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Best Business Loans to Improve Struggling Companies

Being under-capitalized is a primary reason for business failure. Beyond meeting expenses, business financing helps your company expand and invest in ways otherwise not possible.

Thankfully, there are several options to improve your cash flow and operations. These choices can boost profits in direct and indirect ways. The steps also help you make the transition from self-employed to business owner.

Here are business loans and strategies to improve your small company:

Choosing a Business Loan:

Business loans vary greatly in purpose and structure. There are many companies you apply for a loan directly over the internet such as Business Loans Direct and Lending Club. There are several factors to consider when borrowing money for your small business.

What to consider:

  • Purpose of the loan
  • Loan Amount
  • Repayment period

Each of these factors will affect choosing the best business loan for your needs. You can increase the ROI of your loan by knowing answers to these questions.

Based on your answers, loan options to consider include:

Equipment Financing:

From indirect tax benefits to direct increases in productivity; equipment loans offer multiple benefits.

When you need specific machinery, equipment financing may be suitable.  Financing or leasing equipment can be easier and have less liability than a general loan.

Benefits of Equipment Financing vs. General Purpose Loan:

  • Easier to qualify
  • Collateral is easy to determine
  • Typically faster turnaround
  • Leverage finance company relationships for discounts

Equipment finance companies and major banks alike offer equipment loans. Their relationships with manufacturers may result in quicker approvals and more favorable terms. You may also have trade in options to upgrade equipment as technology or needs change.

Productivity is also increased through equipment loans. Your food or product quality may be affected as ovens and presses age. Financing new equipment allows companies to maintain production without disruption.

Note: Many finance agreements allow you to upgrade as new technology become available.

Managing depreciation: Working with a CPA to manage your depreciation expense is also advised. In accounting terms, capital equipment has a useful life. You may be able to depreciate new equipment as a write off for tax benefits. This may be added incentive to finance or lease new equipment.

Business Lines Of Credit and Credits Cards:

Business Symptoms:

  • High amounts of A/R, outstanding invoices
  • Delays in realizing credit card sales, merchant processing

Effects:

  • Struggling to meet payroll
  • Difficulty meeting overhead (leases, utilities, etc.)
  • Inability to capitalize on opportunities

Solutions: Revolving Debt, such as Business Lines of Credit and A/R Financing

There are many credit cards specifically for businesses. Revenues are not created equal. Waiting for A/R or credit cards sales to be realized causes cash flow headaches. It is crucial to have capital for payroll or other overhead in these cases.

Revolving debt is credit available as needed. You will only pay interest expense if a balance is carried. When invoices aren’t paid or credit cards are charged back, you need funds to cover shortfalls.

Savvy business owners leverage lines of credit and credit cards to improve their cash flow. Example: A restaurant owner can use a credit card for volume discounts on food and supplies.

If your restaurant has advanced bookings, a business credit card is leverage to buy supplies in advance of the big events.

Even if a balance is carried, cost savings on supplier discounts may exceed interest expense.  A line of credit may also allow you to secure new clients. For instance, you can commit to a client deadline knowing that funds are available to meet project expenses.

You should determine the ROI of using business credit in this way.

Challenged Credit? Turn to A/R Financing:

A/R financing may be an option if you have limited credit history but high amounts of receivables.

How it works: You sell A/R at a discounted %, also known as factoring.

Since no debt is assumed, credit score is not an issue. How much you receive for invoices will depend on the quality of your A/R. Receivables from a brand name company will likely fetch a higher percentage than A/R from individuals.

Summary:

Which of your needs may be met by equipment loans or revolving debt? Please work with a tax or lending professional, as needed.

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5 Responses to Best Business Loans to Improve Struggling Companies

  1. I have no reason to consider a business loan at the moment but I appreciate this post because it does offer a great insight on the important considerations. In case the need arises, I know this would make a great reference.

  2. Jennifer says:

    Good considerations and overviews of a few of the finance options available. Would like to read your thoughts on other options such as invoice finance and crowdfunding..

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