Small Business Finance – Page 4 – NeeBo Capital Blogs

The Main Advantages of Textile PO Funding

If you are in the textile business, then chances are you are familiar with factoring. It’s become the norm in the industry, although nowadays large banks have gotten involved as well. But now you don’t have to rely solely on your invoices to get the advance you need for your working capital. You can also use your purchase order as well.

Essentially, the textile PO funding company will treat the purchase order as a sign of an eventual payment, similar to an invoice. The only difference is that in this case you can get the money far in advance.

Here are its advantages:

First of all, getting a textile PO funding can be much easier than getting a loan from a bank. This is especially true if you have a low credit rating. With PO funding, the focus is on the customer who made the purchase order. Does it have the ability to make the payments for the order? And does it have a good history of actually making payments?

What will be required of you is some proof that you can actually fulfill the purchase order according to the specified terms. Can you meet the quantity and quality specified? Can you meet the deadline?

The application process for PO funding is also very speedy. This is necessary, because purchase orders have deadlines and you don’t want to waste time. Going through bank loan applications can take forever, and it’s especially frustrating when they often end in a denial. That’s also another plus here: the approval rate for PO funding is much higher.
When you don’t have the working capital to meet the requirements of the purchase order, the PO funding can provide that money. That’s one of the most common problems with invoice factoring. What if you don’t have enough accounts receivable to fund the next projects? With a purchase order funding, that’s not a problem anymore. Invoice factoring involves getting advance on a payment from customers; PO funding is getting the working capital you need so that you can actually get an invoice from your customer.
Some of your suppliers may be from overseas, and the regulations can be tricky. But many PO funders have an international presence, and they are very familiar and experienced in dealing with overseas manufacturers.

How PO Funding Works

Let’s cite an example to explain how it works. Let’s say you have an order for $200,000 worth of garments. Now you need to fulfill this order by getting materials from various suppliers. If the costs amount to $100,000 then you may get that money from the lender. When the retail chain pays you in full, you get your profits minus the cut from the lender, which is usually anywhere between 3-6%. Even at 6%, you’d still make a profit, one that you probably wouldn’t have made if you didn’t opt for PO funding in the first place.

Factoring: The Best Way of Obtaining Fast Working Capital for Medical Companies

According to a May 2014 article published on the CBS News website, banks have become more willing to lend money once again. They have started to ease their restrictions on their loans, and now they experiencing a higher demand for their lending services. One report also noted that large banks are approaching record approval rates for loans to small businesses. But a closer examination of the facts reveals that these sky high approval rates are still only 19.4%.

That means that if you are starting your own medical clinic, you stand at least a 4 out of 5 chance of getting your loan application denied. And even if you do get the loan you need, you may find that the entire process proceeds at a snail’s pace. It’s not exactly a quick way to obtain working capital.

Getting a line of credit or a working capital loan can also be difficult. Even if you are a doctor, you can only qualify if you have considerable assets and you can offer well-documented financial statements. For most medical clinics today, these standards are still too high.

But some of the more popular alternative quick ways to get cash may also be inappropriate for medical companies because they offer very limited amounts of cash. These options include using a credit card and a payday loan. These are simply not enough for a clinic, especially when you need upgrades for your medical equipment. Even a loan from friends and family may not suffice.

But there is still one way of getting fast working capital for medical companies: factoring.

How Factoring Gets You Working Capital Quickly

There are several distinctive features about invoice factoring that allows for fast working capital for medical companies:

The entire application process takes a very short time. It may take only a couple of weeks. In addition, the approval rate for this kind of financing can be among the highest compared to other sources of working capital.
The speed is because there are very few requirements. Your clinics should be free of any taxation or legal problems, and the insurance carriers of your patients should have a good track record when it comes to paying medical bills. The factoring company will also evaluate your billing system to see if it’s up to standards.
You no longer have to wait for the insurance companies to pay. That’s how factoring works. The factoring company takes the invoices, and then gives you a percentage (from 70% to 80%) in advance.

Using your Working Capital

That gives you the working capital you need for your operational expenses. You can now pay your employees, take care of overhead bills, and make payments for your medical equipment. You can also replenish the medical paraphernalia you need on a daily basis, like gloves and face masks. You can also pay for your own malpractice insurance as well. If you want, you can also remodel your office to make it more welcoming for your patient.

Start Your Own Clinic with the Help of Medical A/R Lender

Starting your own clinic can be a very complicated process, and as a doctor you really need to be well-versed in the business side of things before you even get started. There are simply too many risks, and many of the problems you will face at the start may distract you from your primary objective: to help people.

But if you are having cash flow problems when your clinic is already up and running, then you can easily get help from a medical A/R lender.

Accounts receivable financing is one of the best ways to obtain the additional funding you need to cover your operational expenses. That’s because the vast majority of patients don’t pay out of pocket. They have insurance companies to do that, and insurance companies are notoriously slow at paying out claims.

In addition, they also have a tendency to pay much less than what you actually bill at the start—if they pay at all.

The Factoring Process

While going to a bank has always been a popular option for additional financing, medical accounts receivable factoring is becoming more common. The process is quite simple.

The first thing you need to do is to find an experienced medical A/R lender. The health care industry has its own peculiar ways, and a generic factoring company will not be familiar with how things actually work with a medical clinic. By choosing a lender who’s already acquainted with the medical profession, you no longer have to explain the finer nuances of the industry. In fact, you may even learn a few things from the lender.
Setting up the factoring involves a much faster process, and that includes the getting the approval for the funding. An experienced factoring company already knows which insurance companies are reliable, and all it needs to know is that your practice is stable. You shouldn’t have any serious tax or legal issues, and your accounts receivables shouldn’t have any liens on them.
Your practice then submits regular billings to the insurance companies (including Medicare and Medicaid) while copies are forwarded to the lender. This can be done by the factor themselves.
You then receive the advance. This varies depending on the factoring company and the state of your practice. In general, the advance ranges from 70% to as much as 85% of the value of the billings. You can get this advance very quickly in a matter of days instead of having to wait months.
Once the insurance companies pay, the factoring company sends you the balance, minus their factoring fees.

Distinct Advantages of Accounts Receivable Factoring

The benefits you can get for your clinic are obvious right from the start. You can get the funding you need much more quickly, and that can cover operational expenses and even equipment upgrades. And with an experienced medical factoring company, you can focus your attention on growing your practice and taking care of your patients instead of worrying about where to get financing.

How to Get Better AR Factoring Term Sheets

If you’ve been turned down by banks on several occasions, an accounts receivable factoring company can be a lifesaver. But you may not like it when you get the AR factoring term sheets they offer. You can do yourself (and your business) a favor by negotiating the term sheet so that you can get a price concession while providing them with what they need to justify their investment.

Here are some tips you need to keep in mind:

Find a Factoring Company that Specializes in your Industry

Each industry has its own regulations, customs, and realities, so you need a factoring company that fully understands how your particular industry operates. That saves everyone a lot of time, and you don’t have to explain why some things are practiced in your industry.

If a lender is already familiar with your industry, then you stand a better chance of getting better terms. The factoring company already knows the risks involved and they will be more likely to offer a better price.

Understand What a Factoring Company is Looking For in a Client

Essentially, a factoring company wants a client who offers them a very low risk with high rewards for their investment. The variables they are looking for will include:

Good invoice practices
A history of delivering good work
An acceptable record in making profits
Reputable customers
Increasing funding requirements due to growth

Offer a Profile or Summary of your Company

Whether or not a factoring company requires this document, you ought to submit one anyway. It’s not really a lengthy document, as a single page should suffice. The information in the summary should be concise, and of course it has to be factual. It has to answer the following questions:

What is your company all about? What does it do?
What are your invoicing procedures?
What are your funding requirements?
What is the outlook for your company in particular, and your industry in general?

The point of the summary is to put your company in a positive light. You can then lower the perceived risk of financing your company by providing the info they need. Don’t include false information, and don’t exaggerate. They will find out and that leads to worse rates.

Manage Your Expectations

One of the most important variables that a factoring company looks for is the volume of invoices you want to factor. When you increase the volume, you can then pay less for every dollar you get in financing. A low risk company with a low volume of invoices may actually have to pay higher rates than a medium risk company with a high volume of invoices.

In short, you can’t just demand better AR factoring term sheets as a matter of course. Factoring companies have their own guidelines, and making unreasonable demands may simply cause you to lose the financing assistance you need. Your responsibility is to make sure that you present the evidence factoring companies want to justify better terms.

How to Properly Spend Your Apparel Business Working Capital

For some, entering the apparel business may seem like a glamorous endeavor, but it is still a business. A lot of people try to use their interest in fashion to start a clothing retail store, but in reality it’s not as easy as it seems. In fact, most people who have experience in this industry caution prospective entrepreneurs to make sure that they have enough apparel business working capital to operate for years because it takes a long time before they can actually begin to see some profits.

Here are some aspects of the business into which you may have to spend a large chunk of your working capital:

Location. In many businesses, location is the key to success. Finding the right location may mean having to engage the services of a realtor. Often, a good location will already be rented even before an advertisement appears online and even if you do find a great location, you may also find that the rent is overpriced. The ideal location for a clothing retail store isn’t just a place where lots of potential shoppers pass by. It’s also a place that’s defined to be cool and fashionable.
Ambience. The fashion industry is all about image, and your clothing retail store has to operate within the same rules. This means you have to make sure that the atmosphere of your shop reflects the kind of character you want for your brand. A clothing retail store isn’t the same as a hardware store; a clothing retail store is more like a fashion label or a club. You’ll need to invest some money in making sure that your store exudes that feeling you want so that you can emotionally connect with your prospective customers. And like fashion labels and clubs you have to change and update the look regularly in order to match current trends in fashion.
Marketing. It’s not just the ambience of your shop which defines your brand’s image. You need to have a coherent marketing and advertising strategy so that you can foster an emotional connection with your target customers. Your advertising will be different depending on the specialty of your shop. Marketing towards teenage girls is different from how a wedding dress boutique or a store for bikers markets itself. Sometimes image can spell the difference between success and failure, and if you want to be cool you’ll need lots of capital on a regular basis.

The lack of apparel business working capital is just one of the potential problems you have to overcome if you are thinking about setting up a clothing retail store. There are legal ramifications involved, and you actually need to have the skill to manage a business efficiently. Not all clothing retail stores succeed, but having enough money can help.

It may be sufficient to give you enough time to get a firm foothold industry, so that eventually you do make profits from your investment. Knowing where to get your working capital even when business is slow is also important. Non-conventional lenders like invoice factoring companies will be able to provide you with the capital you need.

The Best Working Capital Loans

There are many possible reasons why a business may want to secure a loan. Sometimes a loan can help a company grow, as it is used to purchase new equipment, pay for a new office, or even to train new employees. It may be used to take advantage of a unique business option with a small window of opportunity, like when a college football merchandise company expands its offerings when the team secures a trip to the college football national championship.

The Need for Working Capital

But sometimes a company just needs a loan for working capital. Working capital is the asset you use (usually cash) to meet continuous operational requirements. A restaurant, for example, will need working capital in order to pay the salary of their waiters and cooks, the rent and the utility bills, the daily ingredients used for the meals they serve to diners, and repairs for the kitchen appliances. During peak season such as the holidays, a restaurant may have an overflowing business and consequently, a large amount of cash. But during the off season, it may not generate enough revenue to cover even their operational costs. A restaurant may be able to continue operating if it has enough cash reserves. But if it doesn’t, then a loan is necessary to make sure that the restaurant is still able to operate.

That’s where a working capital loan comes in. The loan can’t be used to purchase long term assets such as a new kitchen appliance so that the restaurant can expand its menu. Instead, it is used to pay salaries and to clear up accounts payable. The best working capital loans are those that are easy to get and sufficient to cover a company’s needs during the lean season. It should also not come with high interest rates if possible, and the payment terms should be flexible.

Cash Advances

A cash advance is a type of working capital loan in which a business receives a lump sum of money from the lender, to be used as a cash reserve for operational expenses. In exchange for the loan, the lender takes a percentage of the daily credit card receipts until the loan (plus the fee for the loan) is paid off. The advantage of this type of loan is that the payment amount expected each month depends on credit card receipts, so even if the restaurant earns less on a given month, it doesn’t put them at risk of not being able to pay their loan.

Factoring

With factoring, the business (such as a clinic or a construction company) sells its accounts receivable to a factoring company for about 80% of its value upfront, with the rest (minus the factor’s fees) coming in when the invoices are paid off. The great thing about factoring your invoices is that you don’t need a good credit rating because the factor will only assess the credit rating of your clients.

If you’re looking for a cash advance or a factoring agreement, then it pays if you spend just a bit of time to compare different sources. That way, you’ll be able to find the best source of working capital loans for your specific situation.

Securing Working Capital for California Businesses

The search for working capital for California businesses continues as it has always been, but in recent years it seems that banks simply aren’t cooperating as much as they used to. Not only do they often reject loan applications much more frequently nowadays, but even if they eventually grant a loan the process takes too long. When a California business realizes that it doesn’t have enough cash reserves to pay rent and utilities, payroll and the purchase of raw materials, a standard loan application just won’t do.

Fortunately, working capital for California businesses can be secured with alternate methods that are becoming more popular lately such as:

1. Vendor financing. Your own suppliers may be able to help you hold on to your working capital, if they agree to extend payment terms for a longer period, such as extending from 30 days to 60 or even 90 days.

2. Social lending. Also known as peer to peer lending, these websites match up lenders with borrowers for a fee. These are generally for small amounts, averaging around $7,000 and rarely exceeding $25,000. The terms are usually for three years, with interest rates ranging from 9% to almost 20%.

3. Credit unions. These are member-owned financial co-ops, and you have to be a member to get a loan. These are great alternatives to banks, since they don’t really rely on credit scores but instead try to evaluate the borrower’s track record or business model. In California, credit union loans are growing at a significant rate.

4. Unsecured loans. Perhaps the most popular type of unsecured loans is by using a credit card to provide the working capital a company needs. There’s also a version called a “signature loan” based on a person’s credit history. Essentially, the borrower gives a personal guarantee that they will service the loan.

5. Pre-settlement lawsuit financing. If your current working capital difficulties are due to an ongoing civil suit, a loan provider who thinks you’ll eventually get some money in a settlement may offer you a percentage of the expected settlement (10% is common) for a larger percentage (such as 40%) of the reward you get. The advantage here is that if you don’t get any reward in the suit, you don’t have to pay back the advance.

6. Merchant cash advance. You get the cash today, and in return you pay a percentage of your credit card sales to the lender until the debt is paid plus interest. The big advantage here is that there’s no risk of being unable to miss a payment, because a month with low credit card sales mean a lower monthly payment. There’s even a California version that limits annual interest rates to about 12%.

7. Factoring. With factoring, you get a big chunk of your accounts receivable (about 80% is common) immediately so you can use it as working capital instead of waiting for your client to pay in 60 to 90 days.

Contact us for a free quote

Understanding Unsecured Small Business Loans in Canada

Small as well as start-up businesses are no strangers to the challenges of having sufficient working capital. From the onset, you would need capital to set up any type of business, although some industries and niches require more funds than others. After putting up your capital, it would take some time to get your ROI. But the reality of the business world is this: the more you invest, the higher your potential ROI is. This means that in order to make more money, you have to keep investing. This is where unsecured small business loans in Canada come in.

Small Business Financing Challenges

Loans are very common in the life cycle of any business. Chances are, you would need to apply for a loan to get the capital that you need, and this is what you’ll use to rollover. But small businesses usually face some challenges when it comes to applying for typical loans offered by banks. You would have to…

Have a track record

Conventional loan providers would ask you to prove your track record before approving your loan. Lenders would like to be sure that your company has the ability to pay them. For small businesses however, especially the ones who are just starting up, they don’t have a track record to show which is why obtaining a bank loan can be a challenge.

Secure a collateral

Traditional lending methods would require that you have a collateral before your loan is approved. Such collateral is usually a business asset such as an equipment, vehicle, or even your building, if you own the property. The challenge with small businesses is that they usually don’t have any valuable asset that they can use as collateral.

Establish a credit history

Showing that you have enough credit history means that you should have already applied for loans in the past, and that these loans got approved and have ideally been paid off. But the reality is that small and start-up businesses rarely have applied and been approved of loans in the past which means they, as a business entity, don’t have a credit history to show.

For all these reasons, unsecured small business loans in Canada would seem like the ideal solution.

What Does ‘Unsecured’ Mean?

Unsecured means there is no collateral needed. It also means the lender will not require you to show documents or even a credit history. In essence, unsecured loans can address all the challenges that small businesses usually face in searching for additional capital. Having the option of applying for unsecured small business loans in Canada will help your business get the leverage that it needs, and this is important especially if you’re still trying to establish your name. Unsecured small business loans in Canada is the answer if you need additional capital in order to expand. Check out www.neebocapital.com to review all the options available for you. If you need additional funding, we can definitely offer a solution that’s just right for you.

Is Business Location Considered When Factoring Loans?

Do you need to consider the geographical location of your company when thinking of whether or not you should apply for factoring loans? While it would be foolish to provide a definitive answer, as there are other variables which may need to be considered, you can make up your mind with the least amount of difficulty by carefully evaluating some statistics that have to do with accounts receivables.

For instance, while it is true that the whole country reeled (and is still reeling in many places) as a result of the economic crisis that overtook the nation a few years ago, not all states have been affected in the same manner or degree.

Cortera, a company that provides credit information on businesses and corporations, released mid last year a list of states with the worst standings, as far as past due accounts receivables are concerned. Here’s the rundown, from highest to lowest:

Is Business Location Considered When Factoring Loans?

Florida: 24.59%
Minnesota: 23.02%
Illinois: 22.97%
Georgia: 21.91%
Hawaii: 21.79%
Missouri: 21.41%
New York: 21.28
Connecticut: 20.76%
Vermont: 20.21%

One of the things that may be inferred from such numbers is that the states mentioned are among those which have heavily experienced the effects of recession. In turn, that makes paying for goods and services difficult.

Should You Consider Factoring Loan?

If you live and primarily do business in a state that’s included in the list above, in the matter of accounts receivables, you would do yourself a great favor by exploring your options in terms of factoring loans.

However this is not to say that those who do business in other states should already relax their guard. On the contrary, even if geographical location may be considered heavily when deciding on whether you should avail of factoring or not, it should not be the only consideration.

Essentially, the most important consideration that you need to take into account is the condition of your business finances. If you often find yourself with a stagnant or blocked cash flow, and its effects are readily felt or seen on your business efficiency or productivity, then it’s highly possible that you need factoring, regardless of where your business is located.

That’s because compared to other “remedies” to deficient cash flow that you may choose from – such as getting a bank loan, or deferring action on business purchases, upgrades, or improvements – getting accounts receivable factoring (a.k.a. invoice factoring) could be the most practical solution.

It’s Not a Loan

For one thing, factoring loans are not really loans per se in the sense that they don’t come with crippling interest rates. It’s more proper to think of factoring as cash advances. Neebo Capital is a factoring company that can best explain the huge differences between a bank loan and factoring. If you’re thinking hard about whether or not to avail of factoring, especially during rapidly changing economic cycles, turn to experts like Neebo Capital, to find out what your options are.

Working Capital Lines vs. Other Lines of Credit

A line of credit can be a huge help to a small business. The security it offers frees you to use your capital in other ways other than as a hedge for emergencies. By being flexible, you limit what you have to pay back in interest since you only take out what you really need. Many people are familiar with working capital lines, but there are other types which you should know about if you own a small business.

Working Capital

Working capital lines of credit typically help small businesses pay for their expenses while they wait for their customers to pay them. For example, utility bills and worker salaries can be paid completely and on time by drawing from the line of credit while you are still waiting on your accounts receivables.

When your accounts receivables are paid, you can then pay back what you drew from the line of credit along with the interest and other fees. This line of credit has a limit, and if you repay what you drew then you can still get access up to the limit of the line of credit. So if you have a $10,000 limit and drew a thousand dollars, you only have $9,000 left on your line of credit. But when you pay back the thousand dollars and the interest, your line of credit goes back to $10,000.

This type of line of credit is usually available for an entire year, after which it can be renewed if both parties are amenable. The interest rate is pegged at a specific percentage over a published rate (such as +1% to +6%) like the prime rate.

Asset Purchase

Getting a business working capital line of credit is pretty much like buying a car through a loan. In business, you may be extended a line of credit to purchase equipment and other assets. The main difference between the working capital line is that it’s non-revolving. If you have a $100,000 line of credit for asset purchase and you spend $10,000 on equipment, you only have $90,000 left on your line of credit even if you repay the $10,000 you drew.

In general, the interest for this type of line of credit is fixed. But sometimes it may be pegged at an adjustable rate.

Construction

We’re not talking about large construction projects here. For example, you may want to make improvements in the space you’re leasing for your restaurant. With a construction line of credit, you first have to pay for the construction out of pocket. Once the lender determines that the construction is complete, then your expenses may be reimbursed. This is also a non-revolving line of credit.

As you can see, working capital lines of credit are not the only lines of credit you can use in order to nurture your business and allow it to grow. If ever you’re approved for a line of credit, try to see which types are available so you can increase your chance of making your business a success.

For more information about business capital lines of credit, please check out www.neebocapital.com.