How to Improve Cash Flow with Asset-Based Lending
Using credit products for cash flow management is not a new strategy. In fact, it’s one of the basic survival techniques taught to most would-be managers who decide to pursue a degree in business. What is less discussed is the range of options available to you, because sometimes you do not have an open asset with equity that can secure a credit line or the operating history for a working capital loan. In those cases, asset-based lending is often the most accessible option. In many other cases, it just turns out to be the most suitable for this particular task.
Asset-Based Loans and Credit Options
There are a lot of ways to finance your business assets individually if you need capital. For example, invoice financing will unlock the value in your invoices so you can meet today’s cash flow needs, for a small fee. There are also inventory loans, advances against a merchant account, and even loans based on the equity in your equipment when assessed as a whole. If you are looking for a solution that gives you more capital than any one asset could, that is when you want to look for a wider asset-based lending program.
These programs exist for both one-time loans and revolving credit accounts, and they differ from other asset-backed products by using multiple assets together to help you get as much capital as you need. It’s worth remembering that credit lines do take ongoing administrative oversight because they flex with the value of your assets and shrink if that value is reduced through inventory sales, invoice repayment, or any other method.
Improving Cash Flow with Routine Financing
It is pretty obvious how a one-time cash infusion can improve cash flow now, but how do you improve it permanently if you’re using one-time asset-based loans and not credit lines? The answer is by refinancing your assets on a regular basis. As you acquire new inventory or rack up new invoices, you can finance them for more working capital. Similarly, if you are using equipment or other assets for collateral, you can refinance them after the loan is paid off.
This gives you options like financing just the assets you need to put up at the moment to get the capital you require, saving the rest for your next planned payday. However you choose to approach it, the flexibility and customizability of asset-based lending provide you with a path to making your cash influxes predictable, which is the key to always having the money you need to meet your commitments if your business is profitable.
If you are the owner of a small business, you are probably familiar with the constant need for cash. Indeed, even for established small businesses, downturns can crop up quickly and unexpectedly, and margins may frequently be tight.
While building a vibrant customer base is essential to creating a business that can be healthy in the long-term, the use of loans is frequently necessary, both at the outset of a new business establishment, and over its lifespan. There is nothing wrong with this — and in fact, borrowing money contains many helpful advantages.
With this in mind, below are three types of loans that may come in handy for your small business.
1. Lines of Credit
Lines of credit can be enormously helpful as you work to build your business. A line of credit essentially gives you access to credit up to a certain limit, which “recharges” as you pay it back. You do not need to draw on it — so it is there when you want it, without pressure to spend it.
Lines of credit can be helpful in all sorts of cases: to cover payroll, order more supplies quickly, pay for unexpected repairs, or many other uses. Provided you use and repay it regularly, you will also help build your business credit.
2. SBA Loans
SBA loans are a type of loan backed by the Small Business Administration, designed to help smaller-scale entrepreneurs. There are many types of SBA loans, ranging from 7(a) loans, to CDC/504 loans, to microloans, to lines of credit, and even disaster loans.
The upside of an SBA loan is that it can provide a solid amount of capital, at a reasonable rate. With an SBA loan, you can be sure you have a stable, long-term loan. It is worth noting, however, that they typically require extensive documentation, and approval can take at least several months.
3. Private Loans
While not everyone has access to private loans, they are worth keeping in mind for small business purposes. A private loan is generally lent by a friend, relative, or wealthy individual or institution — outside of a typical bank loan. The benefit is that rates can be personally negotiated, and so depending on the relationship, these may be uniquely affordable.
These are only three ways to raise cash via loans at a small business. By taking the time to research options, and consulting with a financial professional, you can determine the best funding options for your needs.
Receivables factoring is one method companies can use to gather funding quickly. This option comes with many benefits and advantages for those companies and organizations that choose to utilize it. Here are four benefits receivables factoring offers.
1. You Can Generate Growth Quickly
Factoring your receivables is an excellent way to generate growth, particularly for smaller businesses. When you’re running a small business, it can be difficult to get the immediate funds necessary to back short-term initiatives and growth opportunities, but when you can factor your receivables, you’re better able to access this type of funding.
2. Larger Cash Advances Are Available
Factoring can allow you to access larger amounts of cash sooner than you can when you take out a loan. This is due to traditional lending institutions only allowing small portions of your invoices to be paid in advance. By contrast, a factoring company may allow you to use the loan almost immediately, with the factoring company able to pay up to eighty percent of your invoice’s total cost to be paid directly.
3. Collateral Isn’t Required
A great benefit of factoring is that you aren’t required to put down collateral in order to offset the cost of your loan. The only thing you’re required to do when entering into this type of loan agreement is to sign your unpaid invoices over to the collections company you choose to work with. No additional or alternative types of assurances are required.
4. You Can Work with Professional Collections Companies
Working with professional companies and teams is an advantage no matter what you’re working with them for, and this is no different when it comes to funding. These companies focus on the factoring job and everything that it involves, so you don’t have to worry about your funding needs falling to the wayside in favor of other operations. These companies will ensure you’re able to contact them with any questions, concerns, or requests. They’ll also ensure you don’t have to worry about any factoring operations or applications. These companies will take care of all of those processes for you so you can focus on other work.
There are many benefits to this type of funding generation. The benefits you reap may differ depending on your reasons for using this method and how you go about factoring your receivables. Always do your research before committing to this method, so you know whether it’s the best option for you.
There are different rules of etiquette for different situations and settings. Each set of rules has a different level of formality. One of the more formal etiquette settings is a business and professional situation. Here are four business etiquette tips.
1. Utilize Professional Contact Information
When you’re involved in any type of virtual business situation, you should understand and practice good virtual business etiquette. Make sure all of the contact information you provide with your conversation or negotiation partner is as professional as possible. Utilize a professional email address and carefully determine whether you need to share social media handles with your partner. Make sure your outgoing voicemail message is clean, straightforward, and professional.
2. Incorporate Professional Salutations
Whenever you partake in business communications, you need to make sure your business etiquette extends to your writing, particularly your salutations. You need to be as professional as possible when addressing recipients, particularly when you first contact them. Always begin and end your communications with appropriate salutations, such as Hello, Dear, Sincerely and Thank you. Sign communications with your full name and your job title, if needed. Avoid addressing people by nicknames unless they request that you do so.
3. Exit Politely
Sometimes, people can have trouble leaving conversations, particularly those in professional settings, as it may seem impolite to do so. To avoid this, think about polite but decisive ways to exit these interactions. Prepare a set of exit lines you can use in various situations, such as that you’ll let your conversation partner know if you have any questions for him or her.
4. Know When to Initiate Greetings
When you’re beginning an in-person business interaction, you need to know when it’s appropriate for you to initiate the greeting. If you’re higher in rank or if you scheduled the meeting, you should be the first person to extend your hand for a shake. Everyone involved in a business greeting should stand and introduce themselves by their full names. If you’re an intermediary for someone else, make sure you’re the one who introduces him or her to the other participants in the conversation.
It’s important to practice good etiquette no matter the situation you find yourself in. Good etiquette can make or break an interaction, particularly when it comes to business and transactions. This means it can be the difference between getting hired and turned away or between making a sale and failing to do so.
Getting turned down for a loan can be a blow for anyone, especially if you’re hoping to buy a house, purchase a car, or just do some home renovations. But now you want to apply for a loan, and the bank declined your application because your credit score is too low.
Perhaps you went through a bit of a bad patch, missed some payments, or let your balances get too high. Now, to get that loan you want, you’ll have to take some serious steps to repair your credit. Fortunately, you can add points to your score quickly and easily by following a few steps.
Pay Your Bills on Time
Although paying your bills on time should go without saying, it bears repeating. Paying your credit card bills on time each month will do a lot to boost your credit score. Of course, if your score is particularly low, paying bills on time alone won’t repair credit. But prompt payments will be a significant first step.
Increase Your Limit
Part of what determines your eligibility for a loan is your debt-to-income ratio, which is the amount of debt you have compared to your available credit. It might sound counterintuitive, but a higher credit limit can actually repair credit by decreasing your credit utilization. Just remember that taking on more debt will increase your debt-to-income ratio, so you should only increase your limit if you know you won’t add more debt.
Don’t Pay the Minimum Payment
If you only make the minimum payment on a card that has a large balance, you’re likely only paying for the interest you’ve been accruing. You should pay double the minimum amount, at least, to ensure a large portion of that payment goes toward the principal balance.
Become Someone’s Authorized User
Another way to increase your credit score is by becoming an authorized user on the account of someone who has a good credit history. A parent, a spouse, or other trusted friend or relative would all be great options.
Monitor Your Credit
One thing that can damage your credit is identity theft if it goes unreported. So carefully monitor your credit cards each month and dispute any balances that look unfamiliar. Monitoring your account will also ensure all payments go through as intended, which can help you avoid late payment fees or unnecessary interest.
A good credit score is essential for securing any type of loan or housing. There are many ways you can work to repair your credit, but you have to be disciplined in doing so. Follow the steps outlined here, and you’ll be sure to boost your credit in no time.
If a person has good health insurance, then the insurance should be able to cover most of their medical expenses. This is good news for both the individual and the hospital. However, insurance companies can often take a long time to make payments in full. By using a medical receivable factoring company, hospitals can receive some of the payments earlier, which can make a big difference when it comes to business finances. Not every hospital and clinic qualifies for this service, but yours might if you meet any of the following suggested requirements.
Low Cash Flow
Hospitals that are in financial need are the ones that are most likely to qualify for medical factoring. Since hospitals and other medical clinics do not usually have an off-season, it shows considerate financial need if the business has consistent low cash flow. Not getting insurance payments fast enough could be one of the main causes of this problem.
Looking into medical factoring when a hospital has low cash flow is a great idea because businesses with low cash flow are not likely to be approved for regular business loans. This can provide a great source of income. Unlike a loan, payments do not need to be paid back, as they have been earned, not borrowed.
While “tax problems” might sound vague, that’s okay. Any one of various tax problems can qualify a hospital for medical receivable factoring. The most common accepted tax problems include paying back taxes, and not avoiding paying taxes through illegal means. Just like improving cash flow, using factoring can help to give businesses a boost of cash that they can use to pay off back taxes. This extra money is sure to help with most other tax problems a business may have
During periods of business restructuring, a business’s finances (along with everything else to have to do with the business) are bound to go through some changes. This is often expensive, which even a business with high cash flow and no tax problems may have difficulty with. Using medical factoring, a business can get the cash it needs faster, which can help to pay for the restructuring– or even to keep the business’s cash levels normal until everything else goes back to normal.
Medical receivable factoring is much better than taking out a loan; there’s nothing to pay back! Hospitals would do well to take advantage of these services when they can.
You start your business on a sound footing by separating business and personal expenses, which starts to build a business credit history apart from your consumer credit score. Though distinct, the two credit profiles can still affect each other. See how both ratings are intertwined and how to protect your scores.
How Business Credit Influences Personal Credit
Your company’s credit history begins when you set your business up as an entity and create financial accounts for the firm. The age of your credit, payment history, utilization, and recent inquiries affect your score, which falls between 1 to 100.
Business scores are public info, all the more reason to work diligently to keep a high rating. Business credit cards decide whether to report your activity only to business bureaus or also to alert consumer credit bureaus. The additional account on your personal credit file affects the total utilization ratio, and a high balance could hurt your score. Likewise, on-time payments and low utilization can boost your personal score.
When applying for a business card, the lender pulls your consumer file for approval, and a hard pull temporarily lowers your personal credit score. Because you must give a personal guarantee to pay off debt, lenders need to ascertain your level of responsibility, and the best way to do so is by checking your personal credit. Only make credit requests as necessary to avoid unnecessary dings to your rating.
How Personal Credit Influences Business Credit
If lenders look at your personal credit and see your score isn’t high, you might not be approved for a loan or card. Traditional lenders prefer to see excellent scores (above 720) or at least good scores (above 660). Financial fraud kills almost any conventional financing option. It is nearly impossible to get a traditional business loan if you have a felony, a bankruptcy within the last six months, or unpaid tax liens. Vigilantly attend to personal credit so you can secure business loans when needed.
How To Find Financing If You Have Poor Credit
When conventional lenders turn you away, look to alternative lending to secure financing. Alternative lenders check for cash flow and a good business plan for loan approval. Alternative lenders rarely pull credit history and are more concerned with the state of your balance sheets, tax returns, debt ratios, and profit and loss statements.
Business and personal credit are linked to give financial institutions a well-rounded view of your reliability. By taking care of both profiles, you can open up your options for funding.
Do you want to start a business? If so, you may have thought about SBA loans. Even though a lot of people start by funding their startup business with their personal savings, this is only going to go so far. Eventually, you will need to generate another source of capital, particularly if your business is not generating a lot of revenue just yet. How can you choose the right loan to meet the needs of your company?
Think About the Interest Rate
First, you need to think about the interest rate attached to the loan. The lower the interest rate, the better the loan. There are a number of factors that will influence your interest rate. These include your overall credit score, the size of your business, and the current market. You should always talk to multiple lenders to try to figure out how you can get the lowest interest rate possible.
Consider the Repayment Period
Next, you need to think about the repayment period. Along with the interest rate, this will be the biggest driving factor in the size of your monthly payment. How long do you think it will take you to generate enough money to pay back the loan? You need to factor this into your decision. A lot of lenders will be willing to customize your repayment period to meet your needs, but this could have an impact on your interest rate. Think about this when looking at SBA loans.
Think About How You Will Use the Loan
Finally, you also need to think about how you will use the loan. The lender will probably ask you why you are applying for a business loan. Maybe you need to purchase more equipment. Perhaps you need to hire more employees. Maybe you need to do more research and development. Make sure you have a clear plan of action for that long when you apply for it. This can maximize your chances of getting approved.
Find the Right Loan for Your Business
These are just a few of the most important factors you need to keep in mind if you are trying to find the right loan for your business. There are plenty of lenders available, and you may have thought about SBA loans. Make sure you understand just how much money you need before you apply for a loan. Then, take a look at the interest rate and the repayment period before you sign.