Small Business Loans? – Opt For Better Options!
Irrespective of their size and nature most businesses face financial crunch sometime or the other in its lifecycle. These crisis situations become all the more important for small businesses because the banks and financial organizations are often ready to lend money to big business houses but not to the smaller ones. Besides, small businesses with their limited capabilities often find it overburdening to repay a bank loan.
Small business owners have been trying various options and various types of loans to see which suits their needs better, however, a point that is often missed out by them is that they can probably manage these situations often without any outside help. Sounds surprising? But its true, and here are some of the ways you can do it.
Try to Base Your Business at Home: This is not possible for all but if you can have a home-based business you can actually save a fortune. You save on expensive commercial rent, which is a recurring expense. As you are based out of your home, you don't need to commute, so you save on transportation. In addition, your business use of home expenses would qualify for income tax deduction. So just one-step and you have three fold savings. Credit Cards: If you are a business that doesn't accept credit cards, you are actually saying NO to a big segment of your prospective customers. People hate to see cash going out of their pocket and that is why they love credit cards. Accept credit cards, your sale is bound to increase. Not just that, you might be offering credit to your customers and if so, you must have faced the hardship of collecting your receivables and bad debts are just a part of this game. With credit cards your customers can pay easily and you don't have to think about bad debts. What more, if you have a steady flow of credit card sales, you can qualify for a business cash advance against your future credit card sales receipts. These business cash advances do not have any fixed repayment schedule and are paid off from your credit card sales receipts. Don't Block Your Money in Inventory: Businesses often have a large part of their capital blocked in inventory, not just that if you are maintaining your inventory, you need to store them somewhere; so there is a cost for warehousing / stocking them as well. Avoid this process and try drop shipping. When you make a sale contact, the manufacturer who would ship the product to the customer under your invoice and shipping label. You save on your shipping and warehousing cost and also more money available for other operations. Get Your Customer's to Pay Upfront: Offer special discounts, subscriptions, coupons, gift certificates to customers who pay upfront or customers who purchase for a pre determined amount within a stipulated period. Your sales will increase and people would be more inclined to pay in cash - result: You have more cash at your disposal. Obtaining advance and retainer fees can also be a good way to accumulate cash from your customers. Debtors and Creditors: If you can manage your debtors and creditors properly that would probably solve more than 50% of your fund crunches. Try to get extended credit periods and higher credit limits from your creditors. The longer your credit period, the better it is for you. Maintain a strict credit line and systematic collection procedure. You should be able to get more cash from your debtors and hold more cash from your creditors resulting in increased availability of cash and better cash flow.
In addition to the above-mentioned points, there are numerous other ways that can help you to get more cash without having to opt for business loan. Control your costs in every possible way, try to avoid buying expensive equipments and use them on rent or lease, participate in charities to generate free publicity; these are just some options and there must be hundreds of other options that would help you to run and grow your business without opting for an expensive business loan.
Working Capital Management Basics For Small Business Owners
Because of the recent ineffectiveness that prevails with commercial banking, working capital financing can no longer be taken for granted by any business owner. Some common advice for many complicated problems is often a variation of "it is time to get back to the basics", and working capital loans represent an ongoing illustration of this wisdom for small businesses. Working capital management is the science and art of short term business cash management, and improvements in this area should always be welcomed by commercial borrowers.
Ensuring adequate business cash flow has become a higher priority for most businesses because of declining sales occurring simultaneously with decreased bank financing availability. In one common occurrence, borrowers are likely to attempt to juggle the timing of expenses whenever possible in an effort to match receipt of business income. Business owners will realistically be forced to "get back to working capital financing basics" because this is not an ideal solution under any circumstances.
A primary alternative for any business to explore in their efforts to deal with a mismatch of income and costs is business expense reduction. Credit card processing is a significant cost to evaluate. This is frequently an expense area that is overlooked because the credit card processing provider was chosen for convenience or perhaps because they were recommended by a banking or other professional relationship. Analyzing alternative providers in conjunction with obtaining a business cash advance is one of the most practical methods for reducing this cost. By combining efforts to obtain additional working capital (via merchant financing) with a change of processing services, a dual cash flow benefit can be achieved by receiving commercial financing while simultaneously reducing a major cost. For anyone who might say that this is easier said than done, please understand that this whole process should be undertaken with the ongoing assistance of a business financing expert who routinely accomplishes these transactions.
Looking at whether it is feasible to reduce overall bank financing is another potential cost reduction. For almost every conceivable commercial finance service, many banks are increasing their fees. To avoid some of the bank fees altogether, businesses should increasingly try to reduce their business debt levels. When this is not practical, the possibility of firing the current bank and replacing them with a new bank (and more appropriate fees) will need to be emphasized.
In reviewing working capital basics, small business owners will quickly realize that the most effective commercial funding sources have changed during the past two years. The more active role that banks have traditionally played in providing both working capital loans as well other forms of commercial loans has been quietly stopped (or significantly reduced). Commercial borrowers might need to be alerted that there are both "new basics" and "old basics" for most working capital management situations, and this is the rationale for making the last observation. The entire process of reviewing "working capital basics" will help businesses realize how other business financing options are likely to be more effective in resolving their predicament than the traditional bank solution of taking on more business debt to resolve the described problems.