Small Business Funding Alternatives

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Other Liquid Assets Which a Business Can Leverage to Help Keep it “Cash Rich” as Opposed to “Cash Poor”……………….by Debra Maples

 

Okay, so far we’ve been talking about the Asset-Based Lending industry and/or it’s cousin, the Cash Flow Industry and how they can help businesses with their working capital and cash flow issues.

 

We have reviewed some of the most commonly leveraged assets in these industries such as a business’ invoices, a merchant’s “future” credit/debit card receipts, equipment, and purchase orders and contracts.

 

We have also learned about some of the “financial tools” used to leverage these assets that include:

1. Factoring of a business’ accounts receivable which converts that business’ invoices into immediate cash for daily operating expenses;

2. Advances against a merchant’s “future” credit/debit card receipts;

3. Equipment leasing which helps a business leverage it’s equipment while it is creating revenue; and

4. Purchase order and contract funding for goods and services.

 

But what about “other” assets a business (or individual) might have which can be leveraged for its cash flow needs?

 

“Others?” you ask. Yes! There are many more! Remember…any piece of paper with a dollar value attached to it can be leveraged in these industries. And we will take a brief look at some of them now.

 

Perhaps your business has another liquid asset of which you are unaware which you can leverage and use to further enhance your cash flow! This list is always growing too. So, if you feel you have a negotiable paper instrument with a dollar value but are not sure, don’t hesitate to check it out!

 

Business-Based Cash Flow Income Streams:

• Accounts Receivable

• Aerospace leases

• Bankruptcy Chapter 11 reorganization plans

• Bankruptcy receivables

• Commercial contracts

• Commercial deficiency portfolios

• Commercial leases

• Construction receivables

• Equipment leases

• Equipment timeshares (or “fractional ownership interests”)

• International receivables

• Letters of credit

• Medical receivables

• Partnership agreements

• Purchase orders

• Sports contracts

• Trade acceptance drafts

• Warehouse inventory lines

For instance, a strip mall owner who has 20 retail merchant leases for the strip mall but does not need all the cash flow each month that is generated from these leases can sell a portion of the leases. The owner can then use the proceeds from this sale for improvements to the strip mall or for whatever other purposes he may wish, thus, self-financing the improvements!

 

Collateral-Based Cash Flow Income Streams

• Aerospace notes

• Automobile notes

• Business notes

• Collectibles notes

• Equipment notes

• Homeowner/condominium assessments

• Marine notes

• Mobile home notes

• Private mortgage notes

• RV, Motor home and business vehicle notes

• Tax lien certificates and tax deeds

Private mortgage notes are the most easily recognizable of this group. This liquid asset (mortgage) has been leveraged when the name of the company to whom a mortgage payment is made changes from one company to another. Almost every long-term homeowner has experienced this at least once.

 

Consumer-Based Cash Flow Income Streams

• Cemetery pre-need contracts

• Certificates of deposit

• Consumer contracts

• Credit Card charge-offs

• Delinquent debt

• Health and country club memberships

• Inheritances

• Trust advances

• License impounds

• Retail installment agreements

• Student loans

• Timeshare and vacation club memberships

Consumer contracts such as with mini-storage facilities can also be leveraged (or a portion sold) if the storage facility owner does not need all of the cash flow from the contractual payments, similar to the strip mall owner in the above scenario.

 

The majority of the instruments listed under the first three categories (as noted in the above examples) are leveraged in portfolios rather than individually.

 

In the following categories, the instruments can be leveraged both individually and in portfolios.

 

Contingency-Based Cash Flow Income Streams

• Commercial judgments

• Commissions

• Consumer judgments

• Corporate charitable contributions

• Franchise fees

• License fees

• Royalty payments (including mineral rights fees)

• Sales Revenue

The Merchant Credit Card Receipt Advances would fall under the Sales Revenue category whereby the merchant is leveraging its monthly, documented credit and debit card sales.

 

Government-Based Cash Flow Income Streams

• Farm contracts and conservation reserve payments

• Lottery winnings

• Tax refunds

• Tax credits

We all know how Louisiana has been whooing the film industry with tax credit incentives, right? And most of these companies are not Louisiana companies either, right? So, what are they doing with “Louisiana” tax credits? They are SELLING them to Louisiana companies who can use them thereby leveraging a liquid asset!

 

Insurance-Based Cash Flow Income Streams

• Annuities

• Casino winnings

• Corporate retirement plans

• Funeral purchase assignments

• Prizes and awards

• Structured settlements and class action awards

• Life Insurance cashouts (sometimes called viaticals)

There are funders who will purchase a person’s whole life insurance policy at a higher rate than what that individual would get from the insurer should he or she decided to cancel and cashout the policy.

 

If you have any questions at all or one of these liquid assets you would like to leverage or discuss in more detail, please do not hesitate to give me a call for a free, no-obligation consultation.

 

 

 

Share This

No Comments »

Equipment Leasing – an Often Over-Looked Financial Tool for the Cash-Strapped, Small Business Owner…………….by Debra Maples

Cash Flow or preserving your Working Capital is the name of the game (wouldn’t you agree?) when it comes to “staying” in business!

Then, tell me WHY so many small business owners put out mega bucks on equipment and use up their valuable “cash” assets? Sure, you “own” it, but where does that get you in the long run?

Let’s explore some facts and benefits of equipment leasing vs. outright purchase of the equipment (usually via bank or other loan),

FACT: A lease is a simple agreement between the owner of equipment (Lessor) and the end-user (Lessee) providing for the exclusive use of the equipment for a monthly fee. Because leasing provides more benefits than ownership does, it is one more “financial” tool for the toolbox of the small business owner.

FACT: Leasing is the most widely used method of equipment financing in the United States, accounting for approximately one-third of all capital investments.

FACT: 80% of all small businesses lease some or all of their equipment.

BENEFITS OF EQUIPMENT LEASING VS. OUTRIGHT PURCHASE:

Aids in the Growth of Your Business

A growing business is apt to face the dilemma of limited cash flow and the need to add equipment. Leasing can solve that problem with the addition of that equipment with almost no capital expenditure.

Ease of Application and Fast Processing

Application only required for smaller leases (usually up to $75,000) with no financials or tax returns and processing is usually within days.

100% Financing Conserves Working Capital

All equipment costs, installation, delivery, etc, can usually be included in the lease. You choose the equipment from the vendor you wish and retain all warranties and guarantees. Usually all that is required is a couple of monthly payments up front.

Avoids Loan Restrictions

Leasing leaves your other credit lines intact.  Normally, your banker will not reduce your credit lines when you lease; they may do so when you borrow.  Leasing preserves your access to cash!  Instead of a liability on your financial statement, the lease can be shown as a footnote, maintaining healthy financial ratios.  Keep your cash and credit lines in reserve for when you need them for inventory, advertising, payroll, taxes, or to take advantage of supplier discounts and other opportunities.

Capital Management Tool

Would you pay your employees’ wages several years in advance?  Of course not!

Paying cash for equipment that will provide many years of service is like paying an employee for years of service in advance! 

Leasing equipment is comparable to hiring employees.  Pay for your equipment as it produces income and provides benefits and service to you.

Often the monthly payment will be less than the profits generated by the leased equipment.  And you have the option to own the equipment at lease end (usually for 10% of its original cost).

Provides More Options

Equipment obsolescence can interfere with your continuing profitability.  Upgrades, modernization, and technological advances all become easier with leasing.  When change occurs, you’ll be glad you leased your equipment!

May Provide Tax Savings

Depending on several variables, leasing can provide tax benefits to you. Recent changes in tax laws have been made since President Bush has been in office, however, so that the tax advantages may not be as good as in previous years. You should speak to your accountant about this.

Overcomes Budget Restrictions

Leasing is an operating expense and not a capital item with predictable monthly payments.  This allows you to budget your equipment costs up to 5 years in advance and avoid fluctuations common to “prime plus” loans.  A fixed-rate leasing program enables you to make regular, equal payments that actually get cheaper using tomorrow’s dollars.

Should Every Business Lease

Every business should at least consider the benefits of leasing in the context of tax savings, capital management, and the leveraging and preservation of working capital and cash flow. The more you know about leasing, the better decision you can make.

Our leasing experts will be happy to go over every aspect of a lease and compare it to comparable alternatives to help you make the best and most-informed decision for your particular business’ needs.

So, why don’t you consider adding equipment leasing, along with the other financial tools we’ve been discussing recently, into your small business’ financial toolbox and see how it can help your cash flow better in your business?!

Share This

Tags: avoids loan restrictions, preserve working capital

No Comments »

Retail Merchants – Frustrated with your lack of business funding options? By Debra Maples

 

What’s a busy retail merchant to do when it needs extra working capital?

 

“Oh, NO!!! - Not the gauntlet,” you think – taking your valuable time (and patience) to deal with the “paperwork” required by traditional sources!

 

Correct! You got it! Not the Guantlet! And let me tell you why!

 

Today – there is a better, easier, more reliable, convenient and FAST way to obtain lines of business credit for merchants!

 

“HOW?” you say; tell me more!

 

Okay, I will — since it is my goal to help educate small business owners as to all the alternative financial tools available to them today that were not previously available – that’s just what I intend to do. So, listen up because this is exciting stuff!

 

Any vendor or merchant who accepts credit/debit cards can easily get an advance from their “future” credit and/or debit card receipts!

 

Remember, the folks I work with help a business leverage its “liquid assets” so that no “debt” is created and added to its balance sheet. In fact, many businesses use the options we offer to retire “loans” and “strengthen” their balance sheet!

 

So, those little bitty chunks of paper — those future credit or debit card receipts — are pieces of paper with a dollar value attached to them, right? And, what can you do with them in the asset-based lending industry? You got it! You can “leverage” them! They are a “liquid asset” of the merchant’s business.

 

Using this non-traditional, debt-free funding tool, we have helped businesses by providing money for:

• Equipment and inventory purchases

• Cash flow needs for seasonal businesses

• Renovating or remodeling your business

• Advertising

 

So, “Give me some details,” you say!

 

How does it work?

 

The funding source will literally purchase your “future” Visa/MC receipts in the form of a cash advance.

Generally:

• You are advanced from $1,500 up to $250,000 based on your previous average monthly sales receipts

• A small fee is deducted from your ongoing “future” Visa/MC receipts (the amount or percentage is determined by the business owner and the funder)

• There are no fixed payments and no fixed re-payment term

 

What do you need to qualify?

Generally:

• Your business must accept credit/debit cards as a form of payment

• You need to be processing a minimum of $1,700.00 and above a month

• You can qualify even with poor personal or business credit

 

What paperwork is needed?

Generally:

• Completed and signed simple application

• 3 or more month’s credit card statements

• Bank statement

 

How long does it take?

Generally:

• Once your completed application has been received and processed (which can sometimes be done in as little as 1 day’s time), it takes 5-7 days for the funds to be forwarded and any subsequent fundings can be done in one-half the time.

 

So, as an example, a merchant whose business averages $20,000 a month in credit/debit card receivables, can get an advance of approximately $30,000 against its “future” receipts within 5 to 7 days after completion of the application and approval process.

 

These are easy lines of credit for merchants to establish and maintain – even for years – so that any extraordinary working capital needs they might encounter can be filled almost automatically without any disruption to a merchant’s already busy schedule.

 

The vast majority of the millions of new jobs created in the US in the last 15 years were created by the hundreds of thousands of small merchants and entrepreneurs that have fueled America’s economic growth. And, until now, small business’ funding and other needs have gone unaddressed.

 

As relates to funding, however, innovative private investors have seen this need of small business and have stepped in to lend a hand and help make the small merchant’s business grow and prosper while saving time and headaches.

 

These funders provide the funds a small business needs to realize its full potential and make its dreams become a reality and I, for one, am happy and excited to be a part of it!

 

Please call or contact me for a free, no-obligation business cash flow consultation at 225-247-4370 or dmaples@yourcashflowconnection.com. More details on other non-traditional funding tools can be found at my website, http://www.yourcashflowconnection.com.

 

Share This

Tags: future credit card receipts, hospitality industry, leverage liquid asset, retail and internet merchants

No Comments »

We have plenty of business, but what we really need is cash to run our business!”

Have you ever heard a frustrated business owner utter this remark? Or thought it yourself?

What would you say if I told you I could help you or that other frustrated business owner get that cash to keep that cash flowing in your business — keep your business up and going and running smoothly so that you can do what you do best — run your business?

Okay….got your attention?

Well, let me introduce you to a fast-growing source of cash for growth-oriented and cash-hungry small businesses — factoring of accounts receivable.

“So, what exactly IS factoring of accounts receivable?” you ask.

Factoring is the conversion of a company’s commercial accounts receivable into immediate cash by selling those accounts at a discount. With factoring you can get 70 to 80% of an invoice’s face value wire transferred into your account within 24 to 48 hours of the invoice being issued and approved. Pretty, useful, huh?

Better yet - factoring is not a loan! With factoring there is no interest to pay, nor principal to repay. No liability will appear on a company’s balance sheet due to its factoring. A company simply sells one of its assets (accounts receivable) for an agreed-upon “fee” to obtain a more liquid asset (cash) thus self-financing it’s own growth with debt-free funding. It’s equivalent to when you sell your vehicle (an asset) to someone — the two of you agree upon a price and the transaction is done!

Since factoring is not a “loan,” funding is not based on a company’s ability to repay the amount advanced. Rather, funding is based on the ability of the company’s customers to pay what is owed the company for the purchase of the company’s goods or services.

Unlike traditional funding sources which require all the assets a business has available for collateral on a credit line, factoring is, in essence, a Receivables-Based Credit Line, which needs no other collateral. It is available to be drawn on when and as needed. In fact, a business can conceivably have a credit line with its bank with its other assets as collateral and a second credit line with a factoring company with the receivables ONLY as collateral! Interesting…?

With factoring, you can have cash on demand to meet seasonal demands, accommodate new and larger clients who may demand longer terms or use up any excess working capital you have on hand. Factoring, in essence, gives you the option of offering terms to your customers thereby helping you to increase your customer base.

Prior to the 1980’s, factoring was used primarily in the garment, textile and furniture industries and was only otherwise available to “big business”. At that time (as with many things), the terms and prices were much different than what they are today.

Due to the increased competition and visibility of this very viable financial tool, however, these have changed for the better. The terms and prices we see today make factoring a quick and viable alternative funding tool for small businesses nationwide so that they, too, can take advantage of this proven, debt-free and flexible method to effectively multiply working capital.

SOME HIGHLIGHTS/ADVANTAGES TO FACTORING:

• No financials required — MUCH less paperwork than traditional sources (oftentimes this can be done by fax or email and no personal “appearance” is required by the business owner);

• Quick account setup - usually 5 business days (sometimes faster);

• Usually can have 70 to 80% of invoice amount wire transferred to your account within 48 hours after approved;

• No long-term contracts, you factor as much or little as needed;

 

Why don’t YOU make this a year of growth and increased profits by using this financial tool to enhance your business!

Please contact me for a free, no-obligation consultation at 225-247-4370 or dmaples@yourcashflowconnection.com. Please also see additional information on my website: www.yourcashflowconnection.com.

 

 

 

 

 

 

Share This

Tags: cash hungry, cash poor, growth-oriented, receivables based credit line, small business

No Comments »

The number one reason for business failure in the U.S. today is lack of working capital!

     Businesses need money to grow. A business cannot survive just because it has a better product, an exclusive market or the best method of distribution. The catalyst required for progress is money!

     But where does a business go when the banks say no?

 

Asset-Based Lending - What Is It and How Can It Help?

Asset-based lenders play a vital part in financing the economy and are dedicated to the growth and well-being of their clients. They provide their clients with cash by lending on fixed assets, accounts receivable and inventory, and engage in factoring, purchase order financing, real estate financing and leasing. They include the asset-based lending arms of domestic and foreign commercial banks, small and large independent finance companies, factoring organizations and financing subsidiaries of major industrial corporations.

The increased cash availability provided by asset-based lenders often makes the difference between profitable growth and failure for the undercapitalized business. The flexibility and cash flow availability they provide have enabled countless companies to grow and take advantage of market opportunities.

Asset-based lenders most often advance funds when traditional sources are not available. They are familiar with various types of businesses and are responsive to the individual client needs. Whereas, traditional sources, such as banks, usually have a one-size-fits-all attitude.

The phrases, “too small,” “too new,” and “not enough net worth,” do not deter asset-based funders. These lenders are “proactive” rather than “reactive” and can often help with creative structuring of deals to accomplish the goals and needs of their clients.

These lenders - large and small alike - possess the experience and know-how to structure the proper financing program for their borrowers and specialize in financing business transactions covering a broad range of products and services, both domestically and internationally. They understand the ins and outs of the specific industry they deal with. They have made a point of learning the industry and they have also made a point of thinking “outside the box” to accommodate the industry’s special needs.

Asset-based lending has always been available to “big business” but is just recently becoming utilized by small business. The business world has begun to realize that the total of “small business” is larger than “big business” and is beginning to work hard to make small business aware of these funding options.

Russell Handley, owner of Test Communications Group in Newburgh, NY installs cable lines for large cable companies. In his industry, it is standard for these firms to take as long as 90 days to pay bills. So Handley uses factoring (only one of the numerous types of asset-based lending - which is the sale of accounts receivable) on occasion and getting money quickly for his invoices allows him to take on more work. In fact, he credits factoring with having helped him increase his annual revenue from $500,000 seven years ago to nearly $4 million today. “We wouldn’t have grown as fast as we did without it,” he says.

(Pofeldt, Elaine. “Raising Capital.” Success May 1999.)

Phillip Brach, owner of World Trade Knitting Mills in Brooklyn, NY says, “When you call with a question, you don’t have to wait days and weeks for answers from the president and vice president,” he says. He also credits factoring with allowing him to increase his production and sale by about 25 percent in two years. (Pofeldt, Elaine. “Raising Capital.” Success May 1999.)

Some banks are actually beginning to send clients they reject to asset-based lenders. They have decided it is in their best interest to refer their business to someone who can help the client. Then, when the client grows to the point where he is bankable, they feel he will be inclined to stay with them and borrow from them.

The cost is influenced by the credit risk and collateral associated with the transaction. Again, no one-size-fits-all concept or mindset!

When evaluating an asset-based loan, borrowers should consider the cost of financing in the context of the benefits to be received rather than on the stand-alone basis. Compared with other financing alternatives, asset-based lending is very cost effective and efficient and is there “when” you need it to take advantage of profit opportunities in the market. Asset-based lenders are also responsive to the urgency of a businesses cash needs.

Some of the options available through asset-based lending are:

Accounts Receivable Factoring

Bankruptcy-Reorganization

Construction Funding

Credit Card Receipt Advances

Expansion Financing

Equipment Financing

Franchise Financing

Import and Export

Inventory Loans

Equipment Leasing

Purchase Order Financing

Real Estate Financing

Secured Credit Line

Unsecured Credit Line

Venture Capital

Royalty Funding

Debra Maples is a certified cash flow consultant who counsels companies and sometimes individuals on turning virtually every type of cash flow, income stream, debt instrument, or private paper asset into cash.

Debra’s specialties include:

• Solving cash flow problems with financing techniques banks don’t offer.

• Accounts Receivable factoring; Purchase Order and Contract Funding

• Business Note financing.

Debra is available to assist you with the structuring, purchase, or sale of real estate notes and any other negotiable paper instrument. She can be reached at (225) 247-4370. For additional information, see Debra’s website at www.yourcashflowconnection.com

 

Share This

Tags: cash flow, growth money, small business funding alternatives, working capital

No Comments »