Yes Small Business Can

Even if your business’s sales stay flat in the coming year, your profits can still grow—as long as you can cut your costs. Here are 10 ideas that not only help you trim the fat, but have other benefits to your business as well.

1)         Barter. Trading your goods or services for someone else’s (instead of paying) is a great way to free up more cash. For instance, if you own a marketing firm, barter with a local caterer to supply the food and drinks for your holiday party, and provide them with an equivalent value in marketing consulting or materials. You can set up barter agreements informally, or join a “barter exchange” (find them online) with more formal arrangements. Bonus benefit: Bartering helps you build new business relationships that can lead to more business.

2)         Start telecommuting. Can your employees work from home? If your office is open 5 days a week, having everyone work from home just one day a week saves 20 percent on your monthly utilities costs. Use email, instant messaging and conference calling to keep everyone on the same page. Bonus benefit: Telecommuting is as a valuable “perk” for employees—one that doesn’t cost you a thing.

3)         Lease equipment. If you need to invest in new business equipment, conserve cash by leasing instead of buying. You can lease everything from office equipment to trucks to restaurant equipment right here on iBank.com. Bonus benefit: Leasing ensures you have the most current model of the equipment, instead of ending up with a product that is outdated by the time you’ve paid for it.

4)         Cut the extras. Go over your phone service, Internet service, insurance policies, janitorial services, memberships, subscriptions and other ongoing expenses with a fine-toothed comb. What can you eliminate or combine? Are three employees getting subscriptions to the same magazine when they could be passing one copy along? Are you paying more than you should for insurance? Can the janitor come once a week and your staff takes out their own trash? When you shave off a little bit here and there, you’d be surprised how much it can add up to. Bonus benefit: This is one of the simplest ways to save.

5)         Partner up. Band with other small businesses in your area to create a buying co-op. With strength in numbers, you may be able to get better deals and discounts from vendors than you could alone. Bonus benefit: New relationships with other entrepreneurs.

6)         Cut back on travel. The cost of business travel is escalating rapidly and shows no signs of declining. The good news is, technology enables you to do everything from video conferencing to virtual trade shows and webinars online. Whenever possible, explore all other options for meeting with clients or prospects. Save physical travel for only the most important events. Double benefit: Less jet lag and more personal time.

7)         Go paperless whenever possible. Why print things out? Use email instead of mailing documents. Collaborative editing features in most word processing programs today let groups of people edit documents without ever printing them out. And online storage solutions let you store endless amounts of documents on the Internet instead of in file cabinets. For instance, you can store your business’s financial and loan information on iBank.com. You’ll save on paper, storage space, shipping and ink. Bonus benefit: You’ll help save the planet.

8)         Enlist your employees. You need to cut costs, but you don’t want to lay anyone off. So ask employees for ideas on ways you can trim the fat. They likely have insights you don’t into what tools aren’t needed, what processes are redundant or what accounts are less profitable. Hold a meeting and ask everyone for input, no matter how crazy. You’ll probably come up with enough cost-cutting tactics to equal one person’s salary. Double benefit: Employees feel valued knowing you care about their opinions.

9)         Use interns or part-timers. Got more work than you can handle, but worried about paying a full salary right now? Consider interns or part-time employees. In some states, interns can work unpaid, for school credit alone. And by using part-time employees, you can avoid the cost of benefits. (Check with your attorney to make sure you are following the laws in your state.) Double benefit: You can “test-drive” an employee you might want to hire full-time later on.

10)      Analyze your profit margins. Assess which of your products and services are the most and least profitable. Focus your sales efforts on the most profitable offerings, not on the less profitable ones. It sounds obvious, but as a business expands, it often begins focusing on the products that are the easiest to sell, not necessarily the most profitable. Double benefit: Eliminating unprofitable accounts will energize your staff.

Author – Rieva Lesonsky

Rieva Lesonsky is a nationally known small business expert and the CEO of SMB Connects.

Cash flow is always crucial for small-business owners—and with the current credit crunch, simply getting paid is becoming more and more difficult.

At a business event for women that I attended recently, dozens of business owners told me the problems they are having collecting on their receivables. One entrepreneur who projects $3 million in sales this year told me her receivables were regularly running over 90 days. Another entrepreneur is projecting 2008 revenues of nearly twice last year’s. But that’s not doing her much good right now, because a big corporate client owes her nearly $200,000—and it’s more than 120 days past due.

For women business owners, collecting on past due accounts can be complicated by psychological factors. First, we tend to want to be liked. That means we sometimes have a problem being the “tough guy” when it comes to collections. Second, we tend to personalize business. If we have a friendly phone relationship with a client, or schmooze about our kids every time we meet for a business lunch, we think of them as a friend. We assume our “friend’s” company will pay on time, so we don’t need to worry. And when he or she does pay late, we feel uncomfortable reminding our “friend” about the money we’re owed.

In today’s economy, you can’t afford to assume you’re going to get paid on time. And you shouldn’t wait until the payment’s past due to start taking action.

Keeping your cash flowing begins with your billing system. Here are some simple policies to follow, if you aren’t already:

Set up your accounting systems so bills go out as soon as the work is completed. (You’d be surprised how many entrepreneurs finish a big project, then let several days go by before sending out the bill). Make sure all bills clearly state what they’re for, with any identification numbers or other information the client requires.

Using e-billing can be a smart move to save money (printing and postage costs), get your bills to the client faster and get paid faster. A quick Google search can help you find companies that will help you get set up with e-billing.

Next, consider incentivizing companies you do business with to pay you on time. (You may even be able to get them to pay early). For example, offer a discount if clients pay within 30 days. If you can afford it, offer an even bigger discount if they pay net 15.

If a lot of customers pay you with credit cards, you have to pay the credit card company a few percentage points. To avoid this, offer incentives to customers to pay in cash.

When the initial 30 days comes and goes and you haven’t received a check, follow up with the customer immediately. If you’re like many women entrepreneurs, this idea makes you nervous, doesn’t it? “I’m sure they’ll pay. I’ll just give them a few more days.” Remember, this is business, not personal. And I’m not suggesting being obnoxious. All that’s needed is a polite call or email following up to make sure the bill was received, and asking if they have everything that is needed for payment. If indeed the bill has simply been overlooked, this will prompt the client to take action.

If the client cannot pay at this time, push a little harder. Try to get a clear answer as to when you can expect payment. If the client can’t pay the full amount right away, offer to create a payment plan.

All small businesses are in the same boat right now, and clients will appreciate your willingness to work with them. But remember, you still need to get paid, so be polite but firm. Those friendly relationships you have built can work to your advantage here.

Honesty works both ways. If you have delayed paying bills because of your own cash flow situation, call the companies you owe money to and be frank with them. Being forthcoming and willing to work through the situation will help you in the long run.

If these tactics still don’t get your cash flowing the way you need it to, consider an asset-based lending option such as factoring. I’ve written about the popularity of asset-based lending on this blog (link: http://www.greenbiz.com/feature/2008/10/20/e-billing-most-overlooked-green-practice). Many of the entrepreneurs I talked to the women’s event I attended told me factoring was what’s keeping their businesses going right now. You can find many factoring sources and other asset-based lending sources right here on iBank.com.

Rieva Lesonsky

Rieva Lesonsky is a nationally known small business expert and the CEO of SMB Connects.

In this state of our economy, companies are looking everywhere to cut costs.  One area that can keep costs low is in technology.  Most businesses use Microsoft Office to write e-mails, create documents and spreadsheets, and many other things.  However it comes as a surprise to most business owners and “non-techies” that programs like Word, Excel and PowerPoint are not a part of the Windows operating system, therefore they are a separate, and expensive, piece of software that is installed on your computer after you have paid for it.  Prices for Microsoft Office can range from $300 to over $500, more than the cost of some full PC’s. 

Often to help offset these costs, business owners will either buy it at the same time that they buy their computers which can reduce the cost, or they know someone that has a copy of the software.  Make no mistake, installing Microsoft Office from a CD that your kids have is ILLEGAL.  It can lead to fines and at the very least a lot of hassle.   Instead you can use one of the free alternatives that are just as good, if not better than Microsoft Office and are perfectly legal.

            One example of free office productivity is Open Office (http://www.openoffice.org).  This program is just like office.  It has Word Processing, Presentation, and spreadsheets, and the best part is it is free.  This program is compatible with Microsoft, meaning files can be saved in a format that Microsoft can read, and it can also open Microsoft Office files.  One caveat: as of this writing, Open Office is not compatible with the latest version of Microsoft Office (Version 2007), however they are working on it.

            Another example is Google docs (http://docs.google.com).  The difference between Google docs and MS Office or Open Office is that Google docs resides online.  There is no software to install.  This has its advantages and disadvantages.  Not having to install the software makes it easy to get up and running, which is great, also Google docs makes sharing your docs with other people very easy since it is all online.  The bad part is that if you don’t have a connection to the internet, you don’t have access to your documents, but in this world of constant connectivity that is becoming less and less of a disadvantage.

            In addition to these two freebies, there are plenty of other productivity suites that are not necessarily free, but do cost much less than Microsoft products.  Some examples are Sun Microsystems’s StarOffice  (http://www.sun.com/software/staroffice/index.jsp).  This full featured program may not be free, but at $69.95, it’s a lot cheaper than Microsoft.

            There are downsides to these programs to keep in mind.  For one, it means learning a different skill set.  If you’re used to using Excel to create spreadsheets, Open Office will take a little getting used to.  For another thing, at least with Open Office, support is done by volunteers instead of a paid staff.  This can lead to some interesting searches for help as opposed to Microsoft that you can call for help (for a fee).

            However these downsides are temporary, and compared to the cost of using Microsoft products, you will make up your costs of loss of productivity with all the money you save on your software.

Ken Phibbs – iBank Network/Data Base Manager

In an attempt to reduce the amount of harmful emissions released into the environment by idling heavy-duty diesel engines, the Environmental Protection Agency (EPA) is urging states to recommend for all truck drivers to have Auxiliary Power Units (APUs) installed in their trucks.  With the high cost of fuel, and the hardships that come with an economic recession, how will families struggling to pay rent and buy food afford to retrofit their old trucks with these and other clean diesel emerging technologies, or purchase new trucks already containing them? 

iBank.com has partnered up with the EPA to create SmartWayFinanceCenter.com—part of one of several EPA National Clean Diesel Programs.  Anyone looking to purchase EPA-approved idling or emissions reduction equipment or trucks can apply for a loan or lease on SmartWayFinanceCenter.com.  They can simply complete one online application which iBank will submit to it’s national network of lenders.  Any interested lenders will then get in contact with their prospective borrower within 5-7 business days after the online application is submitted.  Then one wonders, how much does this cost and how can I afford the current high interest rates?

The SmartWayFinanceCenter.com registration is completely free.  Furthermore, the SmartWay Clean Diesel Finance Program awarded 1.13 million dollar grants to some lenders who work with the trucking industry, allowing them to provide their borrowers with below-market interest rate loans/leases and longer loan payback periods.  The lenders who received these grants are members of the SmartWayFinance.com national network.  To sum things up, SmartWayFinanceCenter.com applicants can take advantage of lower interest rate and longer payback period loans and leases for free, regardless of our nation’s current economic standing.

There is a perception along Main Street and Wall Street that credit cannot be found. That is dead wrong. There are thousands of banks and credit unions all across the country that are actively lending to small businesses and individuals. Their business model is much the same today as it was last year and much as it was five years ago. THEY MAKE LOANS THEY BELIEVE WILL BE PAID BACK CONSIDERING A VARITY OF ECONOMIC CONDITIONS. This is the way all lenders used to operate, but many, as we have clearly seen, lost site of this very basic lending model.

The key consideration here is, do not assume lenders are not lending. Many lenders are seeing increased deposits and therefore increased liquidity and are very interested in closing loans. Lending is how they stay in business. They just want to be paid back. With all the negative media attention (by design, don’t you think?) it is very easy for a small business owner or an individual to conclude that a small business loan will not be forth coming so why try. That is the wrong viewpoint to have. PLEASE TRY!! You may be surprised how much interest there will be in you and/or your business.

Getting approval for a loan request will require some combination of positive cash flow and/or quality security. Depending on the lender and the type of loan you are seeking, more or less weight will be given to cash flow or quality security. For a small business, a solid business model that is throwing off positive cash flow is almost always a winner. The same thought process works for individuals as well, that is, are you making more than you are spending. Yes, there really are a lot of individuals and families that live this way.  There are lenders that are very security focused, but no respectable lender enters into a lending transaction with the expectation of liquidating the security. Expect to pay a higher price for this type of loan, unless there is a very easy path to liquidation. With the slowing economy asset liquidation has become an increasingly costly and unpredictable process.

In conclusion, build your case, be reasonable in your expectations, anticipate the questions that will be asked and expect a yes on your loan request. A lot of loans will be made following this formula.

Need a temporary infusion to get through a cash flow crunch, but getting nowhere fast with your bank’s conventional loan department? Consider asset-based lending, an alternative to traditional financing that has grown increasingly popular among small business owners in search of capital.

 Last year, U.S. asset-based lending grew to $545 billion in loans, an 11 percent hike over the previous year, according to the Commercial Finance Association’s annual survey. Given the current lending climate, those numbers will likely rise again this year. “Asset-based lending can really go full steam ahead even when the economy takes a downturn because there’s security on the back end for the lender,” says Jared Goble, director of iBank’s lender network.

Asset-based lending refers to any loan or financing secured by a company’s asset, whether tied to inventory, accounts receivables, machinery and equipment, real estate or other intangible assets. With accounts receivable loans, for example, you can borrow against the value of your outstanding invoices, receiving as much as 60 to 75 percent of the total value. Factoring, a related option, allows you to sell your invoices outright, in exchange for an upfront sum. You can also sell a fixed amount of the company’s future credit card receivables at a discount via a merchant cash advance.

Consider these pros and cons to decide whether asset-based lending is right for you.

The pros:

1. Fast cash. When cash flow has ground to a halt, you often can’t afford to wait the months it might take for a loan application to get approval. With most forms of asset-based lending, you can get a lump sum in weeks, if not sooner. Factoring allows you to get cash for your goods and services immediately (although at a discount), instead of waiting the 30, 45 or 60 days it might have taken for clients to pay. 

2. No collateral necessary. Since the receivables themselves typically act as your collateral, you won’t need to put anything further on the line. And because most lenders or financing companies will be more concerned with your clients’ creditworthiness than your own, you don’t have to worry about having your balance-sheet ratios or cash-flow predictions analyzed by a loan officer.

3. Flexibility for growth. Particularly in trying economic times, you don’t want to have to turn down a big order because you can’t afford the upfront inventory costs. With purchase-order financing, for example, you can grow quickly by giving the lender a percentage of the cost of goods in exchange for immediate access to funds to purchase inventory. All you typically need is a signed purchase order from a credit-worthy account and a gross margin of at least 35 percent. And the financing is usually set up as a line of credit to be used for multiple orders or transactions.

The cons:

1. Higher cost of capital. Not surprisingly, this kind of fast cash comes with a higher price tag than conventional loans. If you opt for a merchant cash advance, for example, you may only get 75 percent of the total value of your credit card receivables, though you will get it immediately. The fee for factoring will typically range from 2 percent to 10 percent of your invoices. This means that your margins should be greater than 10 percent or, at the very least, greater than the factoring fees.

2. Higher risk, long term. You need to make sure you’re not leaning too heavily on a form of financing that will cause you to come in under break-even. Obviously, keeping your business running is critical, but you don’t want to continue to sell your receivables at such a deep discount that you threaten your own profitability.

3. Customers may balk. If you choose factoring, where the lender will now own and collect on your receivables, your customers may not like dealing with a third party. To head off any discontent, proactively talk to clients about what you’re doing and why you’re doing it, and give them information on the lender so they feel more comfortable with the new arrangement.

By Rieva Lesonsky

Rieva Lesonsky is a nationally known small business expert.

While it’s true that today it is more difficult than ever to find financing, it’s not impossible. As the economy goes through this rough patch, and banks get more conservative on their lending, they are looking for assurance on how they can get payback on the loans. A great way to put you in a position to get a loan is to be willing to pledge assets. Traditionally you may think that this would be signing over the deed to your house and car, but a more popular and business friendly way is with invoices. Accounts Receivable loans can get you the money you need now by proving the ability to pay back the lender based on the invoices you have out. While many other forms of lending are hurting these days, Accounts Receivable financing is still going strong because of the security the bank has on the loan. Another form that has become popular in the last year is The Merchant Cash Advance Loan. It is basically an Accounts Receivable loan that uses your monthly credit card processing as your open invoice. When banks are looking at you to give you a loan, they evaluate you on your ability to pay it back, and being able to pledge assets for the loan is a way to make you more appealing and a lower risk loan, and more likely to get financed!

Now more than ever, your business plan is crucial to getting financing from lenders or investors. What key elements are they looking for in your plan?

Think of your business plan as a sales piece. Its goal is to “sell” the lender or investor on why they should give you money. Just like any sale, you “close the deal” by convincing the financing source that you can provide them something of value—in this case, a good return on their investment—and that they can feel confident doing business with you.

To instill this confidence, your plan must answer all the questions readers might conceivably ask, in as specific and concrete a way as possible. For example, if you are listing some of your current customers, include addresses, phone numbers and contact information so lenders can follow up to verify the information. If everything in your plan is easy to verify, the lender or investor can make a faster decision.

There are four key parts of a business plan, and providing specific, detailed information is critical in all of them.

1) Business description: This section explains your industry, your product or service, and how the business is structured. Since the people reading your plan will not know your industry as well as you do, you need to spell things out for them. If you’re writing about your market’s growth potential, for instance, back up this claim with facts from third-party research, government studies, trade associations or trade magazines.

2) Market analysis: This is an overview of the market for your product or service, including size and potential, competitors and how you will beat them, marketing strategy, and management team. Show in detail exactly how you will capitalize on the market. If you already have a business, show the historical relationship between your marketing activities and sales. How many sales calls do your salespeople make? How many result in a sale? What is your email response rate? Hard numbers like these persuade investors.

If your business is a startup, do market testing with various sales strategies to see how they work. Focus on one or two primary ways you will market, and include the numbers from your studies in the plan.

Investors or lenders will focus on the management section so they can see who’s in charge and what their experience is. Like a resume, this section should focus on their experience and include specific examples of accomplishments. What did they do at prior jobs? What quantifiable results did they get (i.e., “doubled the company’s sales each year”)? If your management team is not complete because you need this funding to hire certain personnel, you’ll have an edge if you have already identified who you plan to hire and can describe their qualifications, what they will do and how it will grow your company.

3) Financial analysis: This includes financial statements such as income and cash flow statements, break-even analysis, balance sheet and financial projections. Many entrepreneurs forget to specify how they’ll use the proceeds of the loan or investment. Break down exactly what this money will be used for and how it will grow the company.

Include summary projected income statements for the next five years and summary historical income statements for the last three years. (If your business is new, create them for each quarter you’ve been in business.)

Show your sales and marketing costs and how these efforts translate into sales. Also show your product or service’s cost and your gross margins. These costs should be in line with your industry’s averages, or investors and lenders won’t trust you. To further boost their confidence, have financial statements prepared by a CPA and clearly show the assumptions behind the figures.

4) Executive summary: Two pages at most, this section summarizes the rest of the plan—including a description of the company, its products and services, its market and assets, how it will make money, and how the financing will be used. This is the first thing potential lenders or investors will read, and if it doesn’t grab their interest, they won’t read on. Make it clear, interesting and believable.

Last, but not least, make sure your entire plan is clear and easy to read. Lenders and investors are busy people. Provide a table of contents, and if you include extra information such as sales brochures, testimonials, or articles about your company in an Appendix, make sure everything is clearly marked so readers can tell at a glance what it is.

Your business plan is your most important financing tool. By following these tips, you can craft a plan that gives your company the edge.

 By Rieva Lesonsky

In these days of dire financial news and stock market plummets, it is important to stop listening to all the bad press and read the tea leaves.  I believe the stock market is over reacting to the actions taken by our government, and the media is adding to the confusion.  Let’s look at the facts:

1- The Fed has lowered fed rates to 1.5% from 2% today (The rate banks charge each other for money).
2- A $700 billion bailout package has been passed (To get bad assets off the books of banks) .
3- Congress has approved a loan package to bailout auto makers.
4- The FDIC has increased the guarantee on bank deposits from from $100,000 to $250,000 (Increasing consumer and business banking confidence).
5- The Gov't has now guaranteed commercial paper (Increasing business and investor confidence).
6- The Gov't has now guaranteed all money market accounts (Increases consumer banking confidence).
7- Poorly run financial institutions have been acquired by stronger financial institutions.
8- A Multi-billion dollar loan package to AIG (one of the world's largests commercial insurance co.) was approved.

I was a meeting last night with 12 business leaders in Orange County, California.  Two of these men received business loans to buy new businesses, and 1 another person in the medical field received a line of credit to expand into new products areas. 

BUSINESS LENDING AND EXPANSION IS STILL OCCURING. SPREAD THE WORD!

How Safe is your Money?
Is your money safe at your local Bank? Is it safe at your community bank? With the subprime bubble hitting the floor resulting in the down turn of the economy, there are many issues arising in America’s banking industry. One used to think that you could keep hundreds of thousands of dollars in your local or national bank or credit union and all would be fine a dandy. IndymacBank, the nation’s 9^th largest home mortgage lender, just last week was taken over by the government because of its gone bad home mortgage portfolio. Over 10,000 depositors waited in line to withdrawal all their funds to only find out they were going to lose half of their liquid worth. Now, there are 8,500 banks in the United States and only 5 have gone down this year. However, it makes you wonder if a coffee can berried in the back yard is safer then today’s American Banks and Credit Unions.

Here at iBank.com we spend most of our time connecting the small business with the appropriate business loan, equipment lease, or commercial morgage. This puts us in the particular position of being extremely educated to the ins and outs of the current small business financing trends.

One of our business development managers was telling me the other day about how a particular small business was able to save more than $50,000 over the life of its loan by going with a line of credit instead of a merchant cash advance. The small business was eligible for both types of loans but without the appropriate information the company could have wasted tens of thousands of dollars.

Since we are so knowlegable about this industry we realize how fluid the requirements for all the different loans really are. Equipped with this realization a small business is much more capable of fending for itself if it takes the opportunity to shop around and figure out all of the different types of loans that they qualify for.

Fending for themselves can be daunting however. Just on the iBank.com website we have over 80 loan types listed. Luckily, the iBank.com service takes the risk of changing loan requirements and confusion of loan types and simplifies the process into one application. After the application is filled out the magic really happens, something that could only happen at iBank. The lenders look at each and every business regardless of what one would assume the loan type they would be applying for. This fact alone allows the small business to be offered loans that no one would ever imagine they would qualify for and, even more remarkable, as soon as the qualifications change the small businesses are again being offered the loans that they qualify for. This way there is no lag between the change in qualifications and the small businesses realizing that they can apply for them. All the small business has to do is sit back and compare the offers they get for loans.

The moral of the story is that this industry is under so much flex these days. Even with the exposure our office gets to all of the changes in the loan qualifications there is no one that can truly keep up with all of them. If the small business takes it upon itself to keep seeking the capital there is more and more chance these days that they will find it at companies and loan types that they never expected.
 

Robert Moore,
iBank Comm/Tech Team
 

So at iBank.com we deal with small business loans quite a bit. We try to be the Ferari of small business loan lead generation by being the be all and end all to the small business seeking financing. The "i-CFO" if you will. Or even the "small business finance information bank."

Since this is our industry we try and pay attention to anything that our small businesses are looking to for money or any other needs for that matter. A couple sites that we wanted to talk about here were the prosper.com and virginmoney.com sites. Both can be shortly described as personal loan facilitating web sites and their slogans are "Lets bank on each other" and "Changing the face of money" respectively.

Both very cool. Prosper.com allows an individual to get a loan based on an amalgamation of individual lenders (who are people, not companies or institutions). This allows someone to lend $50 toward a loan that someone wants $3000 for and all the interest rates that people are willing to offer that particular loan are averaged accross to determine what the final interest rate to the borrower is. Virginmoney.com seems to be a site that wants to be the support for the loan. You have to go out and get the money but they will help draw up loan contracts and payment schedules and the like.

Both of these sites seem very useful and allow borrowing to become personal again.

Robert Moore,
iBank Comm/Tech Team

So we here at iBank.com see a lot of trends in the small business finance products. One of the current trends that we have seen is the popularity in the Merchant Cash Advance category. While we would like to say that we have the best knowledge of this product we figured we might as well not reinvent the wheel and instead repost an article from the merchantcashadvanceinfo.com blog on:




"What is a Merchant Cash Advance?
A Merchant Cash Advance is a flexible alternative to traditional small business financing. It might also be called credit card receivable funding, credit card factoring or a business cash advance, depending on the provider or the person or forum talking about the product. While this might be called many things, a Merchant Cash Advance is the most common reference to this funding product.

In a nutshell, a Merchant Cash Advance is a really unique funding product allowing small business owners to access working capital now by selling their future credit card sales.

Let’s start at the beginning.

A Merchant Cash Advance is unique, but it is not hard to understand.If your business accepts credit cards, you might be able to use your future sales to access working capital.

A Merchant Cash Advance is not a loan. It is a purchase and sale…customers sell Merchant Cash Advance providers a portion of their future credit and signature-based debit card sales in exchange for immediate access to business capital.

This is a financial option that can offer many advantages to a small business owner.

You can spend the money for any business purpose. You don’t need personal collateral. There are no checks to write. Everything is automatically handled by the credit card processor. You pay back the balance by processing regular credit and signature-based debit card sales. It is quick and easy when compared to other financial options.

Perhaps the most unique benefit is that there is no set maturity date, no pre-set payment amount. The amount collected aligns with your business’ credit card sales. The more you earn, the higher the payment amount. During slower periods, the amount declines.

Do you know of any other financial obligation that aligns payment amounts with your sales volume? Does your landlord decrease your rent because sales are down this month? Does your bank adjust your loan payment to match your business’ seasonality? No. So you can see how using the flexible structure of a Merchant Cash Advance can be used to help manage your business’ cash flow."

Robert Moore,

iBank Comm/Tech Team
 

What is The Small Business Administration? The Small Business Administration is a United
States Government Agency helping support small businesses through financing programs and
education as well as hands on training. There are several types of loans available through
the SBA. The most common are 7(a) guaranteed loans and 504 Real Estate loans.

The 7(a) Loan Guarantee Program is designed to help entrepreneurs start or expand their
businesses. The program makes funds available to small businesses through qualified banks
and non-bank lenders. The 504 Fixed Asset Financing Program is administered through 
non-profit Certified Development Companies throughout the country. This program provides
funding for purchasing real estate or construction. Of the total project costs, a lender
provides 50% of the conventional first financing, a Certified Development Company provides
up to 40% of the financing through a 100% SBA guaranteed debenture, and the applicant
provides approximately 10% of the financing except for special purpose.

What does it take to obtain a SBA Loan? The general requirements include: the applicant must
be a for profit business, the business must be independently owned, the firm must be 
non-dominant in its field, the applicant must located in the United States, and the applicant
must demonstrate a need for the request. These are the general requirements but in order to be
eligible, there are three types of criteria:

1) Business type and size:

Eligibility is determined by The National American Industry Classification System (NAICS)
based on size and type of the business up to 500+ employees and 6 – 25 million in revenue
depending on type of business.

2) The use of the proceeds:

A) Permitted uses of proceeds - the use of the proceeds must fall into 5 main categories:
   working capital, debt refinance, inventory, equipment, and real estate. Generally the
   term should be the shortest appropriate to the business’ ability to repay the debt
B) Non-Permitted uses of proceeds – SBA Loans cannot be used to repay owners, pay delinquent
   taxes, refinance debt (to a creditor who stands a risk of loss if loan is not granted),
   personal investment, loans to businesses who have defaulted on previous government loans.

3) Personal resources and issues of the principal

Most small businesses and all legal forms of organizations are eligible such as:
1) Proprietorships
2) Partnerships
3) Corporations
4) LLC’s
5) Independent Franchises

Types of businesses that are ineligible are the following:
1) Businesses involved in real estate or other speculation
2) Financing where money is stock in trade
3) Pyramid or multi-level marketing businesses
4) Floor planning for auto or appliance dealers
5) Gambling or illegal enterprises
6) Religious institutions
7) Firms dealing in material of a prurient sexual nature
8) Any borrow