What kind of commercial loans are available and how does an entrepreneur make the best decision for their start-up or for a newer business? First, let’s look at the variables involved in your particular situation and give you a checklist to use:
Start-up business questions
- Are you starting a retail or B2B / B2G business?
- How much money do you need?
- Do you have money to put down?
- How is your personal credit?
- Do you have any direct industrial experience?
- How soon do you project to be cash positive flow
- Will your business be an importer or an exporter?
Let’s take these financing questions one by one:
What kind of business are you starting?
If you are buying and reselling goods, Invoice Factoring or Purchase Order Financing is available for startups. In addition, if you are starting a service business to provide temporary staffing, trucking service or IT services , for example, an invoice factoring company can provide pre-customer credit approval and prepare to finance at the minute you generate an invoice.
What if you are a retailer or restaurant business?
There are SBA backed loans that include 7a, Micro Loan Program and Express Program. In addition, there are business loans based on the receipts of your available credit cards after you have been in business for at least 6 months called Merchant Cash Advance . There are also programs to catch you $ 5000-25000 in financing for equipment or other hard assets needed to get started. Please call us for more information.
How much money do you need?
Different lenders and funding sources have different “sweet spots”. For example, we have programs for Invoice Factoring from $ 30,000 to $ 10,000,000 per month. Others may have larger programs. Our Merchant Cash Advance program can help businesses that need between $ 30,000 and $ 10,000,000.
How much money do you have to put down?
This question is more important if you are going to the traditional bank route or SBA backed loan. Banks typically do not zero down business loans. However, an invoice factoring company is more concerned with the solvency of its customers and we advance you up to 95% of the invoiced amount.
Do you have direct experience in the industry?
This question is extremely critical for traditional banks and lenders backed by the SBA (unless you buy a solid franchise). It is not important for an Invoice Factor and it is important for a Purchase Financing or Inventory Financing Company, since they want to know that you have the experience to help liquidate the financed goods if necessary.
Under the rules of the SBA, we are considered lenders service providers. This is a much more extensive role than a “Packager”, whose job is to take a loan already structured and approved and prepare the documentation for submission to the government. While packers play a valuable role in the process, they do not provide the wide range of services we do.
How soon do you plan to have a positive cash flow?
Again, this question is extremely critical for traditional banks and lenders backed by the SBA. Both will require a business plan with cash flow projections. Again, this is not so important for a factoring company, but an analysis of your profits for each agreement is important for an inventory financing company or PO funder, since they can only finance an agreement where their profits are sufficient .
Will your business be an importer or an exporter?
The SBA has some interesting programs for export companies. If you are an Exporter, businesscash.es has International Factoring Experience and can help you. If you are an Importer, we have a deep experience in Factoring and Financing PO in almost all imaginable consumer goods.