Common Mistakes When Applying for a Working Capital Business Loan

If your business needs to expand, you’ll most likely need a financing solution to make it happen. But whilst there are definitely plenty of banks advertising their loan products to small business owners, they have narrowed their lending requirements making it increasingly difficult for people to acquire a working capital business loan.

Here’s a list of mistakes often committed by entrepreneurs and small business owners when applying for a loan. By being aware of them, you may increase your chances of getting the capital resources you need so your business can grow.

  1. Lack of planning

This particular mistake is actually quite broad because there are many aspects throughout the loan application process that a business owner fails to plan for properly. It begins with knowing if they really need the loan or not. They need to determine if spending an extra $100,000 for a new office space and furniture will be good for their business or if they can make do with the old furniture and tighter space for the meantime.

Planning is also essential prior to actually submitting a working capital business loan application. In order to be taken seriously by the lender, the borrower should have a comprehensive business plan that clearly explains his vision for his company, a marketing plan and how he intends to utilize the loan proceeds.

Preparing financial statements and other business loan applications is also necessary before you should approach a bank and apply for a loan. With sufficient preparation, it is more likely that you will get approved for a capital loan.

  1. Being pressured into making a decision

Banks (and basically all kinds of lender) are in the sales business and if they consider you a suitable candidate, they’re going to use any tactic to push you into a decision. If you allow yourself to be easily swayed, you could end up regretting your decision. Make sure you do enough research, compare several lenders, and find out what their interest rates, hidden fees, and timescales are. These things are very crucial factors that need to be considered.

There are banks that charge as much as 80% and borrowers don’t even realize it. That’s because they only calculate the APR as the total fees divided by the principal amount (the amount they borrowed) instead of computing the interest based on the outstanding amount at every period in time (which is the amortized amount).

Finally, you must also find out how long it will take for the bank to review your application and fund the loan. Most banks take 2 weeks just to assess your application and then take 60 more days to release the funds. Time costs money and in business, time lost is opportunity lost.

  1. Failure to negotiate

One thing you need to know about working capital business loans is that it’s never a take it or leave it proposition. You can negotiate for a reduced interest rate, better payment terms, and other perks/benefits. You can even haggle for a better deal even if you have bad credit. The secret is to do your research and familiarize yourself with the financing market trends so you can leverage your knowledge to come up with a win-win agreement.

The Increasing Popularity of Business To Business Finance

Just about every small business owner knows the value of having enough cash on hand to cover operational expenses and various emergencies. Banks aren’t exactly as helpful as they once were, however, so getting a bank loan or a line of credit can be excruciatingly difficult.

It doesn’t matter if your company is already profitable and established. The bank will still require a paperwork from you which will take many days to prepare. And the approval decision can drag on for many weeks and sometimes even months. And you may yet end up not getting the financing you need.

This is the current scenario which is fueling the rising popularity of business to business finance. Here are some facts you need to consider.

  • The B2B lenders are very easy to find, as you can just go online. Some online companies lend the money themselves, while others have access to as many as 300 lenders which can offer you terms for the loan once you put in your applications. This is a significant improvement over going to banks and negotiating for loans in person.
  • Each B2B lender has its own way of doing things. Some lenders offer cash advances against outstanding invoices. Others offer short term loans, and some are peer to peer lenders. Even payment processors such as PayPal are getting into the act by offering loans to some of its merchants.
  • Here’s an example of how an online lender uses your invoices to give you the money you need. You sign up to the lender’s website, and you allow the lender access to your bank account and accounting software such as QuickBooks Online. You pick an unpaid invoice worth $5,000 and you get the line of credit right away.

Then over the course of 12 weeks, the lender collects its repayments in weekly installments that are automatically debited from your bank account. While the fee may depend on the riskiness of the loan, but in general it may range from $243 to $343 when a $5,000 invoice is involved.

This translates to an APR of 38 to 54 percent, but at least the pricing of the fees is transparent. There are no hidden “processing” fees to pay as well.

  • Another example is to get the help of a consultant, which may not even charge you anything in fees when you apply for a loan. You simply indicate your particulars such as your name and employment and the amount you need. You’re then given a list of lenders with their loan offers. You pick the one you want, and then your loan is sent to your bank account. The money is then repaid through regular deductions from your bank account.

The popularity of this type of financing is increasing. One invoice based lender is now lending up to $200 million a year. Another short-term lender is now funding $3 million a day in loans. Because the loans are easy to get, it’s inevitable that this form of financing will become even more popular in the coming years.

How Medical Receivable Factoring Works

If you’re running a business in the health care industry, it’s guaranteed that sooner or later you’re going to have a problem with cash flow. And that’s where medical receivable factoring comes in.

There are two reasons for this. One reason is that you’re going to have to spend a lot of money on day to day expenses. Whether you’re a vendor selling goods or services to clinics or you run a clinic that helps treat patients, expenses are a fact of life in the medical industry. A clinic, for example, will need sufficient ready cash to cover payroll, pay for rent and utilities, make the regular payments for the equipment, and purchase regular medical supplies such as gloves, syringes, bandages, and medicines.

Another reason is that health insurance companies can really slow down your cash flow cycle. While your suppliers may require you to pay up front or in 30 days, insurance companies can take up to 120 days to settle the bill. What’s really aggravating is that you’d have to follow up on them regularly, and even then they may not pay the full amount.

So how does medical receivable factoring work?

  1. Factoring for vendors. In this scenario, your customers are the clinics who treat patients. When you bill them, you send the receivables to the factoring company which then gives you the advance of about 80% of the value of the invoice. The factor then waits for the clinic to pay them in full, and then the rest of the payment is sent to you minus the fees of the factor. It’s pretty much a straightforward arrangement.
  2. Factoring insurance claims for clinics. This version can get a bit more complicated. It’s the same basic format, in which the factor forwards you an advance and then the rest of the payment is sent to you once the insurance company has settle the claims. Usually the factor deals with the insurance companies by sending a notice of assignment, and experienced factors realize just how long it will take so that they don’t charge you outrageous amounts when they take 120 days to pay.

However, insurance companies are also known not to pay the full amount. So if this happens, the factor doesn’t reimburse you for the missing amount. In fact, the factor may hold back 20% of the receivables in a reserve account to cover instances when the factor pays less than the advance you get. So if you get 80% in advance and the factor ends up getting only 70% of the value of the receivable from the insurance company, the factor takes money from the reserve account to cover the advance and the fees charged by the factor.

  1. Factoring Medicaid and Medicare claims. As you know by now, factors operate by requiring your customers to pay them directly instead of sending the payment to you. Unfortunately, Medicare and Medicaid don’t allow you to assign the claims to a third party such as a factor. Medicare and Medicaid will only pay you directly, and won’t send payment to your factor.

This problem must be discussed with your factor, but an experienced factor already knows how to set a managed account, which is also known as a sweep account. This account is in your name and ownership, so Medicare and Medicaid can send the payments to this account. At the same time, the account gives full operational control to the factor, so the factor can collect the payments and its fees and also settle the invoice for you.

All these may seem complicated, but when you’re dealing with a financing company that has experience in medical receivable factoring, it’s actually very simple.

How to Convince Lenders to Approve Construction Working Capital Loans

Despite the easing of the recession, banks are sometimes not amenable to granting loan applications. In fact, the approval rate for small business loans dropped from 20.6% in September 2014 to 20.4% in October.

In any case, what that means is almost 80% of small business loan applications are rejected.

So what should you do? There’s always the option of alternative financing, of course. But if you’re determined to get a loan from a bank, what you need to do to increase your chances of approval is to be prepared.

Prepare the Minimum Requirements Beforehand

Different lenders have different requirements, but it will help your cause if you already have the following paperwork with you when you ask for a construction working capital loan:

  • A summary on how you plan to use the loan and the impact to the income statement
  • Your tax returns or year-end financials prepared by your accountant
  • Your current year to date financial statement

These three steps are paramount. You can’t hope to boost your chances if you don’t even have this ready right away.

Furnish Additional Details

Now if you really want to go all out and impress the bank officials, you should offer the following info as well:

  • Account analysis bank statements for the last two months, which includes the deposit history
  • Any details of any business succession plan
  • Personal financial statements on all the important owners (more than 20% ownership) of your construction company
  • A summary of the ownership percentages
  • An organizational chart of your company, along a short bio of the top echelon leadership
  • An internally generated current financial, along with a comparison with the previous year to date financial statement
  • Prior 4 year-end tax returns or financial statements prepared by your accountant
  • An expansion of the summary on loan use, with additional documents such as invoices, contracts, budgets, and other documentation

Answering the Crucial Questions

Before a bank gives final approval for a working capital loan, they really want to make sure that they will get their investment back. That’s the reason for all the paperwork. These documents give the bank a clearer idea of how likely it is that they’ll get their money back plus interest.

So the first question they will want answered is if you will have working capital in the near future (such as payments from late-paying clients or guaranteed contracts) to meet the payment schedule. It will make these bank officials feel better if you can assure and prove that you will have the money needed to pay your monthly obligations with them.

The next question is whether you have an additional source of funding. This is where collateral (such as your equipment) or your personal guarantees come in. If the money coming to the company won’t be enough to service the debt, then you better make sure that you have an ace up your sleeve.

Banks want to lower their risks, which is the primary reason for the paltry 20.4% small business loan approval rate. Make them feel secure in doing business with you, and you will get your construction working capital loan.

How to Find a Bank for Construction Working Capital Loans

For most people nowadays, finding something means going online and using Google to get the info they need. So if you are in need of construction working capital loans, you just enter that particular phrase and Google will give you pages of results which you can check out.

But while this method has its advantages—it’s certainly easy and convenient for you—it may not always be ideal. After all, quite a lot of the information on bank websites is designed to attract customers. The info may not always be complete, and the fine print may not be to your benefit.

So how should you find these banks instead? Here are some tips:

  • Ask your friends in the construction industry where they got their working capital loans. You’re probably not the first person in your network who needed an infusion of cash for their working capital.

Once you find these friends, inquire about their experience and satisfaction. What are the requirements? What type of loan can you get, how much money can you borrow, and what will it cost you? How well were your friends treated by the bank? Your friends will be much more honest about these things.

  • Check out online news reports about lenders offering these types of loans. For example, if your construction company is in Minnesota then you may be interested to know about the case of Bald Eagle Erectors. The owner, David Bice, was able to get a $200,000 working capital loan to tide them over until they were able to get a job working on the Minnesota Vikings stadium project. The company had about $1 million in receivable, but the client wasn’t paying them on time. So he had problems paying his crew until he got his loan.
  • Approach a bank that you already have a relationship with. Banks like to deal with people they already know, and if you know some bank officials on a first name basis, perhaps you can talk to them.
  • Don’t just go to one bank. Try to approach 2 or more banks. Just be honest and tell them that you are thinking of getting a working capital loan and that you’re also negotiating with other banks. Then note down the offers of the banks you talk to.

If you are the type of person or company that banks like to deal with, then the competition may spur them to offer more generous terms. You may be able to negotiate for lower interest rates. Even some requirements such as security or paperwork may be scaled back or waived.

  • Work with the SBA. The SBA and other similar eco-development groups are not just for companies who have poor credit and can’t get bank loans. These institutions can help you receive better terms for your loan too.

While getting a loan online is becoming much easier, sometimes you need personal negotiations and face-to-face meetings. Personally going to a bank can help you forge better relationships, and that bodes well for you should you ever need another loan in the future.

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The Importance of Experienced Purchase Order Finance Lenders

On the face of it, purchase order finance seems easy enough to understand. When you have a purchase order but you don’t have the money to fulfill that order, you go to purchase order finance lenders to provide you with the working capital you need. You then get the money to pay for supplies, you make or deliver the product to your customer, and both you and the lender get paid.

But it’s not actually that easy, and a lot of complications can crop up. After all, the lender has to deal with you as the borrower, pay the suppliers, and then collect the payment from the customer. And if foreign suppliers are involved, it gets even more complicated.

So what you really need is an experienced purchase order finance lender. So here are the things you need to find out about the experience of prospective PO finance lenders before you choose which lender to work with:

  1. Length of time in the business. This is an obvious question, but it’s crucial to ask nonetheless. There are too many new finance companies trying to help those who have been denied loans by banks, but some of them are still feeling their way around.

While these lenders are getting more experience, their education may come at your expense. They may in time figure out what to do when specific problems arise, but that may be too late to help you out.

  1. Focus on purchase order finance. Quite a few finance companies offer purchase order financing. But in reality, it’s not really their main focus. They actually specialize in factoring, and the PO financing is just a side business. They just offer it because it can lead to factoring deals.

Now these firms may work out when the PO financing is simple or small. But a lot of these PO financing deals can get complicated, and you need a specialist who knows what to do when complications come up. It doesn’t matter if a finance company has been in existence for the last ten years, when in reality they only do a couple of PO finance deals a year.

  1. Familiarity with your industry. Each industry has its own procedures and rules, so you need a lender who is already familiar with those rules. That’s why when you ask around for recommendations for a PO finance lender, you ask other people in your industry. It’s the same thing when you ask for references. You should find out if the lenders have references in your industry.

The lender is supposed to help you out with your financing. You need to focus on fulfilling that purchase order, and not have to waste time teaching your lender the ins and outs of your industry.

  1. Experience working with your particular customer. Your best bet is always a lender who has dealt with purchase orders from your customer before. Many of the bigger companies have complicated purchase agreement rules and regulations, and it will really help when your lender is already familiar with them.

Purchase order financing can be a maze filled with traps and dead ends. What you need is a lender who already knows the way so they can ensure you don’t get lost.

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AR Factoring Terms: What are Your Options?

Many businesses these days solve their cash flow problems through accounts receivable factoring. You get about 80% of the value of your invoice in advance, and then the rest of the money will be given to you when your customer pays in full.

There are several advantages to this approach: you have a better chance of getting the money you need and the entire process is very quick when compared to bank loan applications. But to maximize the benefits, you have to make sure that you get the best AR factoring terms.

As a business owner, you’ll probably be more concerned about how the AR factoring terms specify how much money you’ll get and how much you have to pay for the factoring service. All these are crucial, but there are several options in factoring which you have to consider.

Non-Recourse Factoring

Factoring isn’t a loan. Essentially, you sell your invoice at a discount to the factor so that you don’t have to wait for 90 days to get your money. Instead, you get your money right away.

But if the customer doesn’t pay the factor for any reason, then you’ll be required to pay back the money you received as an advance. This is called recourse factoring.

But if you want, you may avail non-recourse factoring if the factor offers it. In this type of factoring, factors absorb the loss of the advance money should the customer declare bankruptcy and default on the payment. However, this may mean that the advance you get may be smaller and the fees you pay can be greater.

Selective Factoring

In many factoring cases, every invoice is submitted to the factor who then chooses which invoices to advance money on. If one of your customers is notorious for nonpayment and the factor has agreed to a non-recourse factoring, then the factor may refuse to advance you the money for the account receivable.

But you may negotiate for a factoring service in which you choose which invoices to give to the factor. You can choose just enough of the invoices to generate an amount which should suffice for your needs. Your other invoices will then retain their full value and you won’t have to pay fees for having them processed by the factor.

In a way, this is like having a line of credit.

Many AR factoring terms lock you into a long-term agreement, but the duration may be too long for your business. You should only get the factoring service while you need it, and you can negotiate this with the factor.

This is why some agreements may enable you to choose when to end the factoring agreement, although factors can vary as to what kind of warning time they need. Some factors may ask that you give a year, while others may only ask for three months’ notice.

Factoring can help your business. By agreeing to the right AR factoring terms, you can make sure that everyone’s a winner.

Construction Sub-Contractors Working Capital for Different Types of Jobs

Sub-contractors have to spend money in order to make money. After all, if you are a subcontractor then you’re essentially a separate business; you’re not an employee of the general contractor. You also have to buy the equipment you need, and the construction sub-contractors working capital you need depends on the particular job you’re supposed to do.

  1. Air sealing and insulation. Your job is to keep the heat out during summer while ensuring there’s enough of it during winter. You may also be responsible for preventing moisture problems.
  2. Blasting contractors. Your job is to remove ledge for the foundation or the utility trenches.
  3. Carpenters. All kinds of woodworking fall into your sphere of responsibility.
  4. Concrete contractors. This covers many different tasks, but essentially you work with concrete. If you run a concrete company, you’re also responsible for delivering supplies.
  5. Drywall specialists. You have to install and finish the sheetrock.
  6. Electricians. You need to install the electrical wiring within the wall, along with the service panel. Then you have to work on the power outlets and install appliances such celling fans, lights, and doorbells. You may also have to add the cable and Internet networks to your services.
  7. Excavators. It’s your job to deal with the foundation of homes and buildings.
  8. Flooring contractors. You may specialize in one or several types of flooring, such as hardwood, vinyl, or ceramic tiles.
  9. Framers. You put in the sheet materials like plywood and lumber once the foundation is done.
  10. HVAC. You have to install all the appliances for heating, ventilation, and air conditioning.
  11. Landscaping. You will essentially work on gardens and lawns.
  12. Masons. Your job is to build block foundations along with everything else with block or brick and mortar.
  13. Painters. You need to know how to lay paint on various surfaces, such as wood or cement.
  14. Paving contractors. You deal with walkways and driveways, as well as patios.
  15. Plasterers. You’re responsible for installing lath and plaster.
  16. Plumbers. Your job requires you to place the pipes in the walls then you have to install the plumbing and the water heater. The water treatment may also be part of your job.
  17. Roofers. Your job involves all the aspects of installing the roof.
  18. Septic system installers. You have to install the septic tank according to the instructions of the sanitation engineer.
  19. Siding contractors. You install the siding and sometimes the exterior trim with synthetic materials.
  20. Stair builders. Some stairs are custom jobs, and your job is to install these stairs.
  21. Waterproofing contractors. You have to waterproof the foundation walls. This may involve insulation and drainage too.
  22. Well drillers. It’s your job to drill and develop the well. You also have to connect the well to the plumbing, and water treatment systems may also be installed.

There are even some other types of jobs aside from the ones listed here, which is why homeowners aren’t really expected to deal directly with subcontractors. Building a home means a lot of different workers working together and if you are one of them then you need sufficient construction sub-contractors working capital so you can do your job properly and within schedule.

Medical Receivable Loans | Fast Funding for Medical Companies

Medical Receivable Loans Fast Funding for Medical Companies
Capital you get from medical accounts receivable financing can go toward other things like modernizing facilities, taking advantage of cash discounts, improving credit ratings, small business expansion, correcting cash flow issues, staffing, inventory, and advertising.

Unexpected increased expenses tacked on to your medical practice can create the need amongst business-owning physicians for medical receivable loans. A lot of physicians relish the idea of turning their medical accounts receivable into instant cash, but they just don’t know the receivable financing program to pick. Physicians can ease the pressure on profits that they face with medical accounts receivable financing.


Unexpected increased expenses like malpractice suits and the current economic recession and profits squeeze can make medical accounts receivable financing a necessity for many physicians out there. Plus, the cash that you get with a medical accounts receivable financing program can go toward other things like modernizing facilities, taking advantage of cash discounts, improving credit ratings, small business expansion, correcting cash flow issues, staffing, inventory, and advertising. If you need to boost your business, or you need a stream of cash to flow in, then consider this useful approach to improving, propping up, or expanding out your physician practice. Physicians loans and healthcare facility financing are closely related, and they might be provided by the same company, but they are distinct from medical receivable loans.


A lot of medical professionals out there say that dealing with their accounts receivable are one of the biggest challenges they deal with. Medical accounts receivable are often the biggest asset shown on the balance sheet, but these dollars are often held back for long periods of time. That’s unfortunate for medical doctors who want to put this cash to use, but feel it is tied up and unavailable. The move toward medical accounts receivable has only risen in recent years because of the long process associated with third party payor reimbursement.


Sometimes, loans can be based on medical receivables. However, the majority of the time, the sale of receivables occurs. That doesn’t create any additional debt on the balance sheet. It lets you get a big portion of your receivables in a quick way. Sometimes, you can secure great deals like getting up to 80% of the estimated net medical accounts receivable.


Some medical practices could be required to have a specific monthly billing amount each month. Check with the medical receivable factoring company to see what kind of amounts they require your medical practice to bring in each month before they’ll start taking your application for a medical receivable loan seriously. Medical factoring companies don’t often stop at just physicians, though. Sometimes, they provide loans to laboratories, ambulance service providers, radiology centers, MRI clinics, rehabilitation/physical therapy companies, home healthcare companies, hospitals, and nursing homes. It’s a good idea to work with a company who specializes in your field, medical practice, and work with them to get your loan going. You might not want to work with a company who doesn’t have a specialty in your kind of practice because it might not run as smoothly. There are an abundance of companies that provide medical receivable factoring for small and medium-sized practices, and it’s no problem finding a number of them to make a selection from.

If you have Medical Receivable Loans and need Fast Funding for Medical your Companies Click Here

Invoice Factoring Financial Services

When you need a quick infusion of cash, you can use your accounts receivables invoices to get up-front money from a factoring company. The factoring company can get anywhere from 3-5% of the total value of the invoices (some companies even offer less), and in return you get that money immediately instead of waiting for a month or two for them. But the invoice factoring financial services you receive doesn’t stop there, which is why you may be charged service fees by a factoring company.

There are essentially 4 types of invoice factoring financial services you may receive as part of the factoring agreement:

1. Assessing the Credit-Worthiness of Customers

In some factoring agreements, factoring companies are willing to take on the risk on a customer’s ability to pay. This type of agreement is called nonrecourse factoring. The typical form of this type of agreement means that you are not liable if a customer is unable to pay the bill because of insolvency. Another type of nonrecourse agreement absolves your company of any responsibility at all for a customer’s inability or refusal to pay the bill. The only exception here is when that refusal is due to a customer’s view that your company did not provide the goods or services they paid for. When that happens, your business is still liable for the amount.

Before the factoring company shoulders this responsibility, they will make an assessment as to which of your customers appear able to pay the bill they owe your company. Knowing which customers are worthy of credit and which ones are not can help you determine just how much credit to offer particular customers.

2. Maintaining the Accounts Receivable Ledger

It’s important that you have a record of how customers pay their bills. These records will indicate which customers pay on time, and which ones require installment plans in order for them to pay the total bill. Again, the information here can help you determine which customers are worthy of receiving preferential treatment when it comes to getting credit from your company. These records may also be important for your tax records.

3. Maintaining Regular Reports on Collections

As a business, you will want to know how the bill collection is progressing over time. A factoring company can make weekly or even daily reports on the collection process for your records.

4. Contacting Customers

Having a factoring company do the collections for you means you are spared from having to contact customers yourself. You also don’t have to hire permanent staff in order to fulfill this function.

However, since the factoring company will be dealing with your business’s customers, you may want to make sure that the people from the factoring company who interact with your customers do so in a professional and courteous manner. The best factoring companies offer great customer interaction as part of their invoice factoring financial services.

You don’t want to alienate future relations with your customers, as they will affect your bottom line eventually. For some businesses, entering into a factoring agreement may be temporary, but relationships with customers are long-lasting.