Category: Factoring Invoices

Business Loans Offered by the Government

You need to have enough capital before you can start a business and it’s never wise to touch your life savings or even the money you have set aside for the rainy days. This is so that no matter what happens to your business, your personal life would not be in jeopardy.

Business loans from the government are among the available options for people looking for capital. Many startup businesses consider these kinds of loans more suitable for them because traditional lenders such as banks are often reluctant to grant loans to those without any financial history or a stellar credit report. Although one of the requirements of business loans the government is offering is a good credit report, they are not as stringent as the private sector and they also offer better interest rates and terms.

Who Grants Government Business Loans?

There is a government body known as the Small Business Administration (SBA) and they are the ones who partner with banks and credit unions, backing up loans to lower the lender’s risk and thereby boosting the business owner or entrepreneur’s credibility. If the borrower defaults on the loan, then the SBA will pay off the balance. No risk to the bank.

You can apply for a business loan for the following purposes:

  • Establishing a line of credit
  • Refinancing current debts
  • Purchasing new machinery, equipment, supplies, and others
  • Financing leasehold improvements
  • Financing commercial mortgage

Types of SBA Government Loans

The Small Business Administration has several lending programs and some of its most popular types of loans include:

  1. 504 Fixed Asset Program

This type of government business loan features long term financing and fixed rates. It is more suited for businesses that will directly benefit the community by offering much needed services or by providing more jobs. The maximum loan amount is $5 million.

  1. 7(a) Loan Guarantee Program

This loan is geared towards helping small businesses get started or grow. The maximum amount you can loan under this program is $5 million.

  1. Disaster Assistance Loan Program

This program aims to provide renters or homeowners with a long term, low interest loan to help them restore their property after being struck by a disaster.

  1. MicroLoan Program

This is generally a short term loan and is often used to purchase supplies, equipment, furniture and so on. The maximum loan amount is $50,000.

 

Preparing Your Loan Application

 

Each program under the SBA has its own application process and set of eligibility criteria. Generally speaking however, you need to have a decent credit report and should have invested a reasonable amount of money into your business. You should also have a sound business plan, and you’ll need to submit your income tax returns for the last 3 years. Some legal documents such as your articles of incorporation, license and contracts will also be required.

 

Business loans from the government are without a doubt very helpful because they give you excellent terms and low interest rates. But they are not for everyone. If you don’t meet any of the requirements above, or if you need a loan fast, then you have to consider other non-traditional options such as invoice factoring. Invoice factoring is not technically a loan, but a cash advance against your invoices. The interest rates are higher than regular business loans but they are easier to attain and also have quicker approval times.

Should You Rely on Your Local Bank for Real Estate Commercial Loans?

If you own or manage a real estate company, you sometimes find yourself at the mercy of your local bank when you need a loan. The problem with local banks is that they may not have much experience with real estate companies, and that’s supposing that they are willing to provide you with the funds you need for your business. But with the assistance of a loan consultant such as 1st Commercial Lending, you may be able to get the funding you need – fast.

Here are some of the advantages of dealing with an institution such as 1st Commercial Lending:

  • You get access to more lenders. Shopping for lenders is a necessary step if you want to get the best terms for your loan. The problem is that it is so tedious to do, and so often you’re limited to your local banks.

But reputable firms such as 1st Commercial Lending may represent more than 300 commercial lenders which can offer loans to firms all over the country.

  • Dealing with an industry specialist is much more convenient. A specialist in commercial real estate loans already understands the intricacies of real estate deals and the needs of real estate companies. So whether you need a loan for commercial real estate, business acquisition, expansion, a startup, to boost your working capital, to fund your equipment purchase, or to consolidate your debt, you’ll be guided every step of the way.
  • You can get different types of loans for different types of commercial property. These properties may be apartments, hotels, motels, office buildings, retail buildings, warehouses, industrial buildings, or self-storage structures. The loans can come from banks or private lenders or they can be backed by the SBA. Loan amounts can range from half a million dollars to $20 million.
  • The application process is very quick and easy. You just need to fill out a short application form indicating the type of property, the purpose of the loan, the amount of the loan, the estimated property value, and where the property is located. Then you furnish your data including your contact info.

In 24 hours a specialist will discuss your options with you and you choose which option is the best for your specific situation.

Typically, a commercial real estate loan can be closed in 45 or 60 days. But there is a Fast Track option that accelerates the process so it only takes 30 days.

  • You don’t even need to use up all of your savings. The SBA loan programs can cover up to 90% financing. In some cases, they even offer a working capital loan to help out on the transition.

They can also help you buy an existing business or start a new one.

So should you rely on your local bank for real estate commercial loans? The short and simple answer is no. You’re better off relying on a loan consultant such as 1st Commercial Lending instead. At the very least, you get more financing options so you can choose the best terms for your loan.

 

The Pros and Cons of Assets Based Lending

Wouldn’t it be amazing if you can borrow money simply on your word that you will pay it back? Sadly, that’s not how it works. Far from it. Many banks have very rigid lending requirements in place. Recent news articles report that there’s a surge in approval rates at big banks, but actually as of March 2015 big banks only approve 21.6% of small business loan applications. So if you want to increase your chances of getting a loan, you may have to resort to assets based lending.

What is Assets Based Lending?

Most of the time, assets based lending involves risking your future earnings to get access to capital immediately. The typical assets lenders accept are your accounts receivables and your inventory. These assets represent money in the future, and your lenders are willing to give you an advance against it now.

Other lenders may also accept equipment and real estate as collateral for a loan. The money you can borrow will depend on the valuation of the equipment and/or real estate. Of course, these assets must be encumbered and free to use as collateral. They should not be embroiled in any legal or accounting issues and they’re not already used as collateral.

Typically, you can borrow as much as 80% of the value of the accounts receivable. You may also borrow half the value of the inventory, equipment, and real estate.

Getting approval for assets based lending is also not just a matter of having the appropriate assets. You’ll still need to show documentation that your business has good financial statements and reporting systems, and that your inventory is very easy to sell. You also need to demonstrate that your customers have a good history of paying fully and on time.

Advantages of Assets Based Lending

This form of financing can be very helpful if your business is undercapitalized, in the process of a turnaround, or on the way to rapid growth. That infusion of cash you get may be the final tool you need to set your business into a stable and profitable future.

These loans can also be used to finance acquisitions for growth. Another suitable candidate is a company with seasonal needs and industry cycles which often result in cash flow difficulties. The loan can help them get the cash flow problem straightened out.

Drawbacks of Asset Based Lending

First of all, the chances of securing a loan or a line of credit is only as good as the quality of the assets you possess. The lenders often only approve of accounts receivable as collateral when your customers have stellar credit and they pay in less than 60 days.

The interest rate for assets based lending may also be higher than traditional bank loans, and some lenders may even require you to personally guarantee a loan. Some lenders also insist that your customers send their payments directly to them, and the lender will only pass on the payment to you after they have taken out the advance plus interest. Nevertheless, this form of financing gives you another option besides traditional bank loans.

Special Considerations for Small Business Equipment Loans

Small business equipment loans are loans that will enable you to buy equipment. As a small business owner, your equipment may be an integral part of your company’s operations.

There are basically three types of equipment:

  1. One type of equipment refers to the “usual stuff” that most businesses need. This includes furniture, computers, printers, and other common office equipment.
  2. The next type of equipment defines your business or is a mandatory tool or appliance which you can’t operate without. For example, if you’re planning to run a taxi service then there’s no way you can continue without a fleet of vehicles.
  3. Finally, there’s a type of equipment that functions as a way of differentiating your company from your competitors. For example, you can tout your hi-tech medical equipment in your clinic, such as the latest laser devices in your dermatology clinic. This equipment makes you unique and better than the other clinics.

When Do You Need to Buy Equipment?

Even though you may have had the capital to buy the equipment you needed when you first put up your business, at some point you may have to buy or lease new equipment. It may be because your original equipment broke down or malfunctioned and thus needs a replacement. Your original equipment may also need to be replaced because it has become obsolete and newer models are cheaper or perform better. You may also decide to add to your equipment inventory to extend the range of your services or improve your operations.

When you’re getting new equipment, you don’t really need to spend your working capital, which may already be earmarked for other purposes. You can get small business equipment loans instead.

Leasing or Buying Equipment

You have the option of either leasing or buying your equipment, and the particular situation will decide which option is more suitable.

Leasing is a better option if you can’t get the loan you need, or if the loan application process is too bothersome or time-consuming. Leasing is a less expensive option in the short term, and it also gives you the opportunity to confirm whether or not its use is actually helpful for your business. It’s also better to lease the equipment when you need to constantly update your equipment.

On the other hand, buying equipment has its advantages too. While it is more expensive at first, in the long run the price of ownership tends to be less than leasing the equipment. In addition, it may even be possible for the cost of the equipment to be tax deductible.

Buying is also much more appropriate when the equipment will be used for a long time. For example, restaurants should buy refrigerators and freezers, and farmers should buy basic farming equipment. These things don’t really improve all that much over the years.

For small business equipment loans, your best bet is a lending firm that specifically offers this type of funding. You’ll probably need to have good credit, a solid business plan, and prepared personal and business financial statements to qualify for a loan.

Need Working Capital? Call 1-888-382-3766 or visit our main site for an instant quote by clicking here

 

 

The Benefits of Medical Business Factoring Loans

Need Working Capital? Call 1-888-382-3766 or visit our main site for an instant quote by clicking here

The term “medical business factoring loans” is actually a misnomer. Factoring isn’t technically a loan at all. It involves the sale of your invoices to the factor. You get the typical cash advance that’s 80% of the value of the invoice, and then the rest of the payment is sent to you once the customer pays in full and the factor gets its fees.

Medical factoring is very different from bank loans, and in some ways, it’s better than bank loans.

  1. Factoring can be availed quickly. You only need a few days for your application to be evaluated and decided upon, unlike bank loans which can take weeks. And as a bonus, medical factoring has a higher approval rating than a bank loan. Banks reject the majority of loan applications from small businesses.
  2. You get your cash advance fast. Once you give the factor your invoice, it may only take as little as 48 hours for the cash advance to show up in your bank account. This can be a good thing for your business, because of the way insurance companies and other customers pay. You can boost your working capital, so that you can meet payroll, pay for utilities, and make payments for the various expensive medical equipment you’re using.
  3. Medical factoring, with the right factor, can be very flexible. Some factors may require you to finance in bulk. But other factors may allow you to choose which invoices to finance. This means you can control just how much financing to pay for, instead of getting advances when your working capital levels are doing great.
  4. You don’t have to collect payments from insurance companies. Dealing with insurance companies can be infuriating, to say the least, and you certainly don’t need the added stress. Your work in the health care industry is stressful enough as it is. It’s a well-known fact that getting insurance companies to pay is like getting water from stone.

Since the factor takes care of the payment collection and the invoice tracking, you’re freed from this difficult task. You also don’t have to hire personnel to do this for you, since it’s already part of the factor’s services. The factor can handle Medicare and Medicaid payments as well.

Conclusion

There’s a widespread anger in the health care industry against private insurers, and clinics and hospitals are closing down at an alarming rate. The lack of funding and the intransigence of insurance companies have certainly contributed to the “malaise” in the healthcare industry.

Medical factoring is a way to help revive the health care industry. It offers timely financing in a time when banks are no longer as generous in granting loans to small businesses such as pharmacies and medical clinics. And doctors and nurses can concentrate on healing the sick and the injured, while the factor deals with insurance companies in an efficient manner. With medical business factoring loans, everyone can get better.

The Advantages of Small Business Factoring Invoice

A lot of small business owners immediately think about their banks when they need additional funding. But banks are – at best – a toss-coin proposition, because they’re just as likely to reject a loan application as approve of it. And that’s why small business factoring invoice funding has become so popular in recent years.

Banks Are Not All Too Willing

According to the most recent news released last February 15, 2015, big banks only approved 21.3 percent of small business loan applications in January 2015. And that small approval rating is actually an improvement from the previous month, which was only 21.1 percent.

Small banks are more generous, but even they tend to reject the loan applications of many small businesses. According the latest data, in January 2015 small banks approved only 49.6 percent of small business loan applications, and that’s down from the 49.7 percent approval rating of the previous month.

How Factors are Helping Small Business

Factors tend to have higher approval ratings because they don’t look at your credit history or collateral. What’s more important to them is the credit of your customers. So if you have reliable customers who tend to pay in 30 or 60 days, you can get the factoring funding you need. And since it doesn’t require a lot of paperwork, you will know the status of your application in just a few days, instead of having to wait weeks.

Fast Working Capital through Factoring

The emphasis on time is part of the benefits of factoring. You get about 80% of the value of the small business factoring invoice right away, instead of having to wait 30 or more days to get paid. When you have immediate needs for payroll, utilities, or supplies, this fast turnaround allows you more breathing room.

With factoring, the money allows you to stay afloat or even fuel your growth. You don’t have to worry about having enough money to cover an order, because the cash advance you get can cover your needs sufficiently.

Extra Services

Factors also handle your collection for you. They’re the ones that your customers pay directly. When your customer pays in full, the rest of the money is forwarded to you after the factor has deducted its fees.

While this may be of some concern when your customers need direct communications with you, for the most part you’re alright as long as you get a factor with a long history in your industry and a reputation for courteous and professional collection process. An experienced factor will know the best way to notify your customers about payments, and they can be very polite so your business relationships aren’t affected.

Also, since factors investigate the credit of your customers, you can use them to screen out potential risks among your new customers. If your factor doesn’t think your new customer will pay in full and on time, you can avoid them as they may be too much of a bother for your business. With small business factoring invoice funding, you can concentrate on your business and have enough working capital to boot.

Need Working Capital? Call 1-888-382-3766 or visit our main site for an instant quote by clicking here

6 Indicators of a Top Factoring Company

A top factoring company can be of immeasurable assistance to a small business, and many businesses in fact get their financing from these kinds of lenders than from banks.

Factoring in itself is a really viable option. You simply exchange invoices for advance payouts. For example, the factor gives you an 80% advance for the invoice, which you can then use to pay suppliers, payroll, and utilities. You get the rest of the payment when the customer pays, and the factor deducts its fees from the amount.

But the quality of the factoring company is crucial for this alternative to work. That said, here are some signs that the factor you are dealing with is a top factoring company:

  1. Easy and fast application process. The very short time it takes for you to get your funding is one of the more obvious advantages of factoring, but some factors are faster than others. Most factoring companies take a week to determine if your invoices meet their standards. Others only need a day or two. If you’re getting antsy because the payroll date is fast approaching, even the difference of a few days can be crucial.
  2. Bigger cash advance. This is the bulk of the financing, so its importance cannot be understated. Some companies offer 80% of the value of an invoice, and that’s usually considered the industry average. But others may offer up to 90% of the value, and some even offer 95%.
  3. Competitive rates. While factoring is not technically a loan (which means you don’t pay interest), you’ll still need to pay certain fees. Many factoring companies charge setup fees, and it can reach as high as 6% of the value of the invoice. Then there are also fees that need to be paid when your customers don’t pay promptly.

These fees can eat up your profit margins, so less is always better.

  1. Extensive experience in your industry. The best factoring company may not be the best for you if they have no clue as to how your particular industry operates. But experienced factoring companies are already up to speed about who the major players are and how the supply line works. They know about your unique needs, and they already have the basic plans in place to help you.
  2. Wide range of services. The services you get aren’t limited to just the financing. For example, factoring includes debt collection. The factor takes up this task itself. Other services which you may need include credit investigation for your new customers, invoice and payment processing, accounts receivable bookkeeping, and web-based reporting.
  3. Few contractual obligations. Some factors require a lockup contract with them for a year or even two years, which may not be exactly what your company needs. But other factors are more flexible and will only provide their services as needed.

When selecting the top factoring company, you should get an accountant involved on the matter who will help negotiate the terms and ensure you are not missing any important details. You also need a lawyer to make sure you understand the terms of the factoring contract.

Need Working Capital? Call 1-888-382-3766 or visit our main site for an instant quote by clicking here

 

Trade Receivables Financing Options

Numerous small and mid-sized businesses today are in need of financing, and banks aren’t exactly the best option. With banks, the loan application process can take a very long time. In addition, banks require collateral in the form of real estate or equipment. But with trade receivables financing, many SMEs have found a much more convenient way to increase their working capital and growth financing.

What are Trade Receivables?

In this type of financing, you can get the funding you need by using your trade receivables, which are essentially the commercial debts resulting from the sale of goods and services between your business and other companies.

These sometimes prove an attractive asset for your lender for several reasons. These receivables are self-liquidating, unlike other assets which may be more difficult to convert into cash. They are also generally short-dated, so lenders don’t have to wait long to get their money back. And finally, the volume of receivables can lead to revolving financing, while the range of receivables means you have a variety of ways to make use of them to get the money you need.

Types of Trade Receivables Financing

There are several kinds of trade receivables financing. The two most popular and well-known options are:

  • Factoring. This method involves a sale of the receivable at a discount, so it is not technically a loan. The way it works is simple. Usually, when you make a sale to another company, you deliver the goods and in return you issue an invoice which determines the length of time you need to wait before you will receive payment.

But with factoring, you don’t wait at all. The factor advances you about 80% of the value of the invoice immediately, so you can put that money to good use right away. Once your customer settles the account and pays for the goods in full, the factor then sends you the rest of your money, less the fees charged by the factor.

Factoring also has some variations as well. For example, you are usually obligated to pay back the advance if your customer doesn’t pay you because of bankruptcy. But in non-recourse factoring, that kind of nonpayment is a risk that the factor deals with, and you have no obligation at all in case of non-payment.

  • Invoice discounting. In many ways, invoice discounting is very similar to factoring. The main difference is in the collection process. In factoring, the factor usually takes over the collection process. They’re the ones who contact your customers and get the payment. This is an advantage to you if you don’t want to set up a collections department for your own company.

In invoice factoring, you’re still in charge of the collection process. This is an important point for some businesses where the relationships with customer-companies are extremely sensitive or delicate. You still deal with the customers directly and collect the payments yourself.

With trade receivables financing, the amount of funding you get depends on the quantity and quality of the receivables. Your own credit is not as important as the credit of your customers, so if you sell to established firms then you’re more likely to get the financing. And the more sales and invoices you generate, the more your funding grows to meet your needs.

How to Get Working Capital for a Consulting Company

A consulting company, on the face of it, doesn’t really need a large startup capital, especially in the beginning when they still have very few employees. It’s only when the work gets underway when learning how to get working capital for a consulting company becomes more crucial. Offices have to be maintained, employees need to be paid (even if you’re just the sole consultant in your firm), and of course the networking and advertising expenses must be covered as well.

Figuring out how to get working capital for a consulting company depends greatly on your contacts. This applies directly when trying to get funding, and also indirectly when you’re trying to get clients.

Here are some of the options you need to consider:

  1. Bank Loans. This is of course the standard method of getting working capital funding, but of late this may not be the most ideal option. The crux of the matter is that getting this kind of loan is almost impossible because you usually don’t have much in terms of company assets which you can use for collateral. One way of getting a bank loan for your business is if you are willing to use your own home as security.
  2. Using Credit Cards. This is actually a very popular option. For most solo consulting operations, credit cards have limits which can adequately cover expenses. For best results, you may want to consider getting a separate credit card for your business so that your personal and professional finances don’t get mixed.

This is a viable option if you don’t have an employee such as a permanent secretary to cover. If you do, then this can get very expensive very quickly, as credit card interest rates are usually among the highest in the lending industry.

  1. Equity Financing. This is when you take in a partner who gives you the working capital you need in exchange for a slice of the company. While this is a good way to get funding for growth purposes, for working capital it can truly dilute your future profits. From a long-term perspective, this is one of the more expensive ways of getting working capital.
  2. Immediate billing. Some experts in the consulting industry recommend billing clients on day one. They say that the predictability of this payment process may appeal to clients. In addition, you can charge fees plus 15% for expenses and then agree to reconcile against actual expenses in 90 days. This separates your fees from disputes about expenses.
  3. Invoice factoring. On a more realistic note, it may be more practical to expect clients to want to pay later instead of sooner. Limiting your clientele to just those who can pay upon delivery can severely limit your growth. But then again, that can cause working capital difficulties.

This is where invoice factoring comes in. This method of getting working capital involves getting 80% or so of the invoice amount right away from a factoring company. Then when the client pays in full, the factor forwards you the rest of the pay after they have deducted their fees.

As a consultancy firm, your expenses involve research and meeting payroll for your employees. Certainly marketing and advertising will also have to be taken care of. You can cover all these expenses only if you know where to get working capital for a consulting company.

How Medical A/R Lenders Help the Health Care Industry

It stands to reason that businesses in the various healthcare subsectors—those involved in immediate care, diagnosis, medical technology, and medical IT for example—all require funding on a regular basis. But that’s easier said than done. The healthcare industry as a whole isn’t exactly attractive for prospective lenders and medical A/R lenders can truly be helpful in this regard.

Why Many Lenders Avoid Healthcare Businesses

It’s not difficult to understand why quite a few small businesses in the health care industry can’t get the funding they need from traditional lenders such as banks.

For one, healthcare businesses don’t have much in the way of assets. While they may use numerous pricey equipment to help them care for patients, the truth of the matter is that they don’t own them – they’re leased.

Another reason is that many companies have difficulty in billing and collecting accurately. That shouldn’t be surprising, since healthcare billing can be very complicated especially in light of the Affordable Care Act. And it’s a well-known fact that insurance companies are notorious for not paying the full amount billed to them.

Finally, there is the ongoing trend of increased mergers and acquisitions in the industry. Companies are merging and consolidating so that they can provide the widest breadth of service for patients. Companies which specialize only in certain tasks may find themselves out in the cold in the growing competition for patients.

How Medical A/R Lenders Help

But while traditional banks may be hesitant to lend to small clinics and hospices, medical A/R lenders are filling in the void. Small businesses in the healthcare industry have one obvious asset: their accounts receivable.

A/R lending is quite easy to understand. A clinic may have to wait for at least 30 days (and often for much longer than this) to get their money from the insurance carrier after they’ve treated a patient. This means the clinic often has trouble getting the working capital they need to pay off employees and buy medical supplies such as bandages, syringes, gloves, and medicines.

The A/R lender expedites the payment process by advancing 80% (this percentage varies depending on the lender) of the accounts receivable to the clinic right away. Then when the payment arrives in full, the clinic gets the rest of the money minus fees charged by the lender.

Additional Advantages

This setup offers a lot of benefits for clinics and other companies on healthcare. For one, the clinic doesn’t have to hire people to collect payments from recalcitrant insurance companies. The clinic employees can then instead focus on its most important job of providing quality care for the patients. It is the A/R lender who usually collects the payment on the clinic’s behalf.

This can even help clinics identify insurance companies with a poor payment record. In A/R lending, it’s the payer’s credit history which is crucial, and the lender can identify which insurance companies should be avoided in the first place.

With medical A/R lending, various small clinics and other companies in healthcare can get the funding they need at the time when they need it the most.