How to get the best out of your short-term financing goals

Having worked the rat race of the corporate culture has left you depleted and you’d rather do your own thing. You have decided its time now that you devise up that business plan and get to it. Naturally so, the first hurdle here would be getting your self-funded or getting some business capital.

Regardless, the best of plans by entrepreneurs never see the light of day as progress is thwarted by a lack of venture capital. So, it’s integral to go about it in a rational way and firstly determine how much working capital funding do you exactly need.

Now start with making an estimate of your costs, that includes all things like the various departments in the company’s structure, physical office cost, business licenses, insurance policies, equipment, supplies and a whole myriad of things. Only once that you are done with these things and have a rough estimate can you get down to cost cutting? Make sure you have put pen to paper and jotted down all the necessities and routine supplies needed to streamline your business. You need to be able to justify all this expenditure when going for business capital loans.

Working Capital Loans are considered as short-term funding programs. They help you cater to your immediate needs. However, with Capital for Business, there is no need for collateral and there is minimum paperwork. Nearly every industry is acceptive of these, and you can easily request amounts between $5,000 to $1,000,000 depending on your monthly sales volume.

Now next to Working Capital Loans, other alternates include getting what’s called an angel investor, however, they are hard to come by and end up owning a considerable portion of your company. Crowdfunding too is a great idea and you can check out the many platforms online, where you just upload your proposal and business plan, and interested parties fund you for it. Talk about fast business loans. Going for factoring too is a great option, but if you are considering short term financing solutions, Working Capital Funding could be it for you.

How Merchant Cash Advances can streamline your operations

So, let’s paint an ideal picture here, you are a business and your sales are mostly on debit or credit cards. Now, a merchant cash advance – not technically being a loan – is simply an amount of cash given to you by a financing company in exchange for a certain percentage off your sales, in addition to a simple fee. It is a hassle-free way for short term financing for no collateral, even if you have a bad credit score.

On one hand, MCAs are great when you require a fast-small business loan, suitable for a multitude of business purposes with fairly easy approval rates especially when your credit score is not so good. But on the other, Merchant Cash Advances do come with a higher fee, less freedom to change merchants and a regular charge on your credit card receipts.

Ergo, if you have a limited business history, bad credit score and/or most your sales are transacted on credit/debit cards, Merchant Cash Advance is a fitting solution to your financial short comings.

Innovative alternative lending to traditional small business loans, Capital for Business provides you easy financial fixes to realize your dreams. Our Merchant Cash Advance funding option gives you the flexibility to work around your business’ organic cash flow. If you have been processing credit cards for a minimum of 60 days and process at least $5,000 in credit card sales per month, you can easily utilize our Merchant Cash Advance service and have access to business capital which is just as fast as it is conveniently efficient.

The Science behind Business Line of Credit

Business Lines of credit and the availability of money itself can be instrumental in those crunch times when a business is cash strapped and has to pay vendors, and employees. This may be a result of overtrading, or a few hard quarters when a business is under pressure from economic cycles. Many businesses may also have low cash cover because of their recent entry into the industry and need money to expand. This is relatively true for new small businesses, who have just registered their businesses.

A business line of credit can be in two forms, secured and unsecured.

• Secure lines of credit are usually revolving, can be in millions and billions of dollars, and require collateral to be posted in return for cash. This is usually reserved for more established multinational businesses who need cash during recessions or mergers.
• Unsecured credit lines are primarily aimed at small businesses. They do not require any collateral to be posted, are relatively cheap to borrow due to their low interest rates, and may get a grace period before monthly repayment or interest payments start. They are different from overdrafts, and small business loans.

When to Seek Line of Credit

It is preferred that the unsecured line of credit is sought when a small business thinks their working capital requirements will fall short to repay short term debts and expense. Because unsecured lines of credit are not bound to be used for a specific task, they can be used for a multitude of purposes. Still, a business should have at least three months of cash cover needed to run operations if the line of credit was not provided. Banks and credit unions increasingly look for financial metrics that use current ratio as a basis for lending short term cash. Additionally, after an unsecured line of credit is provided, after a grace period of 30 days, monthly payments will become due and if a business is not able to earn back the investment, they might become insolvent or bankrupt.

When Not to Seek Line of Credit

It is recommended that a small business refrains from lines of credit if they have enough cash to finance their needs. Seeking unsecured lines of credit as a means to increase cash cover without a sustained need may put unnecessary strain on the short term borrowings. A business will be required to use the finances and pay interest payment irrespective of them not using it. Small business owners who have a vendor to pay in the future, or want to spend on revenue or capital expenditures, should time their credit lines in accordance with the payment structure needed to finance these expenses. Seeking unnecessary funds without purpose may degrade interest cover in the long run. There is no denial that seeking an unsecured business line of credit and balancing the financial structure of a business is an art. A delicate business needs to be established to provide businesses with ample cash to operate effectively and translate them into tangible revenues.