For small business owners, an enthusiastic vision for smooth, steady growth can become nothing more than a mirage once company cash flow problems begin to heat up. Most will struggle with the timing of payment from clients or customers at some point, all while attempting to pay their own bills in a timely fashion. With all of the best laid plans for rapid flowing cash streams evaporating down to just a gurgle in the ditch, the potential risk of joining the ninety-percent of businesses that fail within their first three years of operation becomes a very sobering possibility.
Many of us would like to operate our companies the same way we do our personal lives. If we need a new lawn mower, we simply pull out the trusty credit card, sign on the dotted line and put off worrying about it until next month. Meanwhile, we enjoy the benefits of the new equipment, at least for the time being, without it costing a dime. Though in this way we may seek a certain gratification from owning our possessions, it's really just a trick we play on ourselves. The above "charge now, pay later" example doesn't really convey any kind of real, initial ownership. Instead, it's just a very common example of a direct loan. The credit card company facilitates a credit arrangement between you and themselves, and the proceeds of this extension are directly used and repaid by you, the borrower.
In business, however, whipping out the plastic to cover expenses is definitely not the best idea. Many have given in to this temptation, and are paying the heavy cost of damaged or ruined credit. And with that, their chances of digging out of the hole with other means of financing, which should have been sought in the first place, are slim to none.
Thankfully, there are better, specially designed cash flow tools available for businesses that are beginning to feel the scorch of the capital income desert. Many business owners are unaware of these tools. Others that are aware fail to take advantage of them. All of them would do well to at least consider the following:
Purchase Order Financing - Simply put, this tool is a loan against the future income of the business. It's designed primarily to provide the cash needed to pay suppliers and sales-generating business expenses while patiently waiting for clients to pay their invoices. Similarly, purchase order funding is utilized for the completion of existing orders by securing materials when working capital is running short. Once purchase order financing has been successfully utilized for some time, it usually becomes easier for the business to take advantage of more economical means of credit.
Equipment Leasing - With it's one-hundred percent financing, preservation of credit lines, tax benefits and the ability to avoid obsolescence, equipment leasing is one of the sharpest and most efficient cash flow tools a business owner can utilize. Paying a premium in order to own equipment can be a huge waste of money. What companies profit from is the use of equipment, not the ownership. Leases can be extremely flexible to meet the custom needs of each business. Therefore, both small and medium-sized companies can greatly benefit from them.
Accounts Receivable Financing - This tool provides a line of credit secured by the company's accounts receivables. It is a strong method of financing for both short-term working funds and the permanent working capital requirements of businesses that are growing. The paperwork is considerably less involved than in more traditional types of business loans. It is also especially helpful in providing financing flexibility to firms that are growing rapidly.
Factoring - This is the sale, at a discount, of a business' accounts receivables. It is not based on the company's ability to repay the money advanced. Instead, it based on their customer's ability to pay what is owed. Once the factoring facility purchases the accounts receivables, they assume the responsibility for collection. It is not a loan, so neither the time in business, nor the company's debt to equity ratio are a consideration. A business has the freedom to sell only the AR that it chooses, and is not obligated to continue to do so. Factoring is an excellent source for additional working capital needed by both small and startup businesses.
The descriptions above are general, and it's important to understand that there is flexibility and variation within each lender program. In order to get educated on the details of these types of tools, and to find which of them might be beneficial to your situation, talk to a professional loan broker or a commercial lender representative. He or she will explain the benefits of each, and help you decide which tools are right for keeping your business out of the cash flow wasteland.
Mark Uptain is the owner of Regent Business Capital, a loan and lease brokerage that works with lenders nationwide to help small and medium-sized businesses get financing. His website, http://www.EquipmentLeasingSource.com, offers free equipment leasing information and competitive quotes to businesses throughout the United States.
Why Do Most Online Small Businesses Fail?
Search Engines account for almost 90% of all web traffic!In the Offline world its all about "location, location, location."Put your business were people crowd around and your set.
Painful Lessons from the Maternity Ward
Whoever dubbed New York, New York "the city that never sleeps" should visit The Maternity Ward. My recent visit included a drop-in on several screenings of "A Star Is Born" at the late-show theatre, right near Mama's Breast (all night milk bar) and Papa's Gas Station ("We burp you on your way.
Shoes Everywhere!
People who believe shoes are shoes are mistaken. The comfort and support that the shoe offers is important.
eLocal Listing Offers Online Small Business Video Marketing Product
New online video product makes video marketing accessible for small businesses.
How To Achieve Weight Loss Results And Keep Them Information By Dietician And Nutritionist Jill Fleming
This interview is an excerpt from Kevin Gianni's The Healthiest Year of Your Life, which can be found at http://thehealthiestyearofyourlifecom
Stay At Home Mom Assists Small Businesses
Virtual Assistants are a new concept to the Hudson River Valley, but a well needed industry. Assisting small and large businesses with administrative and marketing services without having to hire full or part time staff.
Internet Marketing For Small Business
Internet marketing for small business owners is not as hard as it seems I know that it seems daunting when you are first looking at it
The Single Most Powerful Small Business Marketing Tool On The Planet
Let me get right to the point. The single most powerful small business marketing tool on the planet is a marketing plan.
Blue Tattoo Jeans: How to Lose the "Muffin Top" with Blue Tattoo Two-way Stretch Denim Jeans
Blue TattooJim Shaffer, designer and co-owner of Blue Tattoo Jeans, has invented a signature technique for completely eliminating the appearance of the dreaded "muffin top" in two-way stretch denim.
Designer Clothing: Quality Or Status Symbol?
The movie The Devil Wears Prada was brought a lot of attention to the issue of designer clothing lately. Most of us enjoy seeing the latest styles and fashions in the magazines and on the movie stars, but in reality most of us can?t afford to purchase designer clothing. Some of the outfits they offer cost more than my entire wardrobe, shoes and all! I wouldn?t want to spend that much on an outfit anyway as quickly as the styles change in our society.