Can't Get A Business Loan?
9 Alternatives to a Traditional Business Loan
By Joseph Lizio
It time again to revisit alternative financing strategies for business owners
needing money. Whether your business needs capital to grow, meet payroll, or to
just simply survive, there are numerous alternatives for your company when banks
say "no."
Personal loans are no longer viable options for business owners. Banks have
tightened their purse strings on personal credit just as they have with business
credit. This tightening typically does not have anything to do with the state of
your credit or the value of your collateral. But more reflects their past
indiscretions with their depositors' money. Further, most business owners, over
the last two or three years, have already encumbered all of their personal
assets, leaving nothing of value to collateralize.
The following lists many alternatives that may still be available to your
business. These alternatives allow business owners to capitalize on their
previous hard work; be it from building relationships with suppliers and other
business partners to closing sales and building a strong customer base:
Using Your Business Relationships!
Trade Credit: It never hurts to work with your suppliers. Ask for
better terms; either more discounts or longer time for payment. Here you can
reduce your overall costs or allow more time to collect money from your customer
before payment is due to these suppliers. Now, your suppliers may baulk at this
discussion as they are probably feeling the same pinch as you are. However,
impress upon them that it does their business no good (short term or long-term)
if you go out of business, have to cut back your standard orders, or are forced
to find other suppliers who offer better terms.
In conjunction with trade credit, do all that you can to collect your
receivables from your customers, as soon as possible. If your suppliers
offer you discounts for early payment, offer the same to your customers (just
maybe not at the same magnitude) or offer discounts for cash. This allows you to
collect payments faster as well as reduce you costs by paying less for the goods
you need to run your business. Just remember, in this type of economy, cash is
king.
Using The Strength of Your Customers!
Receivables and/or Purchase Orders: If your business has accounts
receivables sitting on its book just waiting to be collected, you maybe able to
get cash for those assets NOW. There are cash advance companies (not banks) that
specialize in purchasing your receivables. Companies like Bridgeport Capital
Service, RTS Financial Services, or Paragon Financial Group. These companies
will purchase your invoices for up to 90% of their amount. They will then work
with your customers to collect these receivables (saving you both time and money
on collection). When the invoices are paid, these companies will refund to you
the remaining 10% of the invoice amount. This type of funding is great for
struggling companies as these cash advance businesses will focus more on your
customers' credit and business strengths than your.
Many of these same companies will also finance your purchase orders.
If you place an order with your suppliers and agree to pay for their goods over
time, these cash advance companies will finance these agreements. This could
allow your business the opportunity to take advantage of trade discounts
(percentages off the purchase amount) as your company will have immediate cash
to satisfy your supplier. This is very similar to having a line of credit with
your bank but as an individual credit facility for each purchase.
Credit Cards: I am not saying go out and get more credit cards. If your
business accepts credit cards, there are companies (again, not banks) that may
advance cash to your company based on your FUTURE credit card receipts. These
facilities are only paid back when your business generates credit card sales.
Thus, if you have a slow month, you are not stuck with a huge monthly loan
payment. As your credit card sales ebb and flow, your repayment of these
advances will ebb and flow in tandem.
> Next: Using Your Character
About the Author:
Joseph Lizio holds and MBA in Finance and Entrepreneurship
and has a strong commercial lending background. In his current venture, Mr.
Lizio is the founder of
www.businessmoneytoday.com - a site designed to help business owners find
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