Running a small business is one of the best ways to be your own boss. Be it a franchise, or a business that is completely based on an idea of your own. A small business is a key part of the American dream. Rightly so, small businesses play a key role in communities throughout the country. Main Street, not Wall Street, is the real engine of the economy.
As important as small businesses are, you can’t run them without cash. For many businesses, this includes having a backup plan such as setting aside a portion of your profits for a rainy day or establishing relationships with your ‘local’ bank.
However, the ‘local’ bank is not the same as the local bank of times gone by. We all know the story of how banks, on Wall Street and elsewhere, branded ‘too big to fail’ received bailouts during the Great Recession. Then the same banks did not increase lending to small businesses. But times have changed, right? The economy is on more even footing and the banks are surely helping small businesses again. Well, not so fast.
Loans from the biggest banks in the country to small businesses have declined in recent years. The peak was in 2006 when the biggest banks made more than $72 billion in loans to small businesses. But since then the total amount of loans to small businesses has fallen by 38% to just under $45 billion in 2014.
What can small business owners do, when they need a little help making ends meet or finding capital for growth? One answer is to get a working capital loan. These are loans which businesses use to leverage invoices to customers, inventory, or even credit card receipts.
Working capital loans can help to bridge gaps in a company’s cash cycle and many lenders have developed streamlined approval processes. Whilst these lenders are called ‘alternative’ lenders, the only thing alternative about what they do is how they help small businesses. One such lender is Mulligan Funding. They are based in San Diego and offer a number of funding options tailored to your needs. This is something the big banks could never do.
These loans can be used to purchase equipment, inventory, even to meet shortfalls in your cash cycle. This can help you to grow your business faster. In fact, there are numerous choices for working capital loans on the market today. This is a big plus for small business owners and you should check out the right options to meet your situation.
Say you need to purchase a key piece of equipment for your small manufacturing company but your personal credit is not great. Well, you don’t need to worry as a number of working capital lenders on the market have programs for business owners just like you.
It really does not matter what industry you are in. Some lenders don’t even require you to have a registered business or good credit – though it helps. In the end, working capital lenders understand that small businesses are the backbone of the economy and are a critical part of the American dream.
When looking at working capital loans, you want to choose the option which best fits your particular business need. You also want to look at the terms and the conditions of the loan. This is important as every loan is different. For example, a business that has positive cash flow, but needs the loan to grow faster will not have exactly the same concerns as a business which needs the loan just to stay open.
Cash is King so Have a Cash Management Plan
Having a cash management plan will help. After all, it is no use getting a working capital loan to only find out the amount or the repayment terms cannot fit your business. As such, you need to know exactly what the loan is for and how you will pay it back. If you are uncertain how the loan will be repaid, then you will want a loan which has the most flexible terms possible. Lastly, you want to make sure you can pay off any loan early without penalty.
Working capital loans can be a great option for your business. They can help finance that next equipment purchase, or to make ends meet. As you have seen, many banks are not well suited to provide these types of loans. Fortunately for you, it does not really matter anymore. A number of ‘alternative’ lenders are more than willing to provide the support you need.
So when should you get a working capital loan? The reality is that anytime is a good time. As these loans have become a key part in the success of millions of small businesses throughout the country. Just remember to look for the loans which are best tailored to meet your needs today and grow with you tomorrow.