Your struggle over whether or not to take out a working capital loan is one that business owners across the nation are going through every day. Economic uncertainty and long term recession have created an environment of fear in the business world, not just in the United States, but around the globe. The unemployment numbers seem to indicate that there hasn't been any real improvement in the situation since things started to unravel back in 2008. For this reason, and many others, small business owners have chosen in many cases to trim the fat, cut out excessive waste, and eliminate whatever is classified as a "non-essential" service or position.
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These decisions to cut instead of grow could classify as sound business reasoning, if made by an individual or small minority of businesses. As a belief system for the majority, it's actually compounding the problem. Without growth and financial investment, we'll continue to stagnate. Forget cutting back. The economy has stabilized, the housing market has readjusted, and many of those out-of-work Americans need to be trained in new fields because the jobs they lost are in industries that may not exist in a few years. Like we did at the end of the industrial revolution and when global trade barriers were lifted by the development of the worldwide web, we have reached a place in human history where things must change.
Why Would You Take Jobs Away When You Can Add Them?
There are different types of working capital loans, but they are all designed to help you achieve one goal - growth. Why would you cut back and eliminate jobs when you can grow your company and add some, contributing to the solution and not the problem? The lending market is tough right now, but there are funds available to you if you can come up with a solid business plan. Obviously, if you don't know how you're going to use the money to achieve some level of growth, you won't want to take out a loan. Sit down with your company officers and ask professional financial advisors for some assistance. There is a way to expand and grow and the timing is right. Many multi-billion dollar corporations have risen from the ashes of situations similar to what we're going through right now. It just takes some creative thinking, a business owner not afraid to take a chance, and a bank willing to give you the loan.
Approach the SBA First When Searching for a Working Capital Loan
The SBA, or Small Business Administration, is a federal agency that can guarantee a small business working capital loan. They don't actually lend you the money like they did in years past. Instead, they will point you to a lender in your area that is willing to offer the SBA loan once the SBA has done their due diligence on your business. With their guarantee you're more likely to get approved for a loan and the interest rates might be a little more reasonable than with a standard loan. The SBA also offers specialty loans for women and minority-owned businesses, along with some free financial assistance for those who need a little help making business financial decisions.
Asset Based Working Capital Loans are Like Asking Yourself for Money
SBA loans are most often given to new businesses. For established businesses that have weathered the recession storm and have assets such as real estate or equipment, you may qualify for an asset based working capital loan. You'll be putting up your assets as collateral for the loan so you'll want to be particularly careful when preparing your business plan. Evaluate every possibility and set specific milestones. Above all, make sure that you're not putting yourself at risk of losing what you've already accumulated. The way to do this is not to borrow less and cut corners on spending; it's to borrow a little more than enough and make sure you're prepared for unexpected set-backs. Lenders know what it takes to finance an expansion, so don't be afraid to ask for too much. You're more likely to get turned down if you ask for too little.
Take Out an Inventory Financing Loan on Unsold Merchandise
One financing option often overlooked by small business owners is the inventory financing working capital loan. It's basically taking out a loan using unsold merchandise for collateral. From a working capital stand-point it makes the most sense because you want to sell what's on your retail floor or in the warehouse anyway. The risk for you as a business owner is less because you're not gambling with accumulated assets; you're putting up product that has to be moved. The loan can be used to advertise a sale or expand distribution channels, so you'll be using money borrowed against product to sell that very same product, jump-starting your business and maybe adding a few jobs at the same time. Another suggestion for this type of loan is to open up a new market somewhere you weren't doing business before, like on the internet.
Factoring Invoice Loans on Outstanding Accounts Receivable
Does everyone owe you money and no one seems to have the money to pay you? You can turn that outstanding debt into a Factoring Invoice working capital loan. That's right. The bank will take into account what's owed to you as a determining factor when you apply for a loan. If they deem it to be legitimate and collectable at some point, they'll give you the money you need to expand your business. Many small business owners just like you, are taking advantage of this type of loan now because we appear to be at the end of what has been a difficult and often painful financial crisis. The damage to some businesses and families is irreparable, but for those who are still standing it's time to look forward to better times. Forget cutting back. Expand and we can get things back on track, creating a brighter future for everyone and higher profits for you.
Copyright (c) 2010 Trey Markel
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