Eight Funding Sources for Growth Capital to Expand a Business

Wallet Loan AppA merchant cash advance can be an advantageous tool for putting a business on a fast track for growth.  While other growth capital options may be available for some businesses, are they viable or prudent?  What are the choices for funding for small and medium sized businesses?  Well, let’s take an example of an established business, with a minimum of a year of solid success.  Perhaps they have a good customer base and are meeting payroll just fine and earning a living.  Let’s say they are looking to take their business to the next level.  That usually means a capital infusion for growth.  Funds might be needed for more inventory, equipment, more advertising, another location, more employees, etc.  Getting the needed money to invest, a business owner could consider obtaining that needed capital from a number of sources, but many have disadvantages:

  1. From a bank loan.  An SBA loan or a line of credit for the amount needed is what I would recommend as the first source, as it will offer the lowest interest rate.  The reality is that in this business environment, business loans aren’t always easy to get approved for.  Also, it’s often a lengthy, cumbersome process that also shows up on their credit bureau reports and often ties up personal lines of credit as well. (more)
  2. Save and reinvest their profits themselves.  This is a conservative approach and avoids paying interest, but it is a long process for any growth.  Also, although a business may be doing well, saving to get to the next level of growth isn’t always possible.   In addition, although interest expense may be avoided, this savings is most likely outweighed by the lost profit margin on the growth afforded by instant outside funding.
  3. Borrowing from a friend or relative.  Doesn’t everyone know about the issues that can come from leaning on a close relationship for money?  Most people would agree this would be the LAST place to go for business money.
  4. Sell shares of the business to fund growth.  Watch Shark Tank lately?  In some cases it makes sense to bring in a partner.  In most cases it’s the most expensive and burdensome loan available.   Selling a part of the business is selling away the autonomy that a business owner has earned the hard way.
  5. Self-funding.   There are very few people that would have the means to make this a prudent option.  Self- funding would mostly likely mean raiding retirement accounts, cash advances on personal credit cards, a second mortgage or even dipping into an emergency fund.  All of these are poor personal financial decisions that could leave the owner and his family at financial risk.  Financial gurus Dave Ramsey, Suze Orman and even Kevin O’Leary would agree upon that.
  6. Crowdfunding seems to be the new buzz word for raising capital.  It may even be a viable option for the right start up that can catch the public’s imagination.  This is most likely a long shot for the average small and medium sized business.
  7. A traditional Merchant Cash Advance (MCA).  This is fast and easy access to short term capital.  It’s tied to the credit card processing receipts and a set portion (usually less than 20%) of the daily credit card deposits goes to pay off the advance.  Approval is mostly based upon credit card processing volume.  No collateral is required and the process is very quick with low requirements and documentation.  Cost of the funding is generally $3k-$4k for every $10K borrowed.
  8. A small business cash flow loan.  These loans are very similar to a Merchant Cash Advance.  One of the advantages over an MCA loan is that it isn’t tied to credit card processing, but the overall cash flow of the business.  Payback is done through small daily (M-F) equal amounts withdrawn from the business checking account.  The payback is less with only $2K-$3K additional owed for every $10k borrowed.  Approval standards are little more stringent than with an MCA.

Although these are a several different popular ways to obtain the capital necessary for the growth of a business, the pitfalls and obstacles for many of them leave a few stand out choices that just make good sense.  None of the other solutions will jumpstart a business as easily, quickly and effectively as a Merchant Cash Advance or a Cash Flow Loan.  These two programs both effectively can provide the short term loan for high profit expansion without jeopardizing the business or the business owner’s personal finances.  These popular loans have helped many small and medium sized businesses experience dramatic revenue growth that has far outweighed the higher payback amounts.

Can these alternate finance options energize your businesses with the capital to help you achieve your goals for faster growth?  If you are exploring options, call Cornerstone Business Solutions at 888-979-4731 today!

 

 

 

The Lending Trend: Why Alternative Funding is Becoming Popular

MazeIt’s no secret that traditional small business loans have become more difficult to secure during recent years. This type of rejection means owners may have trouble financing equipment or inventory, or that they will struggle to make payroll or lease payments. Some of these businesses are actually doing quite well—but they lack typical bank requirements to attain loan approval.

 

According to the quarterly BDRC Finance Monitor, half of all small and medium-sized enterprises applying for loans for the first time are rejected compared with a fifth of those re-applying for finance. What exactly is it that causes business owners to struggle to attain traditional bank loans? A few key reasons are:

 

Bad credit – Banks review applicants’ personal credit scores, and if their score doesn’t make the cut (often around 680) chances are they’ll fail to get a loan.

 

Insufficient collateral – The amount of collateral offered may not be enough to back the amount of money applicants need to borrow.

 

Cash flow problems – Even with sufficient cash flow, very young businesses may not have enough of a track record for banks to feel comfortable granting loans.

 

Sounds dismal, doesn’t it? It’s not, really. Instead of crossing the pond, you may just need to go around it. Alternative funding methods like cash advances are becoming more popular among business owners, and for good reasons. Securing working capital this way often means forgoing credit checks, leaving collateral requirements by the wayside, and considering current cash flow sufficient as long as the incoming monies are steady.

 

Plenty of business owners have been successful with this new strategy to secure capital.

Benjamin Bohen of Waterfront Wines & Spirits in Brooklyn, New York says, “With the money we were able to invest in the business, we’re trending towards 25% growth this year.” And in the southern region of the country, Sharon Herd of Tropic Tan in Kennesaw, Georgia, adds, “Since closing my loan, I’ve already seen more than 100 new customers walk through my door.”

 

Because alternative lenders are equipped to meet the needs of small business owners, their programs are becoming increasingly popular with those struggling to secure traditional funding. And the trend is only growing—for businesses that need shorter-term loans and enough funding to meet specific needs, looking into a cash advance program is definitely worthwhile.

 

 

Visit www.CornerstoneCapitalAdvance.com, or call 309.820.0076 today to see how an extra $5k, $30k, or more could jumpstart your business this week!

 

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