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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:

One type of equipment refers to the “usual stuff” that most businesses need. This includes furniture, computers, printers, and other common office equipment.
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.
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.

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What Are Your Non Recourse Factoring Options?

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Many small businesses are familiar with the concept of factoring. This is a funding method in which you get a cash advance that’s normally 70-80% of the value of the invoice, and when the customer pays in full you get the rest of your money once the factor has taken its fees from the payment. Normally, you’d have to return the cash advance if the customer doesn’t pay, but that may not be the case in non-recourse factoring.

The Specific Definition of Non-Recourse Factoring

Each factor has its own definition of non-recourse factoring. Now it may be a perfect situation for you if the factor accepts all the risk of nonpayment, but that is almost always never the case. This isn’t a time when you tell your factor about “buyers beware”. Usually, part of your agreement with the factor is a clause requiring you to buy back the invoice from the factor when payment isn’t made.

Almost always, the definition of non-recourse factoring involves only nonpayment due to insolvency. Now here again the term “insolvency” needs to be defined clearly in the agreement with your factor. Some factors have different definitions, so you have to be on the same page.

This clearly means that if the customer declines to pay you because of a payment dispute or a disagreement regarding the quality of the goods you were supposed to deliver, the factor doesn’t assume the bad debt. Instead, you’ll be required to return the money you received as a cash advance.

Time Periods for Payment

Usually, even in non-recourse factoring there’s a time period within which the customer must make their payment in full. Most of the time, this is anywhere from 60 to 90 days. But some factoring agreements call for a return of the cash advance in just 45 days, while other factors even offer up to 180 days. This is one of the non recourse factoring options you may want to negotiate with your factor.

Payment Options

If the customer doesn’t pay for any reason other than insolvency, then the factor can recourse or ask you to buy the invoice back. This is rarely the matter of returning the money in cash. Most of the time, you’d have spent that money already.

But the factor can ask that you submit another invoice for them in exchange, and they can get the payment for the earlier cash advance from the new invoice when that new customer pays in full (and meanwhile you don’t get a cash advance from that new invoice).

Another option is to get the money back from the reserve accounts (the money not part of the cash advance). This is the money held back by the factor for this very purpose.

Conclusion

Non-recourse factoring is more expensive than conventional factoring, but clearly you need to know the details and definitions of their service. Take note of the non recourse factoring options, but the first thing you need to do is to determine if this type of factoring actually serves your needs.

Where to Get Staffing Agency Funding

If you’re running a staffing agency, then it’s very likely that you’ll need extra funding sooner or later. Working capital is probably going to be your most probable problem, because you’ll need sufficient staffing agency funding to cover your payroll needs.

But then this leads to another problem: where exactly do you get staffing agency funding?

Here are some of the more common options:

Banks. This needs to be at the top of the list, simply because it is the first option most business owners think of. But you’ll first need to choose the right bank. For a small staffing agency, the bigger banks may not be the best option unless you can truly demonstrate how low the risks are for your lender.

Smaller community banks are more viable options. In fact, by 2011 the volume of small business loans provided by small banks grew to $302 billion.

You may also want to consider an SBA-backed loan. This involves an inordinate amount of paperwork, but banks are more likely to help with your financing when the government guarantees the repayment of as much as 85% of the loan.

The main problem with a bank loan, however, is that the application process will take time, which isn’t really of much help to you when you have a payroll disaster on the horizon. Even getting a loan can be difficult, especially when you don’t have enough assets to offer as security. You may even have to offer the house you own as collateral.

You can get the help of venture capitalists, or even angel investors. The essence of the deal is simple. You get the money you need immediately, but in return you give up a percentage of the business.

The main drawbacks of this approach are rather obvious. For one, you end up losing a part of the company and therefore part of the future profits that you could have kept to yourself. And there’s also a very good chance that you can no longer make your own decisions without consulting with your partners. After all, they now own part of your business.

This method isn’t much help for startups, but it can be very useful for staffing agencies that are already established. Factoring addresses the peculiar inequity when it comes to payroll and customer payment schedules. So since you need to pay your workers at the end of the week, you also immediately get as much as 80% of the value of the invoices generated, instead of having to wait for two months until the customer company pays in full.

Factoring is comparatively much easier to secure, and the application process may only take a few days.

Most people use their own savings as well as loans from family and friends when they start a small business. That may not be enough for a staffing agency, but at least you still have other staffing agency funding sources to consider.

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The Top 5 Uses of Staffing Company Cash

If you’re thinking about starting a staffing company, the first thing you need to really think about is your working capital cash. You will, in fact, need a lot of staffing company cash at the outset because of the inherent nature of the industry.

Here’s a short list of the most important uses for working capital:

Payroll. This is without a doubt the most important consideration of them all. Your temporary workers are the lifeblood of your company without which you can’t qualify as a staffing business.

But here’s the rub: you’ll need to make sure that you have enough money to cover payroll for all your workers, and that means having the payroll cash ready each week.

At the same time, your customers are companies which have their own red tape procedures to deal with. They’ll need to verify attendance, work records, overtime, and the number of workers. All these need time, so it’s common for a company to take as long as 50 days or more to pay the invoice for your services in full.

So that means you’ll need to make payroll even though your customers haven’t paid you yet.

You’ll need to get the word out that you’re hiring temporary workers and that means spending money for advertising. You’ll probably need a website, and then you may have to hand out fliers and even pay for newspaper ads too. This is going to be a constant drain on your cash, because many workers will leave your company when they’re offered permanent jobs by other companies.
Training your workers. In an ideal world, your workers have all the necessary skills that your customers are looking for. But we don’t live in a perfect world, so that means you may have to offer some training modules for new hires and even refresher courses for older employees.

For some situations, your workers may have to take special aptitude tests to confirm that they have the necessary skills needed by your customer-companies. This is common in industries like health care, in which workers must have the necessary credentials and pass the needed tests.

Paperwork fees. Running a staffing company means paying special taxes, and of course you will need to take insurance premiums into consideration. Coverage for your workers is often mandatory, and failing to do so creates legal risks for you.
Advertising for customers. You also need to find more customers for your business to survive—this is a common goal of advertising after all. But this can also be a double-edged sword for your company. The more customers you get, the more cash you need to pay for the additional hires.

Of course, some of the other uses for staffing company cash are much like what any company would need, regardless of industry. Paying rent and utilities will also need to be covered. Add them all together, and that means several sources of funding, such as bank loans, venture capitalists, and factoring companies, must be considered.

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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

The Challenges of Securing a Staffing Company Loan

Staffing companies often need substantial amounts of cash to get started and also to fund day to day operations. By its very nature, staffing companies need to pay its workers on a weekly basis, but it’s not uncommon for its clients to take almost two months before they pay for the services they availed. This often leads to working capital shortage which explains the need for a staffing company loan.

The Special Needs of Staffing Companies

Like any business, a staffing company needs sizeable capital to set up their business. They have to pay the usual registration fees as well as set aside money for office rent, furniture, and utilities. But obviously they also need to hire (and pay) staffing personnel and these workers don’t just grow on trees.

They have to recruit workers and that means paying for advertising and even recruitment companies and headhunters. Then the workers must also be screened and oftentimes additional training is provided. Then there are also the insurance payments and the taxes to consider.

In short, running a staffing company can really drain the working capital cash.

Additional problems can exist too, especially when current economic situations are not so favorable. For example, your staffing company clientele may begin to hire workers full-time instead of relying on you to provide them with workers on a contract-basis. And workers may also leave your employ when they find permanent job positions in other companies.

And even if you can cover your current work requirements, new customers and demands for more workers mean that you need to hire more people to meet the increased demand, and that means you’ll need more funding.

Getting a Bank Loan

A bank loan is often the first option you think of when you need extra working capital. But securing a loan is not an easy proposition for a small business, and that’s especially true for a staffing company. You usually don’t have enough assets that you can use as collateral, and banks are always hesitant to grant loans to companies that have difficulty meeting their own staff’s payroll.

And even if you’re lucky and you do get the loan you need from your bank, the entire process will take a lot of time. For emergency funding to cover payroll, this delay makes bank loans very impractical.

So how are these problems overcome? Actually, more often than not these problems are virtually insurmountable. This is a fact that many staffing companies realize too late. A staffing company loan is extremely difficult to secure from banks and other traditional lenders.

And it’s for that reason why more creative financing possibilities must be explored if a staffing company wants to survive. Factoring is one of these possible solutions, and it has proven quite useful for many staffing companies.

Factoring is very easy to secure, and you get your funding much faster too. In addition, it’s not technically a staffing company loan at all, so your credit is largely unaffected by the transaction. With factoring, you can get the funding you need at the time you really need it, and this can help your company stay afloat during lean times and foster growth when the opportunities present themselves.

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

Your Staffing Accounts Receivable are Very Valuable Assets

When you’re running a staffing agency, your accounts receivable can be a source of frustration. Staffing companies have a constant need for working capital because of how staffing accounts receivables are set up.

How Accounts Receivables Lead to Working Capital Drain

So let’s say you have a customer (a company) who needs at least 6 workers from you working for 6 hours a day. Sometimes they may ask for more workers, and sometimes the workers may work for up to 10 hours.

Once the work week is complete, your task as the staffing agency is to make sure that the workers are paid. When you pay your workers late your business will fold up in no time. Even doing it once can have catastrophic results.

Meanwhile, at the end of each week, your customer generates an invoice that requires them to pay you for the work done after 30 days. That means you need to have enough money on hand to pay your workers, while you twiddle your thumbs waiting to get paid.

Companies tend to take a long time to pay because they also have their own red tape to deal with. They will need to verify the man-hours they got, and the payment may come from another office or location of the company.

Accounts Receivables and Working Capital

Nowadays you don’t have to wait to get paid. Factoring is a funding method that gets you about 80% of the value of the accounts receivable right away. So that means no more waiting!

In fact, this method of funding is also very easy to secure, in stark contrast to trying to get a bank loan which can take several weeks. In factoring, you will know if you will get your funding quickly (which is more likely, by the way) in a few days or even in 24 hours.

Additional Benefits of Factoring

With factoring, you can even fuel your own growth as a staffing agency. Growth opportunities such as greater demands for more workers can be accommodated because you have the working capital needed to hire and pay more workers.

In addition, you also won’t have to deal with red tape shenanigans when collecting payment. The factor does the collection for you, but you’re updated on the progress. So finding the contact person in the company you do business with and dealing with the payment collections and notifications become the tasks of the factor.

Factors can even investigate the trustworthiness of new customers. Factors review their credit instead of yours, and in doing so they can help you avoid those with poor credit.

So don’t let your staffing accounts receivable frustrate you. They can give you the working capital you need with the right factoring company.

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

Key Reasons Why Toronto Accounts Receivables Factoring is Better than Bank Loans

Many Toronto businesses today have realized that getting a loan from a bank is a truly excruciating process, and often the result can be a spectacular failure. But now alternatives such as Toronto accounts receivables factoring are beginning to look more and more attractive to many SMBs.

The Problem with Bank Loans

Trying to borrow money from a bank, especially in Canada, is a process that’s fraught with many challenges. One immediate problem is the comparatively limited number of funding sources. This is the reason why many Canadian companies are advised to seek financing from US banks and financial institutions. Many US financial institutions are searching for earning opportunities abroad, and Canada is an attractive option.

Yet borrowing from a bank is very difficult regardless of whether it’s in Canada or the US. Sometimes banks have rules that apply to your business in particular. For example, some banks today simply refuse to offer financing to restaurants. What’s worse is that this may be the reason for the refusal to finance your deli, even after the loan application process has gone on for months.

And the time needed for the loan application process can truly test your patience. Banks need to know a lot about your company before they decide to finance it. You have to explain who you are and why you and your company should be trusted. You need to demonstrate your understanding of the market by differentiating yourself from your competitors. You’ll need to explain how you intend to use the funding you will receive, and what your revenue expectations are. And the list goes on and on.

How Factoring is Different

In contrast, numerous Toronto accounts receivables factoring services have sprung up and they offer a better alternative than banks. Factoring is one of the more popular options. In this scenario, you exchange your account receivables for instant cash that’s about 80% of the value of your invoices. Once your customer pays the factor in full, the factor takes its fees and then gives you the rest of the payment.

With factoring, you don’t need months to see whether you will get the loan you need. Instead, you get an answer in a week, maybe less. What’s more, your chance of getting approved for financing is much higher.

The reason is simple. Factors don’t really need to understand the minute details of your business. They only need to determine the trustworthiness of your customers. So if your customers have good credit, then they will give you the funding you need.

Conclusion

The most obvious advantage of traditional loans is that they generally levy lower interest rates than what factors charge. But low interest rates don’t mean a thing when you can’t get the funding you need.

With Toronto accounts receivables factoring, you get your funding right away, and it can continue for months. And as the volume of your account receivables grow, your financing increases to meet your needs.

The Real Truth about Factoring Loans

Is factoring a loan? This is one of the more confusing aspects of factoring, because it is a way of getting funding for companies which need a loan to stay afloat. It doesn’t help that the term “factoring” can sometimes mean a loan when invoices are used as collateral. These factoring loans are often called “invoice discounting”.

What is Factoring?

So, let’s clarify the issue once and for all. Factoring involves the sale of accounts receivable to a third party finance company, called a factor. As such, it’s not a loan at all.

The factor buys the accounts receivable and in return they pay about 80% of the value of the invoice in advance. If you’re the business with the accounts receivables, you can then use the advance money for a wide variety of business functions—to meet payroll, pay for supplies for upcoming projects, or pay for debts that need immediate servicing. Once your customers pay the full amount of the invoice, the factor then forwards the money to your business after it has taken out the fee for its services.

Since factoring involves the sale of the invoices, the factor is paid directly by the customers.

Advantages over Other Forms of Financing

So why has factoring suddenly become so popular among many small businesses? The reason is simple. Ever since the most recent economic crunch, banks have become a lot more hesitant to lend to small businesses. The small amounts of loan needed by small businesses take a lot of effort to process, but the potential profit is too little. Also, the risk is often deemed too great by traditional banks.

That is how factoring became popular. Factoring has already established itself in several industries (most notably the garment industry) but of late it is now a recognized alternative form of funding for just about every industry. Factoring has a much higher approval rating than traditional loans, and the entire process takes very little time in comparison.

Factors don’t really much care about the credit of your company. Instead, it matters more to them that your customers have a good credit history. So if you have reputable customers, you can get the funding you need through your accounts receivable.

Another benefit is that with so many factors offering their services, you can pick out the best option. Perhaps one factor offers a much higher advance than average, as some claim to offer advances of up to 90% of the value of the invoices. Others offer lower fees so that when you get the rest of the money when your customer pays in full, your profit margin is not as reduced as it would be with other factors.

Some factors offer long experience in your particular industry, so that they know which of the potential customers have the best track records for paying fully on time. Others brag about excellent collection services, so that your customers are not alienated when they have to pay a factor instead of your company.

Nowadays, banks have come to recognize that factoring is already considered a perfectly acceptable form of funding, which is why many factoring companies are owned by banks as well.

How to Get Working Capital for a Service Company

A service company needs a lot of working capital in order to operate efficiently. Meeting payroll is of course crucial, since your workers are your most important assets. They’re the ones providing the services in the first place.

Then you’ll need working capital for training your workers. They will need to replenish the supplies they use up, and often you will also need to rent or buy equipment so they can do their job. And not to mention, your entire enterprise needs an office, a website, and utilities.

So how can you get the working capital you need for all these expenses? This is a real problem, especially when your customers take more than a month to pay for the services you’ve provided.

Here are some of the usual methods:

Borrow money from friends and family. This form of financing offers several advantages, including low interest rates and of course a speedier way of getting the money you need. But there are also disadvantages, especially if you have trouble repaying the loan – you risk damaging your personal relationships. Another disadvantage is that you may earn a reputation for “neediness” among your other friends and family, especially if your lender isn’t mindful of your need for confidentiality.
Credit cards. If you can make the minimum payments on time and your expenses aren’t that big (especially when you are the sole service worker), then perhaps this is a viable option. It’s quick and easy and the minimum payments are not all that hard to make. But this also affects your credit, and if you suddenly find yourself unable to pay the minimum payments then the interest rate can be very damaging.
Traditional bank loans. This is usually a good method to try if you have a good relationship with your bank. But the problem with bank loans is that the approval rate is basically 50/50, and the processing of the loan takes too much time. You’ll need to ask for the loan long before you really need the funding, or else it may come too late.
If the fact that your customers don’t pay right away is giving you working capital problems, then this can be solved through factoring. This method of payment gives you an advance of up to 80% of the value of the invoices, and that money can serve as your working capital for future business. The rest of the money will come to you once your customer pays the factor in full, minus the fee of the factor.

The main advantage of this method of funding is speed. You can get approval quickly, the advance comes to you immediately. You can then use that money right away. But keep in mind that with the interest rates, you need a decent profit margin for this to work.

With small service companies, other methods of funding such as crowdfunding and selling a piece of the company to venture capitalists may not be practical. But what’s obvious is that you have lots of options aside from just a traditional bank loan. By learning how to get working capital for a service company, you can make sure you can provide service even when your customers take a while to pay you.