Customized Funding for Business Growth: Four Key Advantages

Today, banks and alternative lenders are out-competing each other to garner the attention of businesses, including small businesses. The government is also playing its part to support businesses and individuals to access tax credits, loans, and grants worth $1.6 trillion due to covid-19.  Any entrepreneur venturing out for funding has a wide variety of options to choose from. There are several sources of funding, such as venture capital, angel investors, credit cards, bank loans, crowdfunding, friends and family, and small business loans.

However, a business owner needs to choose the right type of funding to promote their business goals and needs. It’s also important to be clear on how to pay back and the potential risks. Forbes advises that it’s important to do adequate research on lenders before a need or emergency arises, be aware of the options, and know the right questions to ask. Otherwise, a poorly chosen funding option will cause constraints in the running of the business.

This should be motivation to work with a lender who offers customized business funding. The lender will be equipped to identify which funding aligns with both your financial and non-financial goals.

Here are the pros of going the route of custom-made business funding solutions.

1. Matching Funding To Business Needs and Goals

Alternative lenders like MobyCap can tailor funding solutions to your needs and the strengths of your business. Customization is one of the top advantages of working with MobyCap, given that we offer a variety of business loans at competitive rates and terms. In addition, we cater to every type of business in many industries.

For merchants with significant outstanding accounts receivable, we can do an invoice factoring deal that pays UP TO 90% of the value of the AR. This deal helps businesses meet their cash flow needs to continue with operations. It also allows the business owner to take up any project that comes while waiting for their unpaid invoices to be settled. The business owner does not have to be concerned about repayment schedules or account receivables collections. In turn, it’s possible to meet needs such as paying bills and taking in new customers.

For merchants who need funds quickly, we can do a revenue advance deal in a matter of hours. This does away with a long and complicated application process. It also considers businesses with fewer or no assets and a weak credit score. As a result, an entrepreneur can take up opportunities that will grow the business and afford to repay the advance.

For merchants who want a predictable payment schedule and a longer-term (up to 24 months), we can do a term loan. This is an affordable way to acquire an asset without hurting the cash flow as the owner can plan how to fit the asset purchase into their budget. Another upside is that the business will own the asset that will help grow its revenues.

For merchants who want access to funds they can pull from when necessary (and only pay interest on what they use), we offer a revolving line of credit and a virtual line of credit. This gives the merchants confidence that they can manage operations effectively in the future in case of emergencies and expansion. With a revolving line of credit, the lender increases the credit limit if payments are timely and consistent. This also improves the credit score, making the business a promising candidate for future funding.

2. Access to Flexible Funding Terms

Alternative lenders like MobyCap can modify payments if the merchant’s revenue changes, adding a great degree of flexibility. This is further enhanced with the support of business funding experts who guide clients on their funding options. Many of our funding products include terms in the contract that allow merchants to reduce their payment amount if their revenue drops (like during the COVID-19 pandemic), which can make a huge difference in hard times and/or slow seasons. This safeguards cash flow which affects crucial business operations and emergency expenses. The idea is to work with a lender who looks beyond collecting interest payments to one that is committed to the business’ vision.

Typically, once a merchant receives traditional funding, like from a bank, the terms are set in stone and offer no flexibility. In case they default, the bank will take corrective actions such as seizing assets for auction to recover their money.  For small businesses, this can have both business and personal setbacks. In 2020, Financial Times reported that there were $90 billion of loans in forbearance in US banks by individuals and businesses. As banks operate in a tight lending market, it’s naturally expected for them to tighten their policies as protective measures. This poses even more risk for businesses seeking flexible funding options.

3. Creating a Supportive and Profitable Lender Relationship

Receiving customized funding builds a relationship with the lender, who gains a deep understanding of your business and how the proper funding can help it get to the next level. Traditional bank lenders do not do this sort of due diligence, but rather simply plug numbers into an algorithm when underwriting the business. Banks tend to be laser-focused in determining the best rates for their loans. They consider factors such as inflation, the stock market, rates from competitors, and the international market. In addition, the Federal Reserve sets the interest rate at which banks can lend to each other as part of sustaining the financial system. However, the main target for banks is to set rates that generate good profits for their shareholders. One of the key findings in a 2016 Consumer Banking Survey is that customers did not trust that banks could support them with their issues.

At MobyCap, once we begin this relationship, we are only a phone call away next time the need arises and we can get the funds to the merchant ASAP.  It’s also possible to do an online application, eliminating paperwork. This takes into account the busy schedule of business owners who lack the time to walk into an office and sign an application form. In addition, the borrower can make informed decisions as the funding experts will readily provide in-depth information on loan types, repayment terms, and loan approvals.

We can also improve rates and offer larger funding amounts once the merchant has built up internal credit via a good payback history. We offer one of the most generous capital offerings in the market. Since we value personal and long-term relationships with our clients, we are also invested in their growth from small-scale businesses to large-scale establishments. In response, we cater to the changing funding needs with our loan products and flexible terms.

4. Access to Funding Without Collateral

Alternative lenders like MobyCap offer unsecured, uncollateralized funding, which makes it much easier for certain types of businesses to acquire the funding they need to exceed their goals. One of our unsecured products is merchant cash advances which a business owner can borrow and easily repay based on future sales. Banks virtually ALWAYS require some form of collateral, which can hamper or create an added strain on a business. This places a great risk on existing business assets which can lead to bankruptcy.

Fortunately, our funding options are based on the revenue of the business; therefore, we do not tie up any business assets and allow the business to continue growing with the aid of our funds. This offers the peace of mind to focus on business growth strategies such as bidding for projects and purchasing new equipment to meet increasing production demands.

We do not require any personal guarantee when making offers to merchants and we do not run hard credit pulls during underwriting. Usually, a hard credit pull can decrease the credit scores of an individual with a short credit history. However, our friendly conditions are a great assurance to merchants because there are no significant barriers to accessing funds, regardless of financial history and current situation.

Summing Up

As alternative funding lenders and credit unions expand their market share, there are many factors to consider. It can become a hassle to choose a lender with the best loan types, amounts, repayment terms, and quick access. No business owner wants to be locked in a loan that will limit their business operations. Seeking customized business funding will halve the time and effort spent researching for a suitable lender and one that is willing to offer and adjust funding that aligns with changing business needs and seasons.

MobyCap captures this need effectively, by offering multiple and flexible funding options. We aim to support businesses at every turn through our established business relationships. We also directly engage our customers to help them find the best funding picks in the market through our experienced funding experts. We have success stories of businesses in different industries that have been able to leverage and expand their ventures.

To move forward today, contact us by email at info@mobycap.com. As a BBB-accredited business, we have experience serving all industries and welcome the opportunity to work with your organization.

6 of the best ways to use short-term business funding

Finance is one of the most important aspects of a business that enables businesses to run operations effectively and take advantage of growth opportunities. More small and medium-sized businesses are choosing short-term funding options over traditional loans to quickly meet their capital needs. In comparison, short-term funds are easy to access and apply to and do not require collateral. Business owners also look into this alternative as traditional banks have increasingly limited lending to small businesses since the 2008 recession.

This is a great advantage for any business that lacks the assets and capital base of larger companies and needs to advance to the next level. Even borrowers with low credit scores can access this kind of funding and it can also be a way to improve their credit rating with timely payments. Furthermore, there are many options to choose from, ranging from small business loans to invoice financing and the owner is not limited in fulfilling the business needs.

Here are 6 ways to use short-term funding.

1. Purchasing Inventory

You can take advantage of a good deal on inventory that you can flip for a large profit. Inventory is a crucial asset for a business as it forms part of the production costs which largely impact revenue and profits. As part of your regular business operations, inventory control is important to ensure there is available stock at hand. Otherwise, there is the risk of losing customers to other businesses.  In addition, you may come across vendors offering inventory at attractive discounts.

Having access to immediate cash injection will give you a competitive advantage over your competitors. For instance, if you are running a clothing store, you can quickly take advantage of the large discounts on the latest fashion items while stocks last, which will bring in more customers, leading to a large profit margin. You can pay back the loan borrowed with the proceeds from the clothing sales and improve your credit rating. And, since you can afford to increase your stock supply, you can leverage them to obtain an asset-based loan in the future. This type of loan tends to attract lower interest rates and is easier to get than unsecured loans.

2. Marketing and Advertising Costs

You may need funding for marketing campaigns to drive increased customer traffic to your store or website. It can quickly get competitive in the market to increase the visibility and reach of your brand. Whether you have an online business or run a brick-and-mortar business, you have to apply targeted and effective marketing efforts.

Depending on the budget for your online or physical business, you may take into account factors such as search engine optimization, content marketing, website design, printed materials, and advertising costs. Outsourcing these services could also add more costs. A short-term fund will be readily available especially if you lack enough funds to cover your marketing budget.

You also save time and minimize the hassle with the easy application and approval process.  Even with a small business, you have the opportunity to create a successful marketing campaign allowing you to play at the same level as other more established businesses.

In addition, timing is important in digital marketing as you have to optimize, on capturing your target audience, and increasing engagement which generates sales.

3. Financing a Project

It provides accessible funds when bidding on projects that you will get paid for later, such as construction and engineering.  When you have adequate financing, you will be confident in executing a project when you win the bid.   When the lender deposits funds into your account, you can plan out the roadmap of your entire project.

You can draw up a comprehensive budget covering labor, materials, equipment, and licensing, among others. Project management can be capital intensive and a short-term loan will spur you to achieve the set project milestones.

You can also cover any arising contingencies which can quickly set back your project. Typically, construction projects use 5-10% of the total budget to calculate contingencies. This will in turn build your business reputation in project management and further expand your operations.

Since short-term funds have shorter repayment periods, usually less than a year, you can keep accessing the loans when your project requires additional capital to continue.  This is an advantage as contractors usually do not have a wide variety of funding options for their projects. You will also not be tied to a long-term loan obligation that requires considerable collateral, especially for larger projects with big assets.

4. Managing Cash Shortages

It helps bridge the gap when the slow season hits (if the business is seasonal) or customers are late paying their receivables. Every business goes through phases of downturns in its operations. When this happens, it can easily stall other equally crucial business functions such as purchasing new equipment or hiring new staff.

With a seasonal business, it can be a challenge to get funds to cover the slow months and have ready cash when the busy season arrives. It’s simple to quickly obtain a short-term loan because it offers favorable terms and conditions when you have an urgent need, unlike a bank loan.

Let’s say, your receivables have not been paid on time and you have to repair equipment which is important for your production process. You may consider invoice financing in this case, as you can use your unpaid receivables as collateral to get funds. Even better, the lender will collect payment from your customers, reducing debt collection expenses.

It is also essential for a small business owner with unpaid invoices which can act as loan security without risking personal assets. However, you have to carefully consider factors like interest rates and additional fees depending on your business situation. Overall, having some cash on hand helps to manage any cash flow problems efficiently throughout the financial year.

5. Buying a New Machine or Equipment

As a business owner, you can purchase a new machine or piece of equipment that can enhance productivity. Every business reaches a stage when it needs to upgrade its equipment to reach the next level of growth and profitability. The new equipment will ensure you continue with your business cycle without any challenges.

A short-term loan involves simplified loan processing and you will not be tied to a long-term loan, which involves paying interest for some time. If you choose an equipment loan, a form of short-term loan, you can secure it with the asset you are purchasing as collateral and finance it even up to 100% of the cost.

You can pay off your loan quickly and have your equipment generating revenue for your business. Furthermore, you can gain some tax advantages such as deductions from purchasing new equipment, which can be a great saving on the business expenses.

6. Funding Payroll and New Hires

It is useful when you need funds for payroll or hiring additional staff to keep up with increased demand. These two issues are considered a top concern for most HR professionals in organizations. According to a report by the Society for Human Resource Management, hiring an employee costs $4,129 while it takes 42 days to fill a position. There are also added payroll taxes such as FICA, state unemployment taxes, and federal unemployment tax.

With this outlook, a business has to budget beyond the compensation of the employees and also factor in things like recruiting and training, and development while retaining employees. However, a short-term loan is an affordable way to streamline and finance your payroll costs as your business grows.

You will also immediately hire extra staff that will speed up your productivity to meet your customers’ needs and generate more revenue. With time, you will improve your cash flow due to an adequate and motivated workforce, pay back your loan, and further your business.

Conclusion

If you are a business owner, short-term funding presents a fast and easy way to meet your financing needs. Aside from managing your emergency cash flow problems, it is much more flexible and convenient to access and pay back. In addition, there are multiple options to choose from, allowing you to manage your various business expenses and securing the longevity of your business without necessarily putting up assets as security.

As your business grows, your production costs will also increase, such as hiring new employees or purchasing new equipment, and it pays to have a reliable and always accessible financial source.

MobyCap understands how important funding is and can provide customizable short-term funding for your business.  We offer business loans and alternative funding up to $5 million, which have helped countless businesses to achieve their growth potential at affordable and competitive rates. Our committed customer service experts are ready to discuss the options that will meet your business needs.

To move forward today, contact us by email at info@mobycap.com. As a BBB-accredited business, we have experience serving all industries and welcome the opportunity to work with your organization.

5 Reasons Why Pre-Approval for Funding is Important

Getting preapproved for a loan allows for a stress-free process whenever you need funds. Whether you are buying an asset or investing in a project, you are in a better position to understand your financial status as well as to determine how much funding is available to you based on your budget.

Here are five key reasons to get pre-approved for funding today:

1. Staying Within Budget

It is good to know how much you qualify for with premier private lenders like MobyCap, who use different parameters than traditional banks (annual revenue, time in business, credit score, monthly number of bank deposits). When you have a pre-approval, a lender is willing to lend a certain amount of money to meet your funding needs without first placing any limits. Also, you get to know the amount of funds that are available to you and how much you can afford. For example, if you are pre-approved for a car loan of $300,000, as you walk into a dealership you have an idea of how much you can pay for a car. Therefore, you are left to focus on finding the car that suits your needs. Overall, you will be able to narrow down your search for specific assets since you are aware of your borrowing limit.

2. Negotiating Power

If your business is doing well, it is the best time to get a quote since you will qualify for the best rates and terms possible. Given that pre-approval gives a clear picture of your financial history, such as credit score and assets, such information arms lenders to provide a quote tailored for your needs. MobyCap offers an array of funding options, allowing you to determine which funding you qualify for, including choosing favorable terms and interest rates. When you’re pre-approved, you have the springboard from which to negotiate the best deals that we are willing to offer.

3. Quick And Easy Funding

Getting pre-approved means if and when a need for funds arises, you are only a phone call away from having the money in your account. From that point, we can fund you within a matter of hours. Since we are aware of how much funding you can access, the entire process of transferring funds to you will be smooth. You can move fast and close on an offer in the market without any delay in your finances.

4. Clear and Competitive Terms

Many private lenders will make big promises or provide “verbal quotes,” but very few can back them up with written offers in black and white. At MobyCap, we’re confident that we can provide customers with some of the best options in the alternative finance space and will beat any written offer. We prefer to offer personalized services when discussing your funding options.  When you are pre-approved, we acknowledge that you are serious about getting immediate funds for your business. With this in mind, you will be offered competitive rates and terms, as well as customized funding to promote your business goals. You will never have to worry about being hoodwinked over what appear to be attractive rates.

5. Access to Tailored Funding Options

Speaking with a top private lender like MobyCap can open your eyes to the different alternative finance options that suit different businesses’ strengths. Our full suite of customizable funding products includes term loans, lines of credit (both virtual and revolving), revenue advances, equipment leasing, and invoice factoring. On the other hand, traditional lenders can easily dismiss the fact that time is essential for any business when seeking funds. In addition, lenders like banks usually demand collateral which some small businesses may lack. With alternative funding providers like MobyCap, you are assured that we will manage any cash flow problem with urgency. Being pre-approved allows us to evaluate how much you need and can afford without risking your business’ stability. Pre-approval places you in a strong position to make informed decisions which we greatly value for our clients.

The Next Steps

Going through the pre-approval process reveals how financially prepared you are to borrow funds for your business. Lenders are likely to have different levels of information and documentation required for pre-approval. However, MobyCap is committed to availing fast and flexible funding options in as little as a day without a complicated application process. Similarly, getting you pre-approved will be conducted with keen efficiency from our committed funding experts.

To move forward today, contact us by email at info@mobycap.com. As a BBB-accredited business, we have experience serving all industries and welcome the opportunity to work with your organization

10 Questions a Lender Will Ask Before Funding Your Small Business

According to research, over 50% of small businesses fail within the first year, while 95% go under by the fifth year. Now, that’s not an encouraging statement to kick off this post. But it makes sense because running out of cash is one of the top causes for business failure.

Financing is essential for any business, small or big. Actually, a steady source of funds is to a business as fuel is to an engine. Giants such as Amazon, Microsoft, Coca-Cola, Google, KFC, Nike, Alibaba, you name it, all started small. But years of strategizing, growing their market reach, and of course, external financing to fund their ideas have seen them grow into the industry leaders they are today.

Fortunately, your business has the same potential. As long as you have researched your market well, including doing a thorough SWOT analysis and assembling the right team, you can survive well past the dreaded fifth year. But just like the mentioned businesses, this is only possible if you have a reliable flow of funding to fuel your operations and expand your market reach whenever the business calls for it.

Usually, an entrepreneur starting out may fail to appreciate the importance of external funding until their business kicks off and the funds run out when they need them most. However, as you get more experienced, you realize how essential having a go-to funding solution is for both short-term and long-term cash needs.

For instance, sometimes debtors may delay payments, or business slows down when you need to settle accounts, or it could be a huge opportunity has come up, and you’re cash strapped. Getting financing in such moments is the deciding factor between drifting into a financial crisis and avoiding business interruption.

However, as you already know, securing funding is not a walk in the park. Small businesses seeking external financing get turned down quite often. Below is a list of questions your lender is likely to ask you to assess the viability of your business. We’ll briefly discuss each of them to help you understand how you need to prepare before submitting a funding request.

How Much Money Do You Need?

This is mainly one of the first questions a lender will ask you. It helps them test your preparedness to take up the facility. If you give a very high figure and further questions reveal the business cannot service the loan, or your intended expenditure is too low, chances of being denied increase. In such a case, we often assume you’ve not made your financial projections well and may consider your business too risky to fund.

Essentially, you need to assess your financial needs first and calculate the maximum monthly installment you can afford, given your current profitability. In a nutshell, as much as it’s okay to have ambitious growth plans, it all boils down to your business’s current capability.

How Much Is Your Annual Revenue?

Lenders will want to know how much your business makes in a year, as this helps determine your ability to pay the loan. Here, you’ll need to provide actual past results and not just forecasts. If you have expansion plans, you can include the financial projections in the business plan summary. Generally, as a rule of thumb, we fund about 10% of the annual revenue.

How Soon Do You Need the Money?

Do you need the money to settle an overdue account, pay oncoming end-month bills, or purchase an asset? Giving information on how soon you need the cash helps lenders recommend the most appropriate facility as different loans have varying lending timelines. Again, financiers usually have unique lending policies. Some offer instant loans, while others have lengthy evaluation processes. For instance, we can fund you the same day we receive your offer if you provide all the necessary documents.

How Long Have You Been in Business?

The market has a range of start-up loans, which investors provide based on your business idea’s viability, more so, the market potential. But in most cases, financiers will try to minimize their risks as much as possible by funding businesses with some track record. If your company has been operational for at least a year, generating consistent revenue, it’s viable for most financing options in the market.

How Will You Use the Funds?

Essentially, business loans are meant to help entities generate more income. As such, the purpose for which you’re applying the loan should be directly related to the business operations. For instance, if you intend to acquire a vehicle, be ready to demonstrate how it will contribute to more revenue. That way, the financiers have an assurance that the business will keep generating enough income to meet the obligations.

Do You Have Any Other Loans or Current Funding From Other Lenders?

Usually, most businesses operate with more than one loan. But before advancing an additional facility, lenders will always seek details of the existing loans. This helps calculate a business’s ability to meet obligations without plunging into a crisis. In the event our calculations indicate the loan requested is too high, we often advise on the maximum additional credit that your business can manage.

How Is Your Credit Profile?

Your credit history is another major consideration lenders make before deciding on your creditworthiness. Generally, you should expect them to pull your business and personal credit reports – oftentimes, just a soft pull – so it’s good to answer the question honestly.

Do You Have Any Outstanding Accounts Receivable?

A business requires to provide bank statements, which gives lenders insight into their cash flows. However, sometimes you may have a low bank balance because there are significant outstanding accounts receivables (AR). For this reason, financiers will seek to know if you’re expecting any payment from debtors and how much.

Note that sometimes we may require you to provide detailed accounts to assess the risk factor in the pending invoices. This is especially crucial where you’re offering the accounts receivables as collateral. A significant AR report with credible customers can also qualify you for invoice factoring, in which you can receive up to 90% of the value of their outstanding AR within a couple of business days.

What’s Your Collateral?

Usually, lenders will advance credit on the condition that you provide collateral sufficient to cover the loan should you fail to service it. Even where your financials look healthy, collateral is essential as business risks are always present. Sudden economic downturns can shake up even the most stable businesses, and lenders always want to have a guaranteed means of recovering their money.

What’s Your Business Plan?

A financier will want to look at your business plan. Among other things, it should summarize your company objectives, products and services, financial projections, market potential, employees, business model, etc. Essentially, the plan should highlight your strengths and position in the market against competition and apparent risks.

What Insurance Do You Have?

A lender will always try to minimize their risks as much as possible. As such, they will seek to know what insurance covers you have, both business and personal policies. Moreover, they may want to reach an agreement on payout priority to cover your outstanding dues should anything happen to your business or you.

How Do Your Books Look?

Finally, the lender will want a summary of your books to determine your net worth. This may include your cash flow statement, income statement, and balance sheet. The cash flow statement should summarize the movement of cash in your investing, financing, and operating activities. On the other hand, an income statement should highlight your gross income, net, and taxable income. They will especially be interested in your tax information to establish whether your business has been compliant. The balance sheet will also be a primary area of interest, as it details the available assets for collateral.

In addition to the main financial statements, they may also ask for accounts payables alongside the receivables to determine your solvency. If you have been in business for some time, prepare to provide details about three years back.

Conclusion

Generally, lenders are usually very conservative with lending. They have a duty to safeguard their funds by performing due diligence in their lending activities. This means they typically place much more emphasis on repayment ability, although business goals and credit are also considered. That said, the fact is that lending is not usually an automatic process. You need to demonstrate your business’ ability to handle the additional obligation. As such, it’s essential to prepare your business and have the necessary documents ready before approaching a lender. But above all, you should be ready to tackle common loan interview questions satisfactorily. While financing requirements vary from one lender to another, the above-discussed questions can give you a head start to a successful loan approval process.

To move forward today, contact us by email at info@mobycap.com. As a BBB-accredited business, we have experience serving all industries and welcome the opportunity to work with your organization.

Do You Need a Great Credit Score to Secure Business Funding?

Credit scores have for the longest time been a powerful tool in determining people’s financial lives. You need a good credit score to borrow a car loan or a mortgage. On the other hand, a bad credit score will make most lenders avoid you.

The FICO credit scores have largely dominated the decisions of lenders to qualify an individual or business for a credit card or a loan. FICO’s scores range between 300 and 850 and are predetermined by a borrower’s data from the credit bureaus.

Admittedly, the process of lenders interpreting credit scores can be prone to vagueness, at least for borrowers. This has likely built up to the current Biden administration proposing the replacement of the three main credit bureaus with a new public credit reporting agency.

It is impossible to predict how long society will continue to rely on credit scores. But as a business owner, the reality is, you will experience both ups and downs which will likely affect your credit score. Whether you have a good or bad credit score, you still have the chance to qualify for funding. What you have to evaluate is if all lenders rely on credit scores for approval.

Lenders and Credit Scores

Before you start engaging large lenders or investors, you will naturally start with personal funds, friends, and family. These sources come in handy and do not care about credit scores. But as your capital needs expand, your creditworthiness will play a bigger role.

Usually, one of the first points of contact is your local bank. But how much do banks care about credit scores? This depends on how you plan to finance your business. If you are going to use credit cards to finance your business, then you will have to keep your credit scores high. But, before long, you may need to borrow a larger capital than your line of credit. In this case, a traditional bank will look beyond your financial history because they give great priority to their financial interests. So, even if you have a credit score above 700, you can still be disqualified. They will look into factors beyond your capacity such as the market conditions and industry trends.

As for investors such as venture capitalists, they will focus on analyzing your sales and revenue projections and whether you have the right team to grow a strong brand. In the end, the significance of your financial history will significantly depend on your source of funds, having in mind that other factors will also come into play.

What Is The Cutoff For Credit Scores?

Experian, Equifax, and TransUnion are the three main credit reporting bureaus that play a big role in the credit scoring system in America.

Generally, normal lenders such as banks and credit unions consider your business credit scores or FICO scores. Business credit scores range from 0 to 100 with a minimum score of 75 for small businesses. However, they, including the bureaus, will also look into many other factors like your risk profile.

If you are running a startup for less than a year, your credit score will matter. The ratings for this are between 300 and 850 with a minimum score requirement of 500 to access options such as merchant cash advances.

Building Up Your Business

Overall, to secure good credit scoring, a business will need to pay bills on time, manage debts, and be in good standing with the law. But even with bad credit, you can still be eligible for financing. Bad credit is rated as having a FICO score of between 300 and 579. Your options include using security such as personal assets or equipment or seeking other lenders who look for other requirements such as cash flow. The main idea is to run your business efficiently to present a good picture to lenders and investors.

MobyCap can fund businesses with all credit profiles, even those below 600. We understand that bad things sometimes happen to good people and realize that a credit score doesn’t tell the whole story.

While we take credit into consideration, our underwriting process places more emphasis on time in business (1 year+), cash flow (at least $40k in revenue per month), and how the business can use our funds to grow (opening up a new location, buying inventory, scaling the staff, materials for projects).

To move forward today, contact us by email at info@mobycap.com. As a BBB-accredited business, we have experience serving all industries and welcome the opportunity to work with your organization.

6 Best Practices for Getting a First-time Business Loan

It costs money to run a business and meet short-term and long-term goals. So funding a business is among the most crucial decisions that you’ll have to make. Your choice of financial sources and targets can affect the way you structure and operate the business.

One source of financing to consider is a loan. But let’s face it- getting the right loan can be a challenging task. You need to know the proper funding, ensure you meet the requirements, and do the paperwork.

But worry no more- this article will help you do your homework and get the right product that fits your business needs.

1. Shop around to Compare Offers and Rates

Be sure to narrow your choices down to the best loan option that will help you meet your needs. Keep in mind that you may qualify for some types of loans and miss out on others.

While the financial industry is awash with many varieties of first-time business loans, the most common ones include traditional bank loans: This option is suitable if you’re highly qualified and are looking to finance several purposes. The loan amounts vary, and rates are typically low. You’ll also have around 5 to 10 years to repay the loan.

While they’re easier to get, you’ll still need good credit, a few years in operation, and robust financials. But some lenders can accommodate newcomers, so don’t lose hope.

Are you looking to get a loan from traditional banks? You may have to wait for several months for your approval to go through. So if your project is urgent, online platforms and other lenders may come through for you.

2. Do not Rush into a Loan if it will Cripple your Business

You want to be sure that you’re taking an amount to repay comfortably over the loan’s life. So before approaching any lender for funding, remember to check your business cash flows and other financials.

In fact, most lenders will want to look into your daily operations to see if you can repay their loan. Cash flow indicates the relationship between your main cash expenditures and primary cash sources. This information allows the lender to understand your market demand, business cycles, management competence, and other significant shifts in your business over time.

As a general thumb of rule, ensure your revenue is at least 1.25 times all expenses (including the repayment). This puts you in an excellent position to explore your options.

Are you going for a secured loan? You’ll need to provide business collateral like a piece of equipment or land. The collateral may convince your lender to loan you more amounts at lower interest rates. But ensure you’ve played your cards well here. Who wants their business property seized due to failure to repay their loans?

You may also need to have a personal guarantee even if the loan is not secured. This implies that if your business fails to repay the loan, the lender may come after personal assets like a car or land. So exercise due diligence.

3. Read Reviews of Potential Lenders

Before buying that hot smartphone online, you’ll first research and read genuine reviews about it, right? Don’t forget to do the same when planning to take a loan.

Smart loan decisions and success rely on getting everything right from the word go. One way is to learn every detail first-hand from people that borrowed a loan from the lender. That way, you can obtain term transparency and know the actual cost of that loan.

Is there anything in their terms that may hurt your business? Are the salesmen being honest in quoting the time frame? Will they keep asking for more documentation? Genuine reviews may help you unearth the answers to all these.

Also, you’ll get to know whether or not your potential lender will approve the loan as soon as possible. Furthermore, online reviews can help you unearth those finer details that the lender may have failed to mention.

4. Have a Specific Amount in Mind

No two businesses can ever be equal, as financial needs change from one to another. That means there is no such thing as a one-size-fits-all funding option either.

So you need to do your homework and weigh several factors when deciding on the right amount to help you meet your goals. Some of these players include your niche, industry, local market, geographic location, and how you’ll put the cash into use.

Be sure the loan can enable you to achieve your target or meet your expenses: stocking your shop, getting supplies and equipment, footing the utility bills, paying rent, etc. Ask for too much, and lenders may shy away from you. Ask for too little, and your business may fail to take off or achieve targets due to some unmet needs.

According to Forbes, many small businesses fail to request enough financing, leading to issues with insufficient working capital. On the other hand, overestimating your request can lead to some lenders questioning your credibility and assumptions.

So ensure you’ve supported your budget with water-tight financial projections (think cash flow and profit & loss statements). That way, you’ll be able to convince the lender that you did your research homework well and the budget is reasonable.No lender will fumble with their finances, so they always want to ensure their choices are smart when offering loans.

You can also visit some local vendors to help you with project quotes and estimates when projecting equipment and supplies costs. Most lenders will love seeing such layers of specificities in your plan- it shows them that you did your research. Also, you’ll avoid overestimating or underestimating your loan request.

5. Know What the Loan will be Used For

How will you use the money? You don’t want to waste your loan due to the wrong reasons. Good reasons include financing a piece of equipment, developing software, or purchasing inventory. Conversely, wrong reasons include funding non-essential office assets, continuous losses, or office buildouts.

Lenders will also want to know the purpose of borrowing that loan. In most cases, your financial need will fall under the following categories that determine the most suitable loan option:

  1. Managing daily expenses: there will come moments in your business life when you’ll need a safety net. Think unexpected costs like repairs and the need to pay salaries on time. A business line of credit will be the most suitable option that will offer you that useful net. It’s flexible enough to allow you to tap into the funding as needed to foot these expenses.
  2. Growing your business: taking your business to the next level may require significant amounts of money. That’s where options like traditional term loans can come to your rescue. Why? They usually come with maximum limits that are typically higher. You can get specific loan products that will help you address your exact needs. For instance, a lender may agree to fund a customer’s equipment purchases, opening a new location, or strategic inventory purchases.

6. Know the Expected Return on Investment

Apart from determining the reason for that loan, be sure to estimate its Return on Investment (ROI). You don’t want a scenario where the interest expense is more than the potential for extra profit.

The Return on Investment (ROI) is an excellent indicator of profitability. In other words, ROI helps you determine whether or not your purchase, investment, or expense is profitable.

An example will demonstrate this point:

Suppose you sell discount hair products, and an opportunity of purchasing stock at a 50% discount presents itself. The inventory costs $100,000, and the supplier needs payment in cash up-front.

You calculate that the stock can fetch you a profit of $200,000 if you resell it at $300,000. So you decide to go for a lender that will provide you a quick loan of $100,000 and agree to repay $116,000 in fixed repayments over the agreed period. So the cost of this funding is $16,000.

Therefore, the net profit shall be $184,000 (300,000 -100,000-16,000). The analysis shows that you’re on the right track.

Wrapping Up

Before taking any loan, ensure you’ve shopped around and compared the various offers and rates. Then be sure it will help you meet or even surpass your goals. Assess all your business cash flows and financials to ensure that the loan will not cripple your business. You don’t want to lose your assets or damage relationships with guarantors due to failure to repay the funding. Thorough research on your potential lenders is another crucial thing- don’t rely solely on what they’re telling you about their services and products. Remember to get first-hand information from previous clients’ online reviews. Also, know the exact amount you’re borrowing and the reason you’re going for that loan.

Are you looking for a loan? Consider Moby Capital. We are an industry leader in offering a business line of credit, merchant cash advance, and invoice factoring. To move forward today, contact us by email at info@mobycap.com. As a BBB-accredited business, we have experience serving all industries and welcome the opportunity to work with your organization.

It costs money to run a business and meet short-term and long-term goals. So funding a business is among the most crucial decisions that you’ll have to make. Your choice of financial sources and targets can affect the way you structure and operate the business.

One source of financing to consider is a loan. But let’s face it- getting the right loan can be a challenging task. You need to know the proper funding, ensure you meet the requirements, and do the paperwork.

But worry no more- this article will help you do your homework and get the right product that fits your business needs.

1. Shop around to Compare Offers and Rates

Be sure to narrow your choices down to the best loan option that will help you meet your needs. Keep in mind that you may qualify for some types of loans and miss out on others.

While the financial industry is awash with many varieties of first-time business loans, the most common ones include traditional bank loans: This option is suitable if you’re highly qualified and are looking to finance several purposes. The loan amounts vary, and rates are typically low. You’ll also have around 5 to 10 years to repay the loan.

While they’re easier to get, you’ll still need good credit, a few years in operation, and robust financials. But some lenders can accommodate newcomers, so don’t lose hope.

Are you looking to get a loan from traditional banks? You may have to wait for several months for your approval to go through. So if your project is urgent, online platforms and other lenders may come through for you.

2. Do not Rush into a Loan if it will Cripple your Business

You want to be sure that you’re taking an amount to repay comfortably over the loan’s life. So before approaching any lender for funding, remember to check your business cash flows and other financials.

In fact, most lenders will want to look into your daily operations to see if you can repay their loan. Cash flow indicates the relationship between your main cash expenditures and primary cash sources. This information allows the lender to understand your market demand, business cycles, management competence, and other significant shifts in your business over time.

As a general thumb of rule, ensure your revenue is at least 1.25 times all expenses (including the repayment). This puts you in an excellent position to explore your options.

Are you going for a secured loan? You’ll need to provide business collateral like a piece of equipment or land. The collateral may convince your lender to loan you more amounts at lower interest rates. But ensure you’ve played your cards well here. Who wants their business property seized due to failure to repay their loans?

You may also need to have a personal guarantee even if the loan is not secured. This implies that if your business fails to repay the loan, the lender may come after personal assets like a car or land. So exercise due diligence.

3. Read Reviews of Potential Lenders

Before buying that hot smartphone online, you’ll first research and read genuine reviews about it, right? Don’t forget to do the same when planning to take a loan.

Smart loan decisions and success rely on getting everything right from the word go. One way is to learn every detail first-hand from people that borrowed a loan from the lender. That way, you can obtain term transparency and know the actual cost of that loan.

Is there anything in their terms that may hurt your business? Are the salesmen being honest in quoting the time frame? Will they keep asking for more documentation? Genuine reviews may help you unearth the answers to all these.

Also, you’ll get to know whether or not your potential lender will approve the loan as soon as possible. Furthermore, online reviews can help you unearth those finer details that the lender may have failed to mention.

4. Have a Specific Amount in Mind

No two businesses can ever be equal, as financial needs change from one to another. That means there is no such thing as a one-size-fits-all funding option either.

So you need to do your homework and weigh several factors when deciding on the right amount to help you meet your goals. Some of these players include your niche, industry, local market, geographic location, and how you’ll put the cash into use.

Be sure the loan can enable you to achieve your target or meet your expenses: stocking your shop, getting supplies and equipment, footing the utility bills, paying rent, etc. Ask for too much, and lenders may shy away from you. Ask for too little, and your business may fail to take off or achieve targets due to some unmet needs.

According to Forbes, many small businesses fail to request enough financing, leading to issues with insufficient working capital. On the other hand, overestimating your request can lead to some lenders questioning your credibility and assumptions.

So ensure you’ve supported your budget with water-tight financial projections (think cash flow and profit & loss statements). That way, you’ll be able to convince the lender that you did your research homework well and the budget is reasonable.No lender will fumble with their finances, so they always want to ensure their choices are smart when offering loans.

You can also visit some local vendors to help you with project quotes and estimates when projecting equipment and supplies costs. Most lenders will love seeing such layers of specificities in your plan- it shows them that you did your research. Also, you’ll avoid overestimating or underestimating your loan request.

5. Know What the Loan will be Used For

How will you use the money? You don’t want to waste your loan due to the wrong reasons. Good reasons include financing a piece of equipment, developing software, or purchasing inventory. Conversely, wrong reasons include funding non-essential office assets, continuous losses, or office buildouts.

Lenders will also want to know the purpose of borrowing that loan. In most cases, your financial need will fall under the following categories that determine the most suitable loan option:

  1. Managing daily expenses: there will come moments in your business life when you’ll need a safety net. Think unexpected costs like repairs and the need to pay salaries on time. A business line of credit will be the most suitable option that will offer you that useful net. It’s flexible enough to allow you to tap into the funding as needed to foot these expenses.
  2. Growing your business: taking your business to the next level may require significant amounts of money. That’s where options like traditional term loans can come to your rescue. Why? They usually come with maximum limits that are typically higher. You can get specific loan products that will help you address your exact needs. For instance, a lender may agree to fund a customer’s equipment purchases, opening a new location, or strategic inventory purchases.

6. Know the Expected Return on Investment

Apart from determining the reason for that loan, be sure to estimate its Return on Investment (ROI). You don’t want a scenario where the interest expense is more than the potential for extra profit.

The Return on Investment (ROI) is an excellent indicator of profitability. In other words, ROI helps you determine whether or not your purchase, investment, or expense is profitable.

An example will demonstrate this point:

Suppose you sell discount hair products, and an opportunity of purchasing stock at a 50% discount presents itself. The inventory costs $100,000, and the supplier needs payment in cash up-front.

You calculate that the stock can fetch you a profit of $200,000 if you resell it at $300,000. So you decide to go for a lender that will provide you a quick loan of $100,000 and agree to repay $116,000 in fixed repayments over the agreed period. So the cost of this funding is $16,000.

Therefore, the net profit shall be $184,000 (300,000 -100,000-16,000). The analysis shows that you’re on the right track.

Wrapping Up

Before taking any loan, ensure you’ve shopped around and compared the various offers and rates. Then be sure it will help you meet or even surpass your goals. Assess all your business cash flows and financials to ensure that the loan will not cripple your business. You don’t want to lose your assets or damage relationships with guarantors due to failure to repay the funding. Thorough research on your potential lenders is another crucial thing- don’t rely solely on what they’re telling you about their services and products. Remember to get first-hand information from previous clients’ online reviews. Also, know the exact amount you’re borrowing and the reason you’re going for that loan.

Are you looking for a loan? Consider Moby Capital. We are an industry leader in offering a business line of credit, merchant cash advance, and invoice factoring. To move forward today, contact us by email at info@mobycap.com. As a BBB-accredited business, we have experience serving all industries and welcome the opportunity to work with your organization.

Simple Business Loans to Consider

Most enterprises rely on business loans to scale up their operations, purchase equipment, or consolidate high-interest debts. However, getting a loan is never easy, especially for firms that do not qualify for bank loans.

Most small enterprises have a hard time accessing adequate financing. As the business owner, you must find out the available options to keep your business programs running.

In this article, we will explore small business loans to consider. But let’s begin by looking at the importance of a business loan.

Importance of a Business Loan

Control

A business loan leaves you in control of your business decisions and operations. In some cases, your lender will not scrutinize how you use the funds. They will also not claim a stake in your business since your agreement requires you to repay the loan and all the fees and interest you agree on.

This is unlike when you get funding from investors. Some investors will ask for a percentage of shares in your business in exchange for funding. Some will also follow you to know how you use the funds and want to have a say in your business operations.

Customized Funding Options

Your lender may offer you different funding options aligned to your strategic plans. They may customize the loan for you and streamline the lending process to ensure you secure working capital quickly so that you can focus on reaching your business goals.

Fast Funding

Some business loans take about a day or two to process. If you are applying for an online loan, it may take a few minutes to complete the application and get the money wired to your account. Investor funding may stretch for about 12 months before the application, vetting, and releasing the money to you.

You can also access your lender easily since most of them have offices in most parts of the country. With their dedicated customer service experts, you will have someone to guide you through your application process in any of their offices. In addition, they require minimal documentation.

Transparency

When applying for a business loan, your lender will let you know the cost of your capital. This will help you plan your repayment schedule based on your projected business cash flow.

Excellent Customer Support

Business loan lenders go out of their way to forge a lasting business relationship that enables them to partner with you as you build your business. Besides lending you money, they will typically become valuable consultants that may offer you financial advice to grow your business.

Since they serve customers from different industries, they may customize solutions that give you a competitive edge.

While taking a business loan is an enticing idea, you should not decide without due considerations. Ensure you need the money and that you have a repayment plan. Here are some of the things to consider before taking a small business loan:

How Much Funding Do You Need

Ensure you know the exact amount you want to apply for before submitting your loan application form.  Consider the cost of equipment, transportation cost, or set-up costs to ensure the loan covers it all.

If you want to expand your business, consider the cost of additional stock, display space, and any transport cost you will incur to ship the merchandise. This will help you avoid taking a lower or higher amount than what your business requires.

Timing

Apply for the small business at the appropriate time. If you want to expand the business, the best time to take the loan would be at the peak season of your sales. If the loan is for buying new equipment, apply for it when you anticipate a good discount from the dealer.

Start the preparations early to factor in the time you need to apply, provide what your lender may ask for, and the loan to be processed in good time.

Your Credit Score

Get a copy of your credit report so that you can resolve any disputes on your credit score before applying for your small business loan.  Your credit score may determine the amount you qualify for and the interest rate your lender will charge you.

Shop for Alternatives

Traditionally, businesses rely on banks and credit unions to fund them. Today, you have alternatives such as merchant cash advance, as well as lenders with more flexible loan repayment plans. If you take your time, you may identify an alternative lender like Moby Cap with more business-friendly interest rates and repayment options.

Loan Terms

Read and understand the terms concerning processing fees, repayment period, and if there is a set payment date. Also, find out if there are penalties for early repayment and if the interest rate is on reducing balance. These terms will vary with lenders. Go with the lender with the best terms for you.

Simple Business Loans to Consider

Revenue Based Advance

This is the best loan for a business wanting to increase stock and sales but cannot access bank credit facilities. You agree with your lender on the percentage of your monthly revenue you will be using to pay off your balance.

That tells you there is no definite repayment period since the revenue and repayment installments will fluctuate from month to month. The loan is given based on revenue projection, and you do not require any collateral.

The lender does not need a company valuation to fund you. It also involves minimum paperwork, and the processing may take less than a month.

Pros

  • The lender does not ask for collateral, equity, or processing fees. There are no hidden charges.
  • Based on business cash flow
  • Friendly to your business since you can modify the repayment structure if the cash flow fluctuates
  • Fast loan processing with minimum paperwork
  • Repayment schedule options including biweekly, weekly, or daily
  • There is full disclosure. You will know the full amount you will repay, and there is no penalty for early repayment. This allows you to increase or decrease your installments depending on your sales volume

Term Loans

As the name suggests, term loans are designed to be paid back in fixed amounts over a predetermined amount of time. You will know your repayment period, stretching from 18 months to 5 years.

They are excellent for businesses wanting to increase their capital. Small businesses find these loans attractive since the installments are usually low and spread over a period.

You may choose a repayment plan based on your business projections. In some cases, you may choose to repay in fixed installments or increase the installments are your business grows.

Some lenders may give you a fixed interest rate on your term loan, meaning the interest rate will not fluctuate with the business environment. However, some may offer a floating interest rate that fluctuates with the business environment.

Pros

  • They have long repayment periods and low installments
  • You get fixed repayment installments, enabling you to plan your finances. You can choose a repayment plan that suits your business
  • Fast processing

Invoice Factoring

This is a financing solution where you transact your account receivables like invoices with a financial institution.  If you work for an organization that delays before paying your invoices, you can the invoice factoring institution may pay you up to 90% of the value of the invoice, and you surrender the invoice to them.

Invoice factoring may shield you from delayed business operations like paying salaries and loans or getting merchandise for waiting customers. It may work well for you if you earn a high interest from the invoices to meet the invoice factoring costs.

In some cases, you may receive your invoice factoring cash the same day you present your invoice.  You can decide the amount of the value of the invoice you want the lender to advance you.

Once a lender has verified that your customers are creditworthy, they will release the money to you immediately. You will then wait for the invoice to be paid to receive your balance. Expect the lender to deduct their charges before releasing the money to you.

Pros

  • You have uninterrupted cash flow even when your customers delay payments.
  • You can get up to 90% of the value of the invoice to meet your financial obligation as you wait for payments from your customers.
  • Invoice factoring shields you from bankruptcy.
  • The creditworthiness of your customers is assessed.
  • Fast processing
  • Low interest rate with no hidden charges

To move forward today, contact us by email at info@mobycap.com. As a BBB-accredited business, we have experienced serving all industries and welcome the opportunity to work with your organization.

Get your funding from us in three simple steps where you apply securely, select a funding plan, and receive the funds in as little as one working day. We will assign you a dedicated agent to help you with your application process and to keep you updated about your account and our products.

Get in touch with us to speak to a funding expert and discuss your funding plan. You can get funding up to $5M.

Excellent Options for Business Loans with No Money Down

Most small businesses desire to access working capital quickly and easily without having to put something down. Sadly, this is not an option in most cases. Most lenders want collateral to justify the risk. Additionally, lenders want to ensure that you are resolute while turning away fraudsters and jokers.

Unfortunately, not everyone has the money to put down in order to acquire the funds they need. Does that imply that you can’t get a loan without putting money down? No. If you can’t afford a down payment, there are different options to explore. Here are some of the available options:

Start with Business Term Loans

Term loans are the most common loans for small businesses. They permit a business person to borrow vast amounts of money with a longer, fixed repayment period. For term loans, once a lender determines you have a good credit score, healthy revenue, and several years in business, the lender will not require you to put money down.  Interest rates for term loans are lower than other financing options, making then an ideal option for those who qualify.

Explore Business Line of Credit

Business lines of credit are a fantastic choice for business financing, especially when you don’t have money to put down or collateral to offer. It functions similarly to business credit cards. Based on your qualifications, the lender will determine what amount to allocate you. When you need cash, you can then withdraw any amount up to the maximum allowable limit.

After borrowing, you will make weekly or monthly payments for the loaned money plus the interest. When you pay back the money, it accrues back to your credit, and you can use it again after you’ve offset the loan amount. Its interest rates range between six percent and twenty-four percent.

You Always Have Invoice Factoring

In invoice financing, you sell off your unpaid invoices to your lender. The lender will then fund you ninety percent of the total value in the invoices. The lender withholds fifteen percent as a fee and costs for processing your loan.

The invoices are your collateral, and therefore down payment is not required. Business financing is a fantastic option for businesses with long payment cycles and needs cash. Invoice financing is only applicable for enterprises that are already up and running.

Consider Revenue Advance

With revenue advance, your business pays back the received loan product via a percentage of future sales. You will have to set aside a specific percentage of future sales until you clear the advance. Therefore, it is a straightforward way of getting funding with no money down. It is a quick type of financing that typically takes one business day to process.

However, the amount your business can receive from revenue advances will primarily depend on historical and recent cash flow. Other influencing factors include your credit score and time in business. MobyCap, for example, specializes in substantial advance amounts and can go as high as $5 million for all qualified customers. Additionally, MobyCap is among the few lenders that waiver all up-front fees in the name of establishing long-lasting business partnerships.

Let us Support you

If your lender is unwilling to accommodate your needs, then they are not your best fit. MobyCap offers multiple flexible funding options including, merchant cash advances, business lines of credit, term loans, and invoice factoring.

In addition, Moby Capital provides fast, easy business funding up to $5M to help companies in all industries meet their goals. To move forward today, contact us by email at info@mobycap.com. As a BBB-accredited business, we have experience serving all industries and welcome the opportunity to work with your organization.

Short-Term Loans Keep Your Business Growing as You Await Government Aid

Securing government aid certainly saves money for an expanding business in the long term. But sometimes the wait time for receiving that funding can damage a business’s growth prospects.

In this case, acquiring a short-term loan that can be repaid with the government assistance allows a business to capitalize on the immediate growth opportunity and to gain the benefits of the government-backed assistance in the longer-term.

Though short-term loans come at a higher cost, your business’s ability to remain agile and adapt quickly to market conditions often can make up for that cost while waiting on longer-term government aid loans to come through.

Short-term vs. long-term loans

Short-term loans are exactly as they sound: loans designed to be paid off over a shorter period of time, like a few months to a year. They can, however, have flexible repayment plans. For example, a merchant cash advance is paid back through a small percentage of a business’s sales.

Long-term loans typically are term loans that are paid off at a fixed monthly payment over a period of three to five years, or longer.

Short-term loans often are smaller loans designed to help a business bridge a cash-flow crunch, but MobyCap has business loans available up to $5 million, much higher than many short-term lenders are willing to handle. Short-term loans of this size can be a vital tool for growth among businesses that can put the funds to work quickly and generate a large profit.

The great advantage of a short-term loan is the speed of the application process. Short-term lenders normally have you fill out an online application, then a representative will discuss the application with you on the phone and a final loan decision is made the same day, so your business typically receives the funds the next business day.

A Small Business Administration loan can take from 30 days to 6 months to process and fund, as you must work first through a local or online lender, who reviews your application then submits it to the SBA for a guarantee review.

Your business could lose out on an opportunity to expand to a new location, purchase much-needed equipment or buy out a competitor if loans are delayed too long. At worst, you could be looking at missing out on 3 to 6 months of profit these expansion plans could provide.

Pandemic-related programs

If your business is working through programs the government has established to help small businesses damaged by the pandemic, short-term loans also could provide a bridge that could help you survive, especially if you are seeking funding through the Economic Injury Disaster Loan programs. Processing for these loans was extremely slow in the beginning because of the high volume of applications. Since the program’s extension through December 31, 2021, the process has been speeding up closer to the SBA’s traditional 21-day processing time then 5 days to make payment once the application is approved. SBA is reaching out to businesses that previously applied but were not funded or were funded at lower levels than currently available.

You should be aware that if you did use Paycheck Protection Program funds to pay off a short-term loan, the interest you paid cannot be part of the qualifying expenses you must meet to have these loans forgiven. Short-term loans are considered unsecured loans, and these interest costs are not a qualifier under the PPP regulations.

If your business is playing the waiting game with a government assistance program, consider spending a few minutes today filling out our online application and discussing your options with our lending experts.

Call (737) 577-1180 or email info@mobycap.com to discuss how we can help you grow your business.

Guide to Getting the Best Business Loan for Your Company

Unless your balance sheet is like that of Apple or Coca-Cola, you will probably need to finance your company through a business loan. In fact, even established corporations regularly get capital infusions to address their short-term obligations.

For small and medium enterprises, identifying a suitable funding model can be crucial. If you acquire funds from the wrong source, you risk losing part of your business or may end up locked into unfavorable repayment terms that could impair your entity’s growth for years.

In this detailed guide, you’ll learn the basics of business financing, common sources of funds for small and medium-sized businesses, and the steps of finding the right business loan.

Different Ways of Funding Your Business

You can finance your business in different ways, and all these are classified into two main approaches: equity and debt.

Debt

This refers to a line of credit or loan offering a stated amount and requires you to pay within a stated duration. To get most loans, you must have asset security. This means that your lender might obtain the assets if you fail to complete the loan repayment. You may also seek an unsecured loan that doesn’t tag a specific asset to secure the loan.

Equity

This involves selling part of the company, sometimes referred to as selling equity stakes.

Regardless of the type of product or its name, all business financing solutions fall under equity, debt, or a hybrid combination of both elements.

Here are the different methods that you can use to finance your business:

  • Savings – The most straightforward approach to financing your company is using your own cash. In an ideal setup, most people save for a given duration then inject the money into their business. Despite being the wisest, safest, and most conservative approach, it limits the amount you can raise.
  • Credit cards – You can also finance your business and extend the entity’s cash flow by paying suppliers with your credit card and earn certain protections, discounts, and other benefits. Though expensive, you can use cash advances as your last resort. The main setback with credit cards is that they directly link to your credit score.
  • SBA Microloan Program – This little-known yet extremely beneficial program offers startups and small businesses up to $50,000 in loans. Most also provide management assistance, and one of the loan conditions can be training.
  • Family and friends – You can also source funds by letting your friends and family chip in through equity investments, or you can request a business loan. However, using friends and family can affect your relationship if the business fails. You’ll also be forced into a form of partnership even if you don’t need one.
  • Angel investors – These can be small executives’ groups or private individuals who can invest in your company through an equity purchase. They may share expertise, money, and guidance to aid business growth. However, there’s a risk of substantially diluted business ownership, especially when there’s no CPA or specialized lawyer to guide you through the equity sale structure.
  • Lines of credit and business loans – This is the usual process where banks finance your business via a specific amount of money as a loan. Lines of credit offer revolving facilities that companies use where necessary and pay back regularly. But qualifying and getting this financing is complex, and the option isn’t viable for small businesses with little experience.
  • Factoring – This business financing alternative has been gaining traction in the past few years. It’s a reliable source of funding if your customers pay their invoices slowly, leading the business to experience cash flow problems. However, factoring is only applicable if you work with government and commercial clients with good credit. You’ll only qualify if your organization has substantial assets and a proven track record of revenue generation.

How to Get the Right Business Loan for your Company

There’s no standard procedure for finding the right loan for your business. However, the following steps can help you find the right financing to meet your company’s short- and long-term goals:

Review Multiple Offers

Before you begin the loan acquisition process, you must first understand the available options. There are numerous lenders out there willing to support your business. However, all these offer lots of varying loan approval requirements and terms.

SBA 1 (a) Loans

SBA doesn’t offer loans directly but partners with its lenders’ network to serve small business owners. When looking for working capital, you can consider several loan programs, with 7 (a) being the most popular. You’ll only be required to provide collateral if the loan amount goes beyond $25,000.

For amounts beyond $350,000, lenders must collateralize loans, sometimes up to the loan amount. They may use your personal real estate if your business lacks sufficient assets for security. However, you won’t be barred from 7 (a) loans due to lack of collateral if you meet other thresholds.

SBA Disaster Loans

You can also apply for an SBA disaster relief loan if you experience losses due to an economic crisis or natural disaster. They also don’t require security for loans below $25,000, and you won’t be denied because you don’t provide collateral. If you wish to purchase equipment with the loan, you must provide up to 10 percent of the overall buying price as a down payment.

Alternative Lenders and Online Financiers

Another viable option when looking for business loans with minimal or no collateral requirements is to seek online and alternative lenders who can help you meet the company’s working capital needs. Some of the products that don’t present collateral requirements upfront include:

You can also seek financing from peer-to-peer lending platforms that link small entrepreneurs looking for funding to investors who can pool funds and finance the business. This amount will be repaid like other loan forms with interest.

Understand What You Qualify For

Some business loans for small and medium entities are more complicated to qualify than others. For instance, SBA 7(a) loans require you to present an operating history of at least two years, meet the eligibility definition of a small business, and meet the minimum threshold for revenues and credit score. You also need to exhaust every borrowing option before you apply.

For web-based and alternative lenders, you may encounter more fluid requirements. For instance, having a lower credit score may not hinder you from getting invoice financing or merchant cash advance. You can also acquire startup loans easily from these sources, and most require an operation history of only six months.

  • Evaluating your company’s overall financial position may involve the following activities:
  • Reviewing your business and personal credit scores
  • Creating vital financial documents like the cash flow statement or profit and loss accounts.
  • Checking your company’s overall cash flow and key expenses
  • Creating an updated balanced sheet

There are two primary purposes for reviewing your company financials. The first is determining your creditworthiness, and the second is to check your ability to repay the amount. Failing to pay it back can damage your credit score, limiting you from obtaining financing in the future.

Instead of loan interest rates, you may also encounter loan types that use factor rates to ascertain what you’ll pay as the cost of borrowing. This value can translate into a 2- or 3-digit effective APR (Annual Percentage Rate), and this depends on the loan times and how fast you repay the amount.

Understanding All the Terms

After a successful application and approval of your business loan, the next step is to review the terms and conditions. As you go through the loan agreement, check the APR, interest or factor rate, loan term, and repayment schedule. It’s also essential to ascertain the overall cost of borrowing, factoring in the fees and interest. Also, check out the applicable fees, such as the repayment penalty or origination fee.

You may have the best interests of repaying the borrowed amount, but the different requirements and terms can substantially impact your operations if you fail to fulfill your part of the bargain.

You’re in Safe Hands

Starting and running your company can be daunting, but the process can also be rewarding if you have the right business plan and financing opportunities. But getting sufficient capital for the business can is arguably the biggest challenge.

The most practical way to opt-out of this difficulty is to apply for a business loan. You have lots of options that you can try out, as highlighted above. Your choice of financing avenue depends on your business type, how long you’ve been operational, the company’s performance, position, and marketing opportunities. With the above process, you can easily find the best business loan for you.

Are you looking for a reliable lender to help you meet your business goals? Moby Capital is here for you. You can count on us for simple business funding of up to $5 million. We have decades of combined experience, and an accomplished team of finance experts can help you access the funds you need in as low as a single business day. Reach out for more details.

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