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Cash on hand and flowing is the absolute bread and butter of any small and growing business. You need cash on hand to meet your payroll, fund development of the business, and even just for day to day function of the business. That flow of cash, though, can be a frustrating pursuit as customers rarely meet payables in time for you to pay all expenses. It is the nature of small business, but that doesn't make it any easier. One solution is using a factoring service as alternative funding for your expenses while waiting for invoices to be paid.
Using factoring service as alternative funding for your company is fairly simple to do. You essentially will be selling your accounts receivable from your customers by taking an advance on a percentage of the cash value of the invoice. Then, once the factoring company is paid, they will pay themselves back, take a fee, and return what is left to you.
When you chose to use a factoring service as alternative funding, you will also be able to have the cash on hand in a hurry. Most companies will give you 80% to 90% of the value of the invoices in 24 hours. That means no waiting for the factoring company either. Getting the money fast allows you to relax and think about things besides the money. When you run a small business, the more problems that can be taken off of your place the better off you are.
Using a factoring service as alternative funding does require an application be filled out. You can do it online or in person. Generally, you will be required to give detailed information about your company, yourself, and your customers. Make sure you have business ID and your social security number ready for credit checks. However, most companies actually do qualify since the loans are backed by the invoices anyway.
Finding a company is easy as well. You can look online and find hundreds of factoring companies available. You can also talk to local financial institutes and banks who often times offer it as a service to their small business customers. Be sure, though, to shop around for the best rates you can get. It is still your money.
Using a factoring service as alternative funding allows a small business to have more control over their invoices. You can factor all or just selected invoices from customers. It allows you to have cash on hand, make payroll, and even cover day to day costs. With your finances under control, you can concentrate on growing and running your business and less on when your customers are going to pay and whether or not you will have the cash on hand in time.
Using a factoring service as alternative funding can be of great value to your small business. Let's face it, cash flow is the key to a successful small business, and yet cash flow is the toughest problem in small business. By funding and turning over much of the responsibility for that money to a larger entity, you can take more time to worry about the next step for your business.
Commercial loans can be used to buy business premises or commercial building for both new or establish businesses. They can be used to buy any business asset or to finance the expansion of any established business.
Different commercial loans lender have different way of processing commercial loans. You can start with pre-qualifying for commercial loans. This determines how much as a borrower you can afford as commercial loans and which commercial loans programme will suit the best.
Commercial loans are the biggest way of financing business projects. While providing you with commercial loans, the loan lender will look at general information as your income and existing debts. Your application will be reviewed by a loan officer.
Commercial loans lender will take keen interest in
• Credit history
• Reason for loan
• Collateral
• Ability to repay
• Your investment in the business
Documents to gather while applying for commercial loans are –
Loan request – the amount of loan requested, how the funds will be used, loan type and amount of working capital on hand. Commercial loans lender will feel more secure knowing that you have invested your own money in the commercial plan.
Business plan - If the commercial loans are used for starting a new business, the business plan is crucial. It should include cash flow projections for first 24 months. Information should be concise and clear. Its feasibility will be fundamental in getting commercial loans approved.
Personal financial statements - In case commercial loan is used for expansion of business, it will be required for you to give business profile. Personal financial statements would be required for anyone who owns 20% or more of business. Complete information about current debts balances, payment schedules, maturity, and collateral used to secure other loans. You can be required to provide more documents during the loan process.
In case you are purchasing real estate, you might be required to submit preliminary environmental reports, area maps, title reports, property appraisals, and lease summaries.
Decisions for commercial loans take usually 1-5 days. During this time, you might be required to give further information. Commercial loans broker can help you submit your loan application to several lenders for approval. Your job is to select the most attractive offer and returning the final letter of intent. After all the conditions are satisfied, the commercial loans are approved and the lender will give a final loan commitment. At the closing, the commercial loan will be transferred with a cashier's check, draft, or electronic wire transfer.
Commercial loans are either secured or unsecured - with or without collateral. Secured commercial loans are more commonly available as commercial mortgages. Commercial mortgage are provided at better terms, interest rates and repayment options. Commercial loans are available with fixed and variable rate options. Fixed rate commercial loans will mean that your interest rate and monthly payments will be fixed at the beginning of the loan and will remain so throughout.
Businessmen apply for fixed rate commercial loans for it helps in effective financial planning because they know how much they are giving out every month. With variable rate the interest rates changes in accordance to the changes in the market. The benefit with variable rate is that they start with lower interest rate than fixed rate. But interest rate can increase during the term and therefore you will have to pay more. On the contrary fixed rate commercial loans will leave no space for change in case the interest rates drop.
Investigate before you make a commercial loan claim. Be prepared to answer some questions. Commercial loans are cost effective way of funding business needs when you need it. Commercial loans can strengthen your competitive position; increase your working capital and maximum profitability. Investigate your opportunities with commercial loans and see how your business becomes a commercial success.