boost your cash flow if you qualify. Knowing what it takes to prepare can help your company’s chances of acquiring this type of credit.
Anyone running an independent business needs working capital. If your quest for a loan has been generating denials, you’re likely feeling frustrated. Inadequate funds could be blocking you from branching out and blossoming into the success you envision. Thankfully, there exists an option that may solve the problem. Consider taking out a merchant cash advance. Besides offering greater accessibility, these loans include an impressive list of advantages.
Funds Arrive Fast
One of the most notable benefits is that the money arrives quickly. In most cases, you won’t have to wait more than a week for funds to arrive. Compare that with traditional loans, which often take weeks or even months to complete.
Depending on the situation, timing could be of the essence. Creditors could be breathing down your neck. There might be plans for seasonal business promotion. Under these circumstances, waiting is unacceptable. After securing one of these loans, a lump sum deposit should arrive in your business account practically overnight.
Credit and Assets Are Not at Risk
It is common for young businesspersons to have negative marks lurking in their credit histories. Major lenders often view mistakes as reasons for not working with someone. Cash advance providers care little about their credit scores.
The reason is that the money their customers receive depends on credit card sales. A part of the money generated with every credit card swipe goes toward paying down the loan. Thus, the frequency of sales using plastic is what’s most important.
Because of this arrangement, whatever happens with the loan is unlikely to impact your credit score. Also, since collateral is unnecessary, it will not trigger repossession.
Money Can Be Used Freely
Many loans come with restrictions. Most lenders are interested in making sure their money goes toward particular areas. Deviating from these mandates can result in fines or even termination of the loan.
In contrast, the dollars from a merchant cash advance have no limitations. The money may be used in any number of ways. Pay down debt, hire extra employees, or replace broken equipment. The choice is yours. Having the power to spend the cash in whatever way you see fit is especially welcome when an emergency arises.
Depending on your situation, a merchant cash advance might be the financial solution you seek. Those inclined to favor other financial resources ought to consider the benefits of one. The perks might make forging a deal worthwhile, including for those who have an array of options.
The latest and greatest equipment may not always be within reach for business owners, especially if the equipment is expensive. Instead of going without the machinery you need to grow your company, equipment leasing can help you get the items you need without spending too much money. With this, you can rent your machinery for a certain period, and it can be less costly than buying. Here is why leasing your equipment can benefit your business.
You Can Save Money
If you run a business in a niche that requires machinery, you have probably wondered how you can afford the item. It is especially true if you have a small business or just getting started. Instead of saving up for a long time or getting a loan, you can rent the item you need over some time.
If you want to buy it later, you can do so. However, at the beginning of your entrepreneurial journey, you might not have the money or want to spend it on new or used equipment. You can save money in the short term, but be aware it may add up over time. If you need the equipment constantly, consider buying it when possible.
You Can Use the Latest Equipment
If you need to use the latest equipment in your business for it to run smoothly or benefit your customers, equipment leasing can help you get the items you need. It can be valuable for doctors, medical professionals, or those that work with expensive machinery.
For those in the medical field, it may be crucial to have the latest machinery so you can help your patients live healthier lives. For manufacturers, they can produce items faster and more efficiently, which can make them more money.
You Can Use Items Short Term
Sometimes you do not need items for a long time and instead want to use something for a short period. Leasing your equipment can allow you to do this. It can save you money and help you decide if you need to buy the item outright. Renting your equipment can give you an idea of what it is like to work with it, and you can decide if it is essential for your daily business.
Leasing your machinery can help you run a more efficient business and help you gain new customers. Use these tips to help you decide if leasing is right for your business.
Getting a fast influx of capital by utilizing your company’s accounts receivable could strengthen your financial outlook. Here are a few key things that you should consider about this funding.
How Does Invoice Factoring Work in Practice?
There are a few different formats of factoring models, but the nuts and bolts are fairly similar throughout the various iterations of this accounts receivable financing. You can sell your receivables to a factoring company in exchange for compensation representing a fixed percentage of their amount. Instead, you could obtain financing in exchange for an agreement to pay a fixed percentage or flat fee after you have received payment on outstanding receivables.
Factoring is most common among businesses that do not require customers to pay for products or services in advance. Many invoicing structures give customers anywhere from thirty to ninety days to tender payment. This is particularly common in business-to-business industries. Ultimately, an invoice that you have just issued but a customer has not paid you yet is exactly what factoring companies are looking for.
What Is Factoring Companies’ Upside?
To make the purchase of receivables worthwhile, businesses have to be willing to settle for compensation that is less than their face value. In general, factoring companies will pay in the range of seventy to ninety percent of an invoice’s value to buy it outright.
Age is a key factor in determining invoices’ worth, and an individual customer’s payment history may also be relevant. In addition, the amount that a factoring company is willing to pay for an interest in accounts receivable may partly depend on whether they are assuming responsibility for collections or responsibility for collections remains with the business from which they have purchased receivables.
How Does Factoring Benefit Small Businesses?
Accounts receivable financing through a factoring enterprise can keep your cash position healthy while you wait on payments from customers. Using the proceeds from a factoring transaction could give you instant cash on hand, allowing you to afford your ongoing operating expenses and investments in new assets to drive growth without overextending yourself.
One of the most appealing benefits of factoring for small businesses is that it can get them capital much more quickly than they would be able to by pursuing traditional small lending programs. Moreover, they can get working capital without having to borrow it from a lending institution they will have to make payments on a recurring basis. Resultantly, their debt-to-asset ratio remains intact, and a transaction will not inflict any damage on their credit score.
As a small business owner, you will likely need to seek funding at some point. There are many options available from credit lines to invoice factoring and more. Each comes with advantages and disadvantages. You need to determine why and when you need the funding to determine which one is best for you.
In this blog, we’ll explore some of the most popular business loan options.
Top 10 Business Loan Funding Options
The first funding option we’ll explore is term loans. This option provides you with a lump sum of cash which will be re-paid with interest over a period of time. Alternative lenders can offer up to $1 million and provide funds faster than a traditional bank.
- Cash upfront
- Allows you to borrow more than other loan options
- Funding is fast with alternative lenders
- Often requires collateral or a personal guarantee
- Costs vary, alternative lenders charge higher fees than traditional lenders
The SBA does not provide the loan but provides a guarantee to lenders on a portion of the funds in case the borrower defaults. Repayment periods are determined by how you plan to use the funds:
- Working capital: 7 years
- Equipment: 10 years
- Real Estate: 25 years
- Offers lowest rates
- Can borrow up to $5 million
- Longer repayment terms
- Long, rigorous application
- Difficult qualification standards
Business Line of Credit
A business line of credit provides your business with funds up to a certain amount. You draw what you need from the line and only pay interest on the money used. As you pay down the loan, the funds become available again. This funding option offers more flexibility than others.
- Unsecured, no collateral or personal guarantee required
- Often has additional fees (maintenance and draw fees)
- Strong credit and revenue requirements
An equipment loan is a funding option that can help you cover the equipment needed to run your business. Typically, the equipment is the collateral for the loan, and the terms are matched with the life expectancy of the equipment. Rates depend on the strength of your business and the value of the equipment.
- Strong credit and business finances get competitive rates
- You own the equipment and payments build equity
- Typically requires a down payment
- Equipment may become obsolete before the term is over
Invoice factoring may be a viable funding option if you have unpaid invoices and need fast cash. This process involves selling your invoices to a factoring company that will advance you 80% to 95% of your invoices’ value and collect payment from your customers. Once the invoice is paid, you will be given the remainder of the funds, minus the company’s fees.
- Can be expensive
- Lose control over collections efforts
This funding option is similar to invoice factoring. However, instead of selling your invoices, you use them as collateral to secure a cash advance. You retain control of the invoices.
- Fast funding
- Customers will never know
- Expensive compared to other options
- You are responsible for collecting from customers
Merchant Cash Advance
A merchant cash advance provides your business with funds upfront to fund your business. However, instead of making monthly payments, you commit a percentage of your daily credit card sales or agree to a fixed daily/weekly withdrawal from your bank account.
- High costs
- Cash flow issues due to frequent payments
This funding option is ideal for startups since most banks won’t extend a business loan to a business with no history. Approval is based on your personal credit score/history and typically requires good credit.
- Ideal for startups
- Fast funding
- High costs
- Smaller funding amounts
- Failure to repay can damage personal credit
Business Credit Cards
A business credit card is similar to a line of credit. You can use the funds and repay as needed, as long as you don’t exceed the limit and make minimum monthly payments.
- May earn rewards on purchases
- No collateral
High-cost, rates may increase
Extra fees may apply
The final small business funding option we’ll explore is microloans. A microloan is a small loan, typically $50,000 or less. This type of funding is available to startups, new businesses, and those that are located in disadvantaged communities.
- Low costs
- Services such as training and consulting often included
- Smaller amounts
- Stringent eligibility criteria
Does Your Small Business Need Funding?
If your small business needs funding, keep these options in mind. If you want to learn more, let Dorra Financial Group help!
Every successful entrepreneur has a unique story, but they almost always have a strong sense of their mission, customer profile, and goals. To help you define those, this blog poses three guiding questions you should consider.
Who Are Your Customers or Clients?
If you want to become a successful entrepreneur, it’s essential to know who you want your business to cater to. That’s because, without someone who needs it, even the best product will struggle to capture the market’s attention. A good approach is to identify a problem certain people have, then come up with a marketable solution to that problem. Alternatively, you can look at how preexisting companies are already solving that problem for customers, then offer an alternative that is better in quality, price, or both.
What Are Your Company’s Unique Selling Points?
Along with knowing their customers and the problem they’re solving, a successful entrepreneur must differentiate their company from competitors. That means developing selling points, or reasons a customer should choose your business over others. One way to do that is by collecting success stories from customers who’ve adopted your product and seen the benefits. You can also seek out media coverage and submit your offerings for award consideration.
What Are Your Values?
There is some overlap between a company’s selling points and its values, but values are worth considering on their own. It’s hard to be a successful entrepreneur without them. Values can both guide your leadership decisions and entice customers and potential employees who learn about them. For instance, companies that prioritize environmental friendliness will have an easier time drawing in eco-conscious consumers, while those that position themselves as employee-friendly will have a leg up when it comes to recruiting and retention.
Funding can help you along the path toward becoming a successful entrepreneur. To hear about your potential financing options, just speak with Dorra Financial Group.
The basics of a remarketing campaign involve continuing to advertise to customers who have purchased your products. Some businesses apply this to people who have visited your website even if they haven’t bought anything yet.
Remarketing in a Nutshell
This concept takes advantage of the fact that you’ve already invested significant money in advertising to get someone to the point of visiting your website or store. Why waste it? It’s better to keep marketing to people who have already shown interest in your products than spend all of your marketing budget advertising to the general public.
These days, remarketing campaigns benefit from high-tech features. You can customize what type of individual to advertise to, how, and when. It’s possible to create focused advertising that looks at keywords, landing pages, and purchase history.
Examples of Remarketing in Action
Online stores use this technique extensively. Do you remember the last you were shopping for an item and the website prompted you to sign up for email reminders letting you know about discounts? This is a subtle form of remarketing. The customer is focused on saving money, and the business benefits by encouraging customers to shop at the same store in the future.
Another way a remarketing campaign works is by leveraging Google Ads or Bing Ads to show people specific ads for your products as they browse online. Cookies on your website can help you suggest similar products to those visitors have purchased before, sometimes with text such as “You might also be interested in this product” or “Other customers also purchased these items.”
Tips for Effective Remarketing
There are many ways to make your online advertising more effective. First and foremost, choose a digital marketing agency with experience in a wide variety of advertising methods, including SEO, email marketing, social media marketing, Google AdWords, pay-per-click ads, and remarketing campaign planning.
Next, take the time to understand your target audience. Who are you trying to reach with your advertising and your products? What interests, problems, needs, and goals do they have?
It’s common for businesses to have several main groups of customers. Your remarketing can be more effective if you develop specific content for each of these groups individually. For example, the keywords and topics that work best for corporate executives are likely going to be very different than those for small business owners. The same thing applies to companies that sell to people of a wide range of ages and circumstances.
Starting a business can be an exciting and rewarding experience, but it can also be challenging. In this 15-step guide, we will cover everything you need to know to get your business off the ground.
Step 1: Determine Your Business Idea
The first step in starting a business is to determine your business idea. What product or service will you offer, and who is your target audience?
Step 2: Conduct Market Research
Before launching your business, you need to conduct market research to determine if there is a demand for your product or service.
Step 3: Write a Business Plan
A business plan is a roadmap for your business. It outlines your goals, target market, financial projections, and marketing strategy.
Step 4: Choose a Legal Structure
Your business’s legal structure will determine your tax obligations, personal liability, and ownership structure.
Step 5: Register Your Business
You will need to register your business with the state and obtain any necessary licenses and permits.
Step 6: Open a Business Bank Account
Separating your personal and business finances is essential for tracking your business’s financial health.
Step 7: Choose an Accounting System
Keeping accurate records is essential for managing your finances and preparing tax returns.
Step 8: Secure Financing
You will need funding to start and grow your business. Dorra Financial Group can help you explore financing options that suit your needs.
Step 9: Choose a Location
The location of your business can impact your success. Choose a location that is easily accessible to your target market.
Step 10: Purchase Equipment and Inventory
You will need equipment and inventory to operate your business. Make sure you have everything you need before opening your doors.
Step 11: Hire Employees
Hiring employees can help you grow your business, but it also comes with legal and financial responsibilities.
Step 12: Develop a Marketing Strategy
A marketing strategy is essential for promoting your business and attracting customers.
Step 13: Launch Your Business
Once you have everything in place, it’s time to launch your business.
Step 14: Monitor Your Finances
Tracking your finances is essential for ensuring your business’s success.
Step 15: Continuously Evaluate and Improve
Evaluate your business regularly to identify areas for improvement and adjust your strategy accordingly.
Starting a business can be a daunting task, but with the right guidance, it can be an exciting and rewarding experience. If you need help navigating the process, contact Dorra Financial Group. Our team of experts can provide the guidance and resources you need to start and grow a successful business.
Banks are one of the most common sources of business loans, but they have strict requirements to be met before they approve a loan application. Here are the typical requirements for obtaining a bank business loan and help you determine if you are ready to apply.
Credit Score and History
One of the primary factors that banks consider when reviewing loan applications is the borrower’s credit score and history. A high credit score and a clean credit history will increase your chances of being approved for a loan. However, the bank may reject your loan application if your credit score is low or you have a history of late payments.
Banks also require a detailed business plan that outlines the purpose of the loan and how it will be used to grow the business. The plan should include financial projections, a market analysis, and a description of the management team’s experience.
Banks typically require collateral for business loans. Collateral can include real estate, equipment, and other assets the bank can seize in the event of default. If you are unable to provide sufficient collateral, the bank may reject your loan application.
Banks will also consider the cash flow of your business when reviewing your loan application. They want to ensure that your business generates enough revenue to cover the loan payments. You will need to provide financial statements, including cash flow statements and income statements, to support your loan application.
Banks may also consider the industry experience of the borrower. If you are a first-time business owner, the bank may view your loan application as riskier than an application from an experienced entrepreneur.
Obtaining a bank business loan can be a complex process, but it is a great way to secure financing for your business. Before applying for a loan, ensure that you meet the bank’s requirements. If you need help navigating the loan application process, contact Dorra Financial Group today. Our team of experienced professionals can help you secure the financing you need to grow your business.
Contract factoring is a financing option that allows businesses to access cash quickly by selling their accounts receivable to a factoring company. Let’s take a closer look at contract factoring, how it works, what businesses should consider when choosing this financing option, and the benefits of using contract factoring.
What Is Contract Factoring?
Contract factoring, also known as invoice factoring, is a financing method where a business sells its invoices or accounts receivable to a factoring company at a discount in exchange for immediate cash. The factoring company then takes on the responsibility of collecting the payments from the business’s customers.
How Does Contract Factoring Work?
The factoring company will typically advance a percentage of the total value of the invoices, usually between 70% and 90%, to the business. The remaining amount, minus the factoring fee, is paid to the business once the factoring company collects the payments from the customers. The factoring fee is usually a percentage of the invoice value.
What Should Businesses Consider?
Businesses considering contract factoring should take into account the factoring fee, which can range from 1% to 5% or more, as well as the factoring company’s reputation, customer service, and collection practices. They should also consider whether the benefits of accessing cash quickly outweigh the cost of factoring fees.
The Benefits of Using Contract Factoring
Contract factoring can provide many benefits to businesses, including improved cash flow, faster access to cash, the ability to take on larger contracts, and reduced administrative costs.
If you’re a business owner considering contract factoring, contact Dorra Financial Group. Our team of experts can help you navigate the contract factoring process and find the best financing solutions for your business needs. We have years of experience helping businesses improve their cash flow through contract factoring, and we can help you too. Contact us today to learn more about our services and how we can help your business grow.