Thinking About Financing A New Business?

Financing a new business is a tough call to make, regardless of what the economy is doing. In a down market, however, the stakes are even higher. A poor economy reduces your options when it comes to getting your business off the ground and keeping it there. Some would-be entrepreneurs put off starting a small business altogether.

The number one challenge facing would-be entrepreneurs is small business financing. If you don’t have investors, and your personal savings isn’t large enough to front the cost of startup and to cover your own expenses while you build your business income, starting a business may not be in the cards.

There are several options for financing, but loans can be difficult to get if your credit is not pristine and your business plan has some holes in it. The Small Business Administration will back loans for both capital equipment and other startup costs. The loans are administered through private lenders and you’ll need to meet the lending standards in place at the time you apply.

Legislation under consideration in Congress right now would enable the Small Business Administration to lend directly to borrowers if no private lender will accept the loan application. In addition, the legislation would permit the SBA to increase the amount of its guarantee from 85% to 95%. Even with these incentives, private lenders who are risk-averse are unlikely to part with the capital an applicant may ask for.

You may also attempt to secure a personal loan from the bank or another private lending source. If you’re applying to a private lender, this route will be difficult to manage if your credit isn’t perfect. Personal lending volumes have dropped significantly, since many consumers aren’t interested in taking on more personal debt and few lenders are interested in writing new loans.

For some new companies, a business cash advance is a likely option. Like a credit card cash advance, a business cash advance is relatively easy to get. Business cash advances are usually based on the credit card sales of a business. Unlike a loan, there are few papers to file, and most businesses that request a business cash advance are approved.

To apply for a business cash advance, the business must be located in the United States, must accept Visa or MasterCard and must have credit card transaction volumes of at least $2,500 per month. Using a business cash advance, the lender provides payment up-front for future credit card transactions. As the transactions are made, the lender is repaid. Repayment includes a small percentage of the borrower’s daily credit card receipts.

The business cash advance is an unsecured loan. There is no collateral to put up, and the business simply conducts itself as it would under ordinary circumstances. Repayment occurs as the credit card transactions are processed, so there’s no monthly loan payment to make. Businesses can receive advances of up to 1.5 times their monthly credit card sales volumes, so you can get the emergency cash you need when you need it. There are no restrictions on what the cash advances can be used for, and advances can usually be arranged in a week or less.

If you would like more information about how a business cash advance can work in your favor, contact Rapid Capital Funding today.

Photo Credit: Dani Simmonds

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