BlogGrrl

The concept that alternatives readily available for small business owners come down to choices between traditional financing, alternative financing , or venture capital is the wrong way to examine financing small business initiatives. Even if the business relies entirely on debt financing to feed its capital demands, business owners should examine the financing options readily available to them as a 'portfolio' of investment possibilities.

One size does not fit all-- two or three sizes don't fit all either.




Most of the Main Street businesses we refer to here will fuel growth and fund working capital with borrowed money or cash flow. The good thing is, there are a ton of options accessible. Sadly, many small business owners consider the possibilities as an either/or choice to be made. I think it makes good sense to look at financing solutions that are appropriate to different scenarios and how they might work together to help small business owners get the capital they need.

For example, a good relationship with a community banker is very important to the long-term health of a small business. That's not to say an SBA loan or some other traditional loan is the most ideal and only answer to the financing requirements of the local dry cleaner or restaurant. Yes, interest rates are lower on a traditional fixed-term loan, but how fast a small business owner can get capital could be problematic with a term loan that takes weeks or months to fund if the small business owner needs to have the cash immediately.

And, the big hurdle is that many Main Street business owners don't have the credit, time in business, or revenues to comply with traditional loan requirements. This is particularly painful for early or idea-phase startups. No history, no product, and no revenues typically mean no loan.

For a business owner who doesn't fit the underwriting guidelines of a traditional lender, invoice factoring company products can help establish credit while enabling the borrower to fill his or her short-term capital demands. Invoice Factoring Companies have less rigid lending guidelines than does the local bank-- but that comes with higher interest rates. As a result of greater interest rates, small business owners should review repayment terms of a few months instead of a couple of years. Although factoring company financing might be a powerful resource when used the right way, it can also be very costly if misused.

Many small business owners who do get low-interest term loans still go to receivable factoring techniques as a short-term bridge to a traditional term loan while they anticipate a traditional loan to be funded. If the business owner is attempting to take advantage of an opportunity and can't an SBA or other traditional loan to close, the additional interest they pay over the two or three months they wait is well worth almost immediate availability to capital offered by invoice factoring .




When taking a look at the numerous funding choices readily available for small business owners, a few of the questions that should be asked include:.
1. What is the range of terms available?
2. Are there any upfront costs?
3. What is the minimum credit score needed in order to get the loan?
4. What exactly are the underwriting guidelines in addition to my credit score?
5. Just how quickly can the loan be funded?
6. Will I need to have the cash now, or can I sit tight?
7. Will I have the ability to make regular and timely payments?
A small business owner should manage his or her credit score like a valuable asset. Frequently short-term financial choices have long-term outcomes. For instance; a business owner that had a very good business idea but no collateral, no income, and no credit was frustrated and upset that lenders weren't fascinated by his idea and weren't gushing themselves to give him money. He wasn't considering bootstrapping because it would cause him to scale back his growth plans. It wasn't what he wished to hear, but bootstrapping his idea was the only real option available and the approach I suggested. Many incredibly successful companies were set up by an entrepreneur who bootstrapped his way to the top.

Just what's the most effective approach for your Main Street business? There are certainly more than just one and even a combo of many alternatives-- once size does not fit all.