Archive for need working capital

Customers, of course, are the vital key to a successful business.  Without sufficient revenue coming in from existing and new customers, business debt will quickly consume the entire business and the business will inevitably fail.  However, just having customers isn’t sufficient; customers must pay their outstanding invoices or your small business will quickly fail.

As most small business owners know, it can be both extremely frustrating and time-consuming  to chase down your clients and get them to pay their outstanding invoices.  If even a small number of your customers are late in paying their accounts, then as a small business owner, you will soon find yourself in the position of not being able to pay your own creditors, payroll, and accounts.

Often, when finding themselves in this position, a small business owner will consider taking out small business loans – which is a sound strategy.  However, business finance offers another method for small business owners to seize the value of outstanding invoices – Invoice Funding.  Invoice funding is both efficient and easy to accomplish, as alternative method of business finance.

Invoice funding works as follows:  a business submits outstanding invoices to an outside agency, commonly known as a ‘factoring agency’, who then assumes responsibility for collecting the debt.  The factoring agency is responsible for following up with the client, and is also responsible for starting legal proceedings to recover the debt if the client refuses to pay.  The factoring agency will give the business upfront capital for the invoices, often as quickly as in one business day, and often at a value of up to 90%.  When the agency receives payment on the invoice, they deduct a commission and give the rest to the small business.

Of course, a small business that chooses to hire an outside agency to administer invoice funding will have to pay a commission to the agency, but in the event that your small business finds itself in need of immediate capital and thousands and thousands of dollars in outstanding invoices, a 10% commission is a smart investment to save your business.  Being in a strong financial position, without an overwhelming balance in outstanding invoices, will allow the small business owner to be able to face sudden or unexpected expenses with relative ease.

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Are you one of the many people who find themselves in need of working capital, but have a history of bad credit scores?  If so, you may find no lending institution will consider your loan application, even for amounts as small as $1000.  Faced with this dilemma, many people run out of ideas on how to get the cash you need to run your business.  Don’t despair, however – spending a little time researching the subject, you may find that you can get a business loan from the very same bank that previously denied your application.

Research and Network

Start by networking with people you know, as poor credit scores are common in today’s economy, and many people are in the same situation.  Through networking, or through an Internet search, you may very well find valuable suggestions on how to get the loan you need.  Many lending institutions understand the economy and are willing to give small business loans to people with poor credit scores but strong working ethics.  You should be willing to offer any assets your business has as collateral, such as your home or other equity.

Get Someone to Co-Sign for your Loan

Alternatively, look for a friend, family member, or business partner with good credit who will agree to co-sign on the loan for you.  Often you will need to offer these individuals collateral (such as a percentage of your business) as well, but this is a small price to pay to get the loan you need and keep your business afloat.  The bottom line; small business loans for business owners with bad credit are available, if you’re willing to do your homework.

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Why Working Capital is Essential

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Working capital is a necessary part of developing your business.  But too many small businesses get caught in a bind when they don’t plan for growth or expansion expenses.  Here is a breakdown of how working capital comes into play and why you need to plan on it if you wish to run a successful business.

New Ideas Need Money

Imagine developing a new product launching your business to the next level.  When this occurs, there are many costs involved.  You need to pay the people that are working on it, cover project materials, any legal filings necessary, testing expenses, and more.  In addition, once the product is completed, there is marketing, social networking, promotions, advertising needed to be implemented.  There is cost involved in every aspect of this new product and/or idea.  And this is where small business owners get stuck.  They do not comprehend the full picture.  They think great we have an idea, but since we did not financially plan on the costs involved, we are just going to sit on this opportunity.  There are many problems with this way of thinking.  For while you are waiting, another company could swipe the idea before you.  Technology could change causing the research and development to occur from the beginning again.  Sitting and waiting only wastes money and time.  Both of which you do not have.

To make sure none of this occurs, talk to a small business loan professional about how to attain working capital.  Find out what your options are and don’t get caught in a financial trap.  It only hurts your small business and you.  You need to jump on the opportunity to expand your business when the iron is hot.  Otherwise, it may be too late.

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