Small Business Farm Microloans

Farming is not exactly the rage in the US these days. Out of more than 313 million people in the country, less than 1% of them are farmers. And of these farmers, less than half claim it as a principal occupation.

Yet despite the dwindling number of farmers, it’s an undeniable fact that the efficiency of the American farmer is still impressive. US farmers are still among the best in the world. For proof, consider that 3 million farmers are responsible for exporting $115 billion worth of agricultural products all over the world.

The Challenges Faced by Farmers in the US

Today, it’s not really all that easy to be a farmer. Challenges faced by farmers all the time include climate change, the inadequacy of current soil and water conservation, the abuse of pesticides, and genetic modification.

There’s also the fact that farming is not a popular industry among the youth. The average age of a principal farm operator was 54 years old back in 1997. By 2007, that age increased to 57 years old.

Finally, there’s also the matter of economics. The average expenses incurred by farm production is $109,359 a year. Meanwhile, less than 25% of all farms in the US generate revenues of more than $50,000.

The Perseverance of US Farmers

All these challenges have not deterred most farmers from continuing in their efforts to become viable farms. But often they need more capital to take full advantage of the opportunities they encounter. However, financing is often difficult to come by. Some farmers are just beginning in their farming endeavor, so they may not have the necessary credit or collateral to secure the loan they need.

This is where small business farm microloans come in.

The Advantage of Farm Microloans

These microloans are extremely convenient for many farmers to make their business more efficient. These loans are comparatively easier to get. The application process usually takes less time than a traditional loan to process, and the needed paperwork is significantly reduced.

The maximum amount you can get as a small business farmer is $50,000 which is an improvement from the previous $35,000 limit. There is no minimum amount for the loan and you can use the money to:

  • Buy livestock such as chickens and pigs, and the feed for them as well
  • Get much needed farm equipment such as tractors
  • Cover operational costs such as fuel, farm chemicals, and insurance, along with family living expenses
  • Make minor improvements or repairs to farm structures and buildings
  • Refinance some particular debts related to farming
  • Hire management and leadership roles not directly related to farming, such as a marketing director

Limitations of the Farm Microloans

Microloans often require shorter repayment periods, and farming microloans are no exception. The loans must be full repaid within 7 years.

In addition, the loan cannot be used to finance non-farm operations, and that includes horses for non-farm purposes (racing or for pleasure, for example), dog raising, tropical fish, earthworms, and exotic birds.

Still, even with these limitations, the availability of microloans can help new and struggling farmers. These people need all the help they can get to make enough money to support their business. Fortunately with farm microloans, they can.

 

Supply Chain Financing

If you’re part of the retail, automotive, manufacturing, electronic, or automotive sales industry, then the state of your business probably depends a lot on the efficiency of your supply chain.

The supply chain is the path by which any consumer product is transported and sold from the manufacturer to the consumer. In between are the middlemen which facilitate the process.

As part the supply chain, it’s in your best interests that it works efficiently, but often that’s not the case and problems can arise. For example, you may get the consumer items from a supplier who demands that you pay cash immediately. Meanwhile, your own buyers may take 75 or even 90 days to pay what they owe you in full. This can truly put you in a bind if you suddenly find yourself having insufficient working capital.

How Supply Chain Financing Works

There are many types of supply chain financing (SCF). SCF refers to a broad variety of solution designed to maximize the cash flow of all parties in the chain. You can arrange to have such a solution custom-tailored to your circumstances.

For example, let’s say you’re a supplier to a retail store which pays you in full 75 days after receiving the items from you. The SCF provider can take note of the invoices and you can even track all the invoices approved by your buyers. If you don’t mind waiting, then the money owed to you will be paid on the maturity of the invoice.

But if you want to be paid immediately, then the SCF provider can advance you the money right away. The rates are generally favorable for you, because the risk is based on the retailer’s promise to pay fully on the maturity date on the invoice. You get almost the full value of the invoice, minus the discount charged by the SCF provider for its services.

You can then pick and choose which invoices you want to get your advance payment from. The money can be transferred electronically to your company bank account, and it can take only a day or two to arrive. The retailer then pays the SCF provider on the given date on the invoice.

Benefits of SCF

With the right SCF solution in place, it becomes a true win-win situation for all parties involved. For example, suppliers can get their money much earlier. Meanwhile, retailers can extend their payment terms so that they have ample time to sell their wares.

In the end, everyone can improve their cash flow. Suppliers can use the money to stock upon the merchandise, while retailers can maximize their working capital because they don’t have to pay their suppliers immediately. And if they do, they may even enjoy a discount from their suppliers.

Most SCF solutions are not considered loans at all, so your credit won’t be affected. Suppliers essentially sell their accounts receivable, and all it costs them to get their money in advance is a very small fee.

Merchant Cash Advance

When you have your own business, there are times when you need an infusion of cash ASAP. When such a situation comes up, approaching a bank is often an exercise in futility.

There are several reasons why applying for a bank loan may not be ideal for your situation. For example, your business may be new. You may also not have enough equity which means you don’t have collateral needed for a loan. A bank loan application also takes a few weeks to process even if you do get the loan in the end, and the more time you waste waiting for your loan to be approved, the more money you lose.

But you don’t have to rely on a bank loan to get the money you need. One increasingly popular alternative is merchant cash advance.

How a Merchant Cash Advance Works

A merchant cash advance is not a loan, so the cash advance premiums can be very expensive. Usually, a merchant cash advance must be paid within two years, and sometimes the lender may only give you a year to pay back the advance.

Unlike a loan which usually requires a set amount every month, the payment for an advance is often dependent on the amount of credit card business you do on a daily basis. That means you don’t have to worry about making the payment each month.

Merchant Cash Advance Case Study

Here’s a real-life scenario of a merchant cash advance agreement. Calderon puts $700K of his own money for a restaurant business, and his business partners chipped in another $500K. He thought he was all set, but construction costs for the new restaurant went over budget by $80K, and that really cut down his operating capital.

Calderon needed the $80K quickly, and the bank loan required a waiting period of 4 to 5 weeks. The merchant cash advance, on the other hand, was available within 48 hours of applying. He only needed to prove that his business did $40K of sales a month, after which the funding company checked his credit and his business agreement with his partners, and the advance was already available.

Calderon received his $80K, and agreed to pay back $100K. The funder took 12% of his daily credit card sales until the entire amount was paid off.

Pros and Cons

As the case study illustrates, a merchant cash advance is very easy to get and it’s quick too. What’s more, the payment amount isn’t set in stone, so when business is slow then the amount that will need to be paid is expectedly lower.

But then again, the markup can also be very high, so the first rule for you is to shop around so you can get the best rates. You should also make sure that your business makes enough sales so you can still operate with the money you have left. With Calderon, the remaining 88% of his daily sales had to cover his other business expenses.

The funder will always be paid first, so you need to make sure the money you have left can cover utilities, payroll, and inventory, and equipment maintenance. If you can’t cover these expenses, you may not have much of a business left.

 

 

What is Inventory Financing?

It’s pretty normal to have a small business of your own and then find yourself running a little low on operational cash. Perhaps you underestimated how much of a cash cushion you need, or maybe some projected expenses were much more expensive than you thought it would be. Sometimes the competition can crowd you out, or maybe a customer you depended on to pay on time suddenly failed to do so.

When these things happen, most small business owners tend to think about getting a traditional bank loan. But these days the odds of actually getting a loan from a bank aren’t all that good. This is especially true if you don’t have any collateral to offer as security for your loan.

In a way, inventory financing is a form of secured business loan, even if you may currently not have any inventory to speak of.

How Inventory Financing Works

With inventory financing, you get either a short-term loan or a line of credit, which you then use to buy the inventory you need. These products are the inventory, and they serve as collateral for the loan. In other words, if you’re unable to pay the loan according to the agreement you drew up with the lender, the lender then has the right to seize this inventory as part of the payment.

Often, the reason you’re unable to pay for the loan is because the inventory you’re supposed to market and sell isn’t selling as well as you expected. According to experts, this makes inventory financing a form of unsecured loan. After all, if your business is to sell these items and you fail, then how is a bank supposed to succeed where you didn’t?

However, if the inventory is selling well, the money generated by the sales is then used to pay off the loan. For example, let’s say that the lender advances you $100,000 to buy gadgets at $5,000 each which you can sell for $10,000. You can then use the money from each sale to pay off part of the loan or use that money to get more inventory.

In the end, you pay off the loan plus the interest or the cost of the cash advance. Usually, the cost of this form of financing is greater than what factoring entails because of the greater risk and uncertainty. With factoring, items have already been sold, but in inventory financing this is merely hoped for.

Should You Use Inventory Financing?

It depends on the marketability of your inventory. If your inventory is selling well, then you can use inventory financing to reap more profits for your business. However, if your items are not selling well, then lenders may find them unsuitable as security for the loan.

To get inventory financing, you usually need a good credit record and a viable business plan, along with the inventory (and the values) you want to finance. The lender will then offer financing based on the realistic expectations of sales and profits from the inventory.

As the recipient of the loan, part of your responsibility is to make sure that your inventory is in good condition. Lenders have the right to inspect the property to certify that it retains its value as collateral.

 

The Challenges of Small Business Lending

Running a small business is often regarded as a challenge and small business loans can help business owners overcome difficulties along the way. But ironically, applying for a business loan is also a challenge in itself. So instead of having a quick infusion of cash to solve your urgent problems, by applying for a loan, you may encounter even more problems than you already have.

So what are the challenges in small business lending?

  1. Large banks have lousy approval rates. According to the latest figures for small business loans, the approval rate in big banks is only a paltry 4%, even if that rate is still 20% higher than in 2013. That just proves the point that about 80% of small business loan applications are rejected and yet that’s already much better than in the past.
  2. Small banks are disappearing. Meanwhile, in October 2013 the approval rate for small business loans in smaller banks is at a comparatively healthy 50.2%. While this sounds good, the problem is that smaller banks are disappearing from the financial landscape.

Over the last 20 years, regional and local banks with deeper ties to the community have been taken over by foreign banks and large national banks who don’t actually care as much about the community as for their profit margins.

  1. Bank loans take up too much time and effort. The entire application process can take weeks, and during that time the business may already be up in flames because of the lack of much needed cash.

According to one study, on average a small business owner needs to approach numerous banks and use up three full days of man-hours to fill out applications, and that’s before they find a bank who will agree to lend them money.

  1. Banks don’t find small business loans as profitable as larger corporate loans. The banks find these loans much more labor intensive, and that cuts down on their profits. Simply put, a bank usually finds that lending a million dollars is more profitable and easier than lending $50K.
  2. Banks have rather stringent loan requirements. The US may be past the worst of the recession, but banks have a pretty good memory and they no longer have a taste for risky loans. The problem with small business loans from the banks’ perspective is that these companies are intimately tied to the health of the economy.

A large company can weather a financial storm more easily. But a small business may not be as sturdy, and another financial downturn can cause many small businesses to fold up and unable to pay their debts.

So nowadays, if you need a bank loan you better make sure you have excellent credit, a very stable business, and some collateral for the loan. And you should be able to wait several weeks before you will get your money. That is, if you get your money.

For all these reasons, alternative funding institutions offering factoring services and merchant cash advances have become more viable sources of funding than ever before.

The Advantages of Janitorial Factoring Services

 

Advantages of Janitorial Factoring Services
Advantages of Janitorial Factoring Services

There are several good reasons why janitorial services are thriving these days. The most common reason is that just about every place of business needs to be maintained and cleaned, but it doesn’t always make sense for a business to have its own cleaning staff. It’s too much trouble to hire janitors on a permanent basis, especially when the company also has to buy cleaning supplies and equipment as well.

But while there are good reasons for you to start a janitorial service, it may be difficult to maintain its growth when you’re experiencing cash flow issues. You need the cash to meet hire new workers, meet payroll, buy and maintain cleaning appliances, and buy cleaning supplies.

Without the cash flow, you may find yourself walking away from future contracts because you don’t have enough money to hire new workers. And what’s more, you may even have problems with your current contracts since you need to hire new workers for those who quit working for you.

If you’re having cash flow problems, then janitorial factoring services may be the answer to your situation:

  • Factoring services are very easy to get. The approval can come in just a single day, unlike bank loans that take such a long time. The approval for factoring services is also much more likely compared to bank loans. That’s because there’s no need for you to have excellent credit, and you don’t really need to put up any collateral for a loan. Setting up the factoring line takes only a week or so.
  • Factoring gives you your own money now, instead of having to wait. Your customers may take 30 days (or more) to pay you for the services your workers provide. But your daily and weekly expenses won’t wait at all. This causes cash flow problems that factoring solves easily.

What’s more, the cash advance you get is not a loan at all. It’s your own money, but you only get it in advance. This means that such arrangement won’t affect your credit.

  • The factor takes over the collection duties. It’s hard enough to hire sufficient numbers of janitors to meet the demand. So it’s convenient for you when the factor takes the responsibility of collecting the payment from your customers. You don’t have to hire staff for your own collection department.
  • The factor doesn’t tell you how to spend the financing you get. They don’t tell you if you should spend it on growth, new facilities, or hiring new workers. After all, it’s your You spend it on whatever you like.

In contrast, banks often insist that you spend the loan they provide in the manner they prescribe. That’s because it’s the bank’s money, and the bank wants to make sure you’re using the money properly so that you’ll be able to pay them back.

Banks loans may be good for your business, but it’s not always easy to get one. On the other hand, it’s easy enough to get factoring services whenever you need it, so that your company can grow and help many other companies with their cleaning requirements.

 

Factoring for Staffing Companies

factoring for staffing company
All you need to do is send in your weekly timecards and invoices, and you can get between 80% and 93% of the cash in your account the very next day.
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Staffing companies these days fulfill a vital role in our economy. The stats are clear on this. These staffing companies employ 11 million people per year, and they occupy just about all the jobs across all industries. Staffing companies offer benefits to employers, employees, and to the economy as a whole.

Employers benefit because they don’t have to undergo the hassle of hiring competent workers, as the staffing company has done this job for them already. They can get as many workers as needed, and it’s less of a hassle when they need to let go of workers they don’t need any more. And if they find a great worker, the employers can just simply offer them a permanent contract.

Employees also benefit from staffing companies because they get employment that they may otherwise not get. And staffing companies find the employers for them, so they don’t have to scurry around looking for work.

But despite the many good things staffing companies offer, they may also experience problems along the way.

Why Do Staffing Companies Have Problems?

The problem that many successful staffing companies have is that they may not have enough cash flow to handle the payroll. More and more companies these days are looking to staffing companies to provide for their manpower needs. That means staffing companies have to spend money looking for the appropriate candidates, and they also have to meet payroll requirements.

But clients who make use of staffing companies don’t pay on the dot. Usually, they pay 30 days or so after being billed. This delay is causing a lot of headaches for staffing companies. Some have even been forced to not accept new requests for manpower because they don’t the cash flow to recruit and pay for new workers.

How Factoring Helps Staffing Companies

This is where factoring comes in. In factoring, the staffing company may be able to get as much as 80% of the value of the accounts receivable immediately. That money can then be put to good use hiring workers to fill some urgent slots. There’s no need to not accept any new requests anymore.

When the company which needed the extra workers then pays the bill in full, the factoring company forwards the rest of the amount to the staffing company, minus the fees they charge.

This method is in many ways superior to asking a bank for a loan:

  • Banks don’t always grant approval for loans, while factors have much higher approval rates. That’s because factors don’t care how good the credit of the staffing company is. What’s important is the paying history of the company that used the temporary staff.
  • Banks take a very long time to grant approval, but factors may take as little as a single day to decide to grant approval.
  • Factors take over the collection duties, so staffing companies don’t have to set up an entire department for this purpose.
  • Factors don’t interfere with how a staffing company uses the advance. Banks, on the other hand, want to know how the money will be used.
  • Factoring doesn’t count as a loan. It’s a cash advance, technically speaking, because the staffing company is using its own money instead of the lender’s money.

So if you’re running a staffing company, think about getting factoring services if the demand for your workers is making it difficult for you to meet payroll on time.

 

Identifying the Best Commercial Factoring Companies

The good thing about factoring is that now you can find additional financing for your small business if your local bank is unwilling to provide you with the loan you need to operate.

But there’s catch: commercial factoring companies are so prevalent that it may be difficult to identify which one will work best for your business.

So how do you choose among all the commercial factoring companies out there? Here are some steps you can take:

  1. Ask around and read newspapers. What you want are authentic factoring companies, especially those with experience in your industry. This means you should ask around your contacts in your industry to see which factoring companies have experience in your line of work. You can also read newspaper accounts of factoring deals in your area.

By asking for recommendations and reading newspaper articles, you get a more objective review rather than simply go by the advertising copy used by these companies.

Your best bets are always the factoring companies who have extensive experience in your industry. You won’t have to explain how your industry works, and the factors already know which of your customers can be trusted to pay in full and on time. You may even benefit from the contacts and knowledge you gain from an experienced factoring company.

  1. Determine the advance rates and fees. The main advantage of factoring is that you’re more likely to get approval, and the entire application process takes only a day or so to complete. Afterwards, you get a term sheet detailing the advance rates and the types of fees involved.

Obviously, the greater the percentage you get in advance, the better it is for your cash flow. Also, you should compare the fees charged by these commercial factoring companies. There’s a world of difference between a fee of 2% and a fee of 4% of the value of the accounts receivable factored.

You’ll also need to be aware of late fees, especially when your customers have developed an unfortunate habit of paying late.

  1. Assess the ability of the factors to collect payments. In general, factors are the people who handle the collection from your customers. Factors don’t wait for you to pay them. Instead, they’re paid directly by your customers and they forward the money to you after they’ve deducted their fees.

Unfortunately, a factoring company that doesn’t know how to collect payments properly may screw up your amicable relationships with your customers. The twin goals of payment collection are to get the money and still maintain friendly relationships with customers. But a rather brusque approach to payment collection may do more harm than good.

Ask for references and make sure you bring up this topic when you talk to them. Just how aggressive are their collection methods? How do they plan to communicate with your customers? These topics must be discussed before you sign an agreement with a factor.

If you find a factoring company that’s very professional when they deal with you and your customers, then this is a resource that you should treasure for many years to come.

 

The Key Benefits of Manufacturing Asset Based Lending

Asset-based lending provides you with the money you need for your company, using assets such as your inventory and your accounts receivable as collateral. The money you receive depends on the value of these assets. Ordinarily, you can get 80% of the value of your accounts receivable and about 50% of your finished inventory.

As a manufacturer, this type of financing may be suitable for your needs. You probably need to invest in research, new manufacturing tools, and materials to make your finished products.

All these can use up your cash reserves very quickly and you end up running out of money to continue your operations. With asset-based lending, you get the money you need immediately instead of having them tied up in your inventory and accounts receivable.

There are many benefits to this type of financing:

  1. You improve your current cash flow. This is perhaps the most important benefit of asset-based lending. As a manufacturer, you know for a fact that there may be a long period of time between capital outlay and receiving payment for your goods. And within this period, you may run out of money to pay for operational expenses, including meeting payroll and paying utility bills.
  2. It offers you the chance to grow. It’s hard to take on new orders when you don’t have the cash to spend on buying the supplies you need. But with the additional infusion of cash, you now have the money needed to buy supplies to fulfill new orders from your customers. Your ability to fulfill these new orders gives you a better chance of getting even more business in the future.

On the other hand, if you start walking away from orders because you don’t have the necessary capital it may stain your reputation, and your customers may turn to your competitors instead.

  1. The additional funding enables you to negotiate for better prices when you buy supplies. You can now negotiate for better terms and discounts because you can pay for these supplies early. In addition, you can take advantage any deals that may come your way. When prices of raw materials fluctuate, you can buy larger quantities when prices are low.
  2. Asset-based lending often offers flexible payment terms. Most loans require you to pay fixed amounts every month. But these asset-based loans may allow you to pay based on market or seasonal fluctuations.

These fluctuations are common in the manufacturing industry, but you still have year-round expenses, such as plant operation expenses, technology upgrades, payroll, and marketing. These loans cover such expenses while enabling you to pay based on the revenue you receive every month. For example, the lender may ask for 20% of your gross income every month, and that means regardless of how much business you make each month you can still make payment each time.

As a manufacturer, you’ll need a lot of cash reserves to run your business and boost its growth. If you can’t get a traditional bank loan, asset-based lending can offer you what your company needs.