John Palmer, Author at New Bridge Merchant Capital

The Complete Guide to Taking Out Business Loans to Finance Your Next Restaurant Expansion Project

How to Use a Restaurant Business Loan to Finance Your Expansion

Obtaining capital for a restaurant expansion is often the first critical step toward realizing your culinary dreams. As a restauranteur looking to grow, you want make sure you have the best financing options available so you can focus on what you do best—serving up delicious meals to your loyal customers.

In this guide, we’ll present you with everything you need to know about restaurant expansion financing, including what it is and the different expansion financing options to ensure you’re up to speed on the full breadth of available loan products. You’ll learn how to compare and evaluate restaurant financing to encounter the perfect expansion loan for your upcoming project.

By taking the time and effort to properly research expansion financing products, you’ll be in a better position to make an informed decision about the best financing solution for your restaurant. Taking out a New Jersey business loan is a significant commitment, so you want to consider the implications of the financing and all risks they entail. This guide will help you consider all the restaurant funding options and advise you on how to take out the right loan to finance your upcoming restaurant expansion project.

Restaurant expansion financing explained

Whenever a restaurant business plans an expansion project, one of its primary concerns is obtaining affordable financing. Turning to an alternative business lender is one reliable option many restaurant owners may not have considered. Opening a new loan is often the best -if not the only- way to fund a restaurant expansion due to the speedy process and relatively lower interest rates.

Before a restaurant can access financial services, its owners and staff need to, foremost, understand the types of loans available. New Jersey Business loans come in a variety of forms. Restaurant expansion loans generally fall into two categories: term loans or lines of credit.

A term loan is a lump sum of money that a borrower pays back over a set period of time, with predetermined interest rates and terms. A line of credit is similar to a business credit card, with a set spending limit. The borrower can distribute the funds however they need to for their expansion.

As with any financial transaction, there are several vital considerations. Restaurant owners should carefully weigh the pros and cons of their loan options before making any decision. Taking out a loan requires substantial research and due diligence. When expanding a restaurant business, understanding the impact of each available loan and its associated risks is paramount.

Why do restaurant owners need expansion financing?

Restaurant owners, like any other business owner, may one day want to expand their operations. Whether you’re starting a new restaurant, renovating your existing location, investing in new kitchen equipment, or launching a large-scale expansion into multiple locations, taking on a restaurant expansion project is an exciting growth opportunity. These projects may require access to considerable financial resources that usually need to come in the form of a New Jersey small business loan.

Expansion loans help restaurant owners afford the upfront capital required to launch their next venture. You can leverage an array of lending products to cover a diverse range of costs associated with restaurant expansion, including improving your facilities’ look and feel, accommodating more guests, investing in back-of-house kitchen equipment and supplies, funding operational expenses, creating a reserve for unexpected costs, and working with consultants to modify processes and improve performance.

Business loans can also help fund new revenue streams through rebranding initiatives, consumer packaged goods, or catering services. Access to these funds can be invaluable to many restaurant owners who aim to diversify their services and maximize profits. In fact, loans can often offer cheaper funding in the long run than venture capital.

To ensure your business is in the best position to acquire a restaurant loan, start planning early, verify your financing needs are accurate, and confirm all your financial records are up to date. Strong personal and business credit profiles will demonstrate your commitment and financial responsibility to prospective lenders.

Restaurant owners with their sights on expanding shouldn’t let a lack of cash flow stop them from pursuing their strategic growth objectives. With the right business financing product, you can easily fund your expansion and start immediately reaping the rewards. The capital injection after a new loan can unlock your restaurant’s full potential and let you take the next step toward establishing long-term success.

When should think about restaurant expansion financing?

When running a restaurant, owners are often faced with decisions on how to take their restaurant operations to the next level without breaking the bank. While expansion projects are the most obvious solution to this problem, an endeavor like this often requires significant upfront capital. To fund their expansion projects, many restaurateurs have been turning to alternative business funding solutions.

But when should you start seriously thinking about taking out a small business loan in NJ? Let’s take a look at why restaurant owners should consider using business loans to finance a few popular expansion projects.

Expanding your current space can include anything from adding an outdoor bar to additional seating, expanding your kitchen, or providing more parking space. These projects can require a large sum of money upfront, making business loans a great option for businesses low on working capital.

Restaurant owners who have been in business for a considerable time often need to acquire or upgrade their kitchen equipment. With all the technology now available, it’s important to keep up with the local competition. If you find yourself in need of cash, New Jersey small business loans provide a convenient solution.

Renovating your existing space to reflect a more modern venue is another common expansion project we see often. You may want to completely makeover your restaurant, from the furniture to the décor. Business loans can allow you to finance the entire project without any pressure.

Opening a second location may also be a smart idea, as well, and business lenders can help you acquire the necessary real estate. Likewise, you may also need to rebrand or add more items to your menu. Opening a new expansion loan account can help do just that.

What are the most common restaurant expansion financing solutions?

You’ll encounter several expansion finance options out there for restaurant owners. Knowing where to look and which loans to consider can make a big difference in achieving that next milestone for your business. Now, in the sections below, let’s explore some of the most common restaurant expansion solutions in today’s business lending market.

A term loan from a traditional brick-and-mortar bank is among the most popular options for business owners. As with any loan, you’ll encounter advantages and disadvantages to this financing type. Depending on the size and scope of your restaurant expansion project, a term loan may be a good match, particularly if you can demonstrate a solid credit history and can offer up collateral in exchange for the loan.

Alternative loans provide business owners with a different funding path than traditional bank loans. Rates and terms can vary significantly from one lender to the other. This same principle follows for the industries they lend to. Alternative loans frequently provide business owners with much faster funding than a bank term loan, and some lenders are willing to accept lower credit scores than conventional banks.

Small Business Association (SBA) loans are products with which the government partners with traditional lenders to make available to small business owners. These loans can be attractive because they often have lower interest rates and flexible terms. However, due to the high level of government involvement, the qualification process can be a long and arduous process.

A merchant cash advance loan could be an excellent solution for businesses that accept credit or debit card payments. A merchant cash advance provider will provide a lump sum to your company in exchange for future income generated from its credit card transactions. While these types of loans usually have higher fees, their repayment flexibility can be helpful for restaurant owners.

Business lines of credit have demonstrated to be an ideal solution for businesses that need short-term solutions. They offer flexibility in both repayment and release of funds. With a business line of credit, you can access funds when you need them and you only pay interest on the balance you draw.

Equipment financing allows business owners to purchase necessary equipment without dipping into their cash flows. Most lenders are flexible concerning repayment terms, and the application process can be much quicker than other financing solutions. Equipment financing is also attractive because it usually does not require a high credit score or additional collateral.

Restaurant owners who wish to expand their operations will encounter several funding options, and the examples listed are just a few primary solutions many business owners have been leveraging to drive revenue and growth. Finding the right solution for your business necessitates careful research, reliable education, and due diligence. Hopefully, thus far, this guide has provided the necessary resources and information to set you on the right path.

Steps to prepare for taking out an expansion financing loan

Accessing capital for your restaurant expansion project can seem like moving mountains at first. However, with the right preparation, there are a few proven strategies to make the process go smoothly. Before presenting your business plan to lenders, you, as the business owner, must have a clear picture of your conceptualized expansion, target customers, staffing requirements, market analysis, cash flow projections, premises rental, and energy costs.

Start by drawing up a well-structured business plan for your lender’s review. Be sure to describe the concept of your restaurant expansion in detail, along with who your target customers are and how you plan to reach them. Also, account for the anticipated staffing requirements, from managers to servers to cooks.

Next, take the time to perform a comprehensive market analysis for the area surrounding your desired expansion space. Outline the competitive landscape, analyzing the strengths and weaknesses of your competitors. You should also review recent sales trends to predict how your restaurant idea would fare against them.

Determine the necessary cash flow projections for the financing of your restaurant expansion. This includes accounting for premises rental, energy costs, and other expenses. Project your cash flow patterns over several years to uncover potential slow periods in the business.

Presenting a well-crafted business plan to lenders takes a lot of preparation, but doing so effectively can make the loan acquisition process much smoother. When you map out your restaurant expansion concept, target customers, staffing requirements, market analysis, cash flow projections, premises rental, and energy costs, you ensure the lender has all the relevant details to make an informed underwriting decision about your loan.

How long does it take to get an expansion loan approved?

As you consider your financing options for your next restaurant expansion project, you might be curious about the average time it takes to find an approval. On the whole, it really depends on your circumstances and the creditor, since timelines can vary you can significantly.

You can reasonably expect the approval process to take anywhere from a few days to several weeks. Once approved, you should be able to access the capital quickly, however, and begin executing your expansion plans straight away.

In determining whether or not to approve the loan, lenders will evaluate the total payback of the loan by examining fixed-rate payments versus variable-rate payments to establish your overall debt burden. They will also look at whether or not you are required to put up collateral to secure the loan. Keep in mind, as well, lender reputation. A creditor with a good track record will be more inclined to extend favorable terms and conditions to you.

Again, the timeframe for your loan approval will vary, and it really depends on the nature of your loan request and the financial health of your restaurant. Working closely with your lender and following up promptly with any additionally requested documents is the best approach for ensuring a fast approval. Any reputable business lender should be offering helpful advice along the way to get you to the signing table as quickly as possible.

Your financial well-being only benefits if you can secure the loan in a timely manner, so it is in your best interest to ensure that you get all the necessary paperwork in order and choose a credible lender with experience in restaurant financing. Follow the steps outlined above, and the transition into a bigger, more modernized space and profitable restaurant model should be quick and relatively stress-free.

Evaluating the best restaurant financing options

When you decide to take out a loan to finance your restaurant expansion project, carefully evaluating all the different loan options is crucial. This approach can save you a great deal of time and money while relieving several common headaches as you progress through the entire approval process. Here’s a breakdown of what you should consider before committing to any loan product:

Loan Amounts – Make sure the loan amount covers your expansion needs; otherwise, you’ll be left scrambling for further financing.
Rates and Fees -Take time to understand the interest rates, closing costs, and other fees associated with the loan.
Payment Terms – Be aware of the repayment terms, how long you’ll have to make payments, and what happens if you miss a payment.
Funding Speed – Finally, consider how fast you can get the funds and how they will be dispersed. Many lenders won’t approve a loan until all requirements are met.

Each of the above factors can influence the time it takes to approve a restaurant expansion loan. Expect the process to take anywhere from 3-6 weeks, on average, though it can take longer, depending on the lender and your loan amount. Keeping these key elements in mind will spare you from losing time, becoming frustrated with the application process, or, worse, getting into the wrong expansion financing product.

Explore your restaurant funding options with a reputable loan service provider

When growing your restaurant, it pays to work with a credible business lender. You’ll need an experienced financial provider familiar with the restaurant industry and its challenges, such as seasonal fluctuation in demand.

Conducting careful research and being aware of the various red flags discoverable in the swath of disreputable business loan service providers is critical for avoiding costly mistakes and overpaying for borrowing costs.

When searching for restaurant financing options, remember to communicate openly with prospective lenders to ensure you understand the full picture of the loan pricing and process. This will help you to better vet prospective business loan service providers and minimize the economic burden of borrowing funds.

Your decision to take on financing is a major step in the life and growth of your restaurant. To ensure that you have evaluated all of your options and selected the best loan to meet your business needs, it is important to contact a reputable financial institution like New Bridge Merchant Capital.

After speaking with one of our business lending experts, you will be able to determine which loan product best fits your restaurant expansion goals and budget. Finally, as you evaluate the financing options for your restaurant expansion project, always remember the importance of open communication on both ends of the transaction. This ensures you understand the full scope of the loan and its complex terms.

If you’re looking to compare an existing loan offer or start a new application, contact a business loan consultant at New Bridge Merchant Capital now at 844-228-0593 for a comprehensive review. We’ll let you know which of our restaurant expansion loan products you qualify for.

Secondary Business Financing: The Risks, Alternatives, and How to Make an Informed Decision

Should You Take Out a Second Business Loan?

Making an informed decision about your second business loan will undeniably have a long-lasting impact on the growth and success of your company. Second business loan origination, also known as loan stacking or piggyback loans, describes the process of taking out secondary secured or unsecured business financing in addition to the loan product you currently have.

While most savvy business owners are aware of the potential risks of opening multiple loan accounts, it is still worth reiterating which secondary loan products could be beneficial. Discussing other viable alternatives to opening another loan is valuable, as well. The following information will help you make the best choice when it comes to evaluating how to support the financial health and profitability of your business.

In this article, we will discuss the risks associated with second business loans, potential alternatives to taking out another loan when you have an existing one, and how to make an educated decision on whether secondary business financing is right for your business.

What are second business loans?

Second loans are relatively common among business owners seeking to expand, restructure, or take advantage of new business opportunities. Opening a new loan account on top of the one you already have can provide the necessary working capital for entrepreneurs facing financial shortfalls, cash flow challenges, and time-sensitive opportunities.

Several secondary business lending products can supply the extra boost your organization needs to realize its growth potential. However, since it carries various risks that could damage a company’s fiscal health, whenever you take on additional business debt, this decision should never be taken lightly.

Opening another loan account demands careful consideration because it could disrupt your financial stability if you make the wrong choice. It’s not uncommon for businesses that feel like they need additional funding to land themselves in the wrong financial product that strains their ability to repay their existing loans while keeping up with another payment schedule and interest rate.

Moreover, failure to repay this new loan could lead to significant financial losses, due to the added expenses, potential late penalties, and loan origination fees. Remember, your second loan’s pricing is premised upon your credit rating and the overall financial health of your business, making the loan more costly if you overextend your debt or haven’t been keeping up with your existing payments.

Before making any decision to take out a second business loan, entrepreneurs should also assess the various alternatives. You should first consider whether or not can safely utilize existing capital, available credit lines, or your other loan accounts, since this option could prove less expensive in the long run. One such viable alternative may include applying for governmental programs or restructuring your current loans in a refinance to improve the terms.

Regardless of whether you decide to take out a loan or an alternative, exercising caution is crucial. Before making the decision, ensure that you understand the repayment terms, interest rates, length of term, and total costs of the loan. Thoroughly researching a prospective loan product and consulting a trusted business lending consultant is essential. Ensure that you understand the financial benefits of the loan before signing any agreement, and the terms should be tailored to your company’s specific needs and abilities to repay in full.

For entrepreneurs to make an informed decision on whether a second business loan is the right option, they should assess their overall situation and available alternatives. Familiarizing yourself with the tangible risks a second loan could pose to their business is equally important.

When you thoroughly research all terms and conditions and understand the repayment structure and potential hidden costs associated with the loan, you’ll be in a much better position to benefit from a second loan product. This approach ultimately helps you make the most informed decision possible on whether taking out a second business loan is the best path for your organization.

Can I get a second loan?

When your business needs fast capital, and you already have an existing loan your only option may be to apply for secondary business financing. Of course, this is not always the most financially wise decision, so considering the consequences before applying is vital. To get approved for a second loan, you must qualify by evidencing a solid financial history and meeting certain criteria.

When considering a second loan, the first step is to review credit reports from all three of the major credit bureaus: Experian, Equifax, and TransUnion for personal credit scores and the Dun & Bradstreet PAYDEX score in the case of your business credit profile, if you have one. Since lenders base loan approval decisions upon personal and business credit scores, ensuring accurate reporting information is crucial. Any discrepancies in your report should be addressed before submitting a new application.

You should also carefully analyze the type of loan for which you’re applying. In most cases, you’ll have the option of choosing between secured and unsecured loans. Unsecured loans are generally more difficult to qualify for and often come with steeper interest rates. Secured loans, on the other hand, require collateral, but you don’t always need perfect credit, and they typically come with more favorable pricing.

Borrowers should, likewise, be prepared to provide financial information to the lender, such as profit and loss statements, balance sheets, and tax returns. Creditors also require personal information, such as names, addresses, dates of birth, and Social Security numbers for all business owners. Lenders, depending on the circumstances often request additional information, such as a business plan and/or collateral.

Once your application process is complete and the lender has approved the loan request, the borrower will either receive the loan funds directly or through a third party. The repayment terms vary based on the loan amount and product type, so borrowers should ensure that they read and understand all of the relevant loan documentation before signing any agreement.

When deciding if a second business loan is a suitable next step, be sure to consider all of your options carefully. There are advantages and disadvantages to taking out a second business loan; but, with proper research and planning, businesses are all but assured to secure the necessary funds at a reasonable cost.

What are the risks associated with stacking small business loans?

When you cannot obtain adequate funding through traditional avenues, you might find stacking your business loans to finance your operations is always a viable option. And while it can be beneficial to certain businesses, be aware that there are a few potential risks and pitfalls to consider before signing onto a secondary business loan.

One such risk is having too much debt. Businesses that take on multiple loans, each with their own interest rates and repayment terms, can quickly find themselves in a financially precarious position. You want to ensure that the new debt burden won’t become unsustainable. Additionally, businesses should be mindful of their credit health, since multiple loan inquiries and new debt can negatively impact future borrowing capabilities.

Accumulating excessive debt may also lead to less-than-optimal cash flow performance. When you take out different loans from competing lenders, you will find yourself dealing with multiple loan payments with varying due dates. While this is often overlooked, having more than one due date can throw your cash flow out of whack, potentially making it difficult to cover your operating expenses.

Another risk small business owners should be aware of is what might happen in the event of a loan default. When you open more than one loan, this increases the likelihood of falling behind on at least one account. Defaulting on any business loan can have devastating consequences, including a call for full repayment, loss of collateral, legal action, and damage to their credit score. This is why a proper risk assessment before taking any secondary business financing is essential.

Finally, be aware that servicing multiple business loans can lengthen the amount of time you stay in debt. Carrying multiple loan obligations to different lenders with varying terms usually reduces the business’ ability to quickly pay off its debts. If you are extending repayment terms, this decision should be analyzed carefully before committing to a second business or third loan account.

Stacking your business loans offers you the opportunity to access the funds you need, but, as a business owner, you should carefully examine the potential risks associated with this approach. Look at the new debt burden, cash flow demands, potential for default, and the total repayment timeline before deciding if a second business loan is a suitable fit for your organization.

How many business loans can you have at once?

How many business loans can you get? The answer is that it depends. The number of business loans you can hold at one time depends on several factors. The main considerations include your credit score, the amount of capital you have available to invest in the venture, the size of the loan, and the industry you are in. Many lenders will not offer more than one loan to a single borrower. This is due to the increased risk for the lender and the potential for default.

The business lending industry follows generally accepted guidelines for piggyback loans, which are multiple loans taken out on the same collateral within a specific timeframe. The Centers for Industry Research and Standards (CIRS) notes that piggyback loans should not exceed 75% of the collateral’s value. For example, if your collateral is a building worth $2,000,000, the maximum loan amount is $1,500,000. The remaining $500,000 may be used to secure additional financing from other lenders.

As a borrower, consider the total cost of all the loans when planning your business financing strategy. Secondary loans can be a great way to make use of the value of existing assets, but they can also be costly in terms of interest payments. Remember to research and calculate the total cost before taking out multiple loans.

The lending industry follows specific criteria for secondary loan limits. Generally speaking, lenders will not allow a single borrower to have more than three loans at one time. Depending on the amount of the loans, your FICO and DUNS scores, and the creditworthiness of your industry, taking out three loans or more is entirely possible.

Whichever the case, we advise that you consult with an experienced business lending advisor before taking out multiple loans. Since there are numerous factors to consider, a seasoned loan consultant familiar with your industry can give you a better sense of the risks associated with taking out multiple loans and help you plan a reliable long-term growth strategy.

In addition to the loan limit, being aware of the regulations in your state and industry is critical. Some states have specific laws governing the number of loans a single borrower can have at any given time. Before taking out any new secondary financing, refer to your local regulatory guidelines to ensure compliance with all the necessary lending standards.

The most common types of second business loans

The need for additional business financing usually arises after business owners have already leveraged popular options such as conventional bank loans and credit cards. While these are often the go-to choices for business owners, there are several other loan types that shouldn’t be overlooked when you need additional funding. The four most common second business loan types are merchant cash advances, invoice factoring, equipment financing, and business lines of credit.

A merchant cash advance is one of the most common second loan types available and allows for a business to borrow a pre-determined amount of money in exchange for a percentage of future sales. Invoice factoring doesn’t just offer businesses an influx of immediate cash. It also allows the time that would normally be spent chasing down late payments to be focused on other more productive tasks.

Equipment financing options are beneficial when large purchases are necessary as they allow companies to buy now and pay later. Lastly, a business line of credit loan is an effective business finance tool since it lets a business borrow and lend as needed—up to a specified limit or amount.

Considering all of your available options for second business loans?

Connect with New Bridge Merchant Capital business lending consultant today to ensure you receive the best possible terms on your secondary financing. New Bridge Merchant Capital equips companies like yours with the expert advice and premium lending services you need to ensure you make the right decision before opening a second business loan account.

Apply online today, or contact us now at 844-228-0593 to learn more about pricing and our secondary business loan services.

Inventory-Secured Loans: How to Finance Your Inventory and Receive the Best Terms

Maintaining sufficient working capital is among the primary challenges small business owners face in today’s unpredictable economic clime. When your cash flow starts flagging, seemingly without notice, access to fast funding might appear daunting at first. But luckily, there are several sources of alternative business funding you may not have considered yet, one of which is inventory financing.

In this article, we’ll provide you with a comprehensive overview of inventory financing, its suitability to different business types and applications, its associated pros and cons, and best practices for applying for an inventory-secured loan. By the end, you’ll have sufficient knowledge to make an informed decision about whether or not inventory financing is right for you.

What is inventory financing?

Inventory financing can be an excellent choice for business owners who need quick solutions for replenishing their stock. This loan product represents a type of short-term borrowing solution that gives businesses an opportunity to purchase inventory they can’t pay for upfront at an affordable rate.

The concept is fairly simple. Any inventory you purchase, as well as your existing stock, serves as collateral for the loan. Should your business default on the finance payments, the assets you staked can be collected by the lender to cover any potential losses.

The nice thing about inventory financing is that it’s customizable pursuant to your business needs. You can expect this financing type to come with several unique financial terms engineered to meet your specific requirements and strategic objectives.

The lending terms can vary, with payoff lengths from three months up to three years or more. Borrowers may opt for a set or variable annual percentage rate (APR). Depending on the lending institution, inventory financing term loans, for example, can start as low as $20,000 and go up to $1 million for qualified businesses. Some creditors may allow you to borrow up to 100 percent of your inventory’s value, as well.

Since inventory financing can be tailored to your specific needs, you’ll usually find ample flexibility when it comes to selecting your ideal loan terms. For business owners who need an adaptable financing solution, inventory financing often serves as a reliable long-term option.

This financing type is a great way to build your business through the acquisition of new inventory that you may not have the capital to cover. With the guidance of a business finance expert at New Bridge Merchant Capital, business owners will find identifying and securing an efficient and cost-effective inventory financing option that can be custom tailored to meet their unique business needs.

Which types of business benefit from inventory financing?

Inventory financing is, of course, by implication, best suited to businesses that sell tangible products. It helps ensure your shelves are well-stocked, even in the face of an unexpected financial shortfall.

Inventory financing lenders help companies like yours maintain healthy cash flow while they increase their stock levels. While inventory financing is primarily orientated toward retail stores, wholesalers, and specialty shops, it also offers seasonal businesses a reliable means of boosting their cash flows.

This financing type works by allowing companies to use the value of their inventory as collateral for the proposed funding. The funding structure is generally flexible, and certain lenders may focus on specific types of businesses.

To qualify you for inventory financing, lenders typically assess your financial track record rather than the items you aim to sell. The traditional approval process could make inventory financing less suitable for startups buying inventory for the first time or those with no prior sales.

The possibility of attain an inventory financing loan when you’re first starting out is, by no means, excluded, however, when you consider alternative lending sources. Regardless of who you choose to finance your inventory, this method of borrowing can help you build your business credit and generate short-term working capital to leverage long-term growth.

When should you consider inventory financing?

Any established business that needs to stay well-stocked and increase its inventory levels should consider inventory financing. It’s suitable for several business types, including retailers, wholesalers, and specialty stores. It may also be an effective solution for businesses that experience seasonal fluctuations in demand and need to cover their expenses during the off-season.

Inventory financing lenders assess your business’s financial track record rather than the individual goods you stock. As mentioned, this can make the option less suitable if you’re just starting out.

However, before discounting this option entirely, it’s worth consulting with a reputable business lender to see if you can still qualify for inventory financings or other alternative funding solutions, such as a business credit card, merchant capital advance, or secured term loan.

Inventory financing is a dependable way to sustain a healthy cash flow while expanding your inventory levels to increase sales. But remember to never underestimate the importance of working with credible inventory financing lenders that understand your industry and can provide the right terms to meet your specific requirements. You should also weigh your inventory financing options carefully against other alternative financing solutions to ensure there isn’t a better loan product for your application.

The different types of inventory financing

Many small businesses rely on short-term funding to restock their shelves and pay for supplies upfront, which is why inventory financing has proven vital for managing a stable and profitable business. There are essentially two traditional inventory financing options: loans secured by inventory, or inventory equity loans, and term loans. Both have advantages and disadvantages, and the effectiveness of the financing depends on the season and fiscal health of your company.

For example, inventory financing has grown popular because it allows business owners to use their inventory as collateral to secure a loan from lenders. This type of loan also allows lower credit scores when compared to other loan options, making it among the more accessible short-term financing solutions for low-credit or no-credit business owners. These loans tend to carry a higher interest rate, however, which is why you should explore all your options before committing to any one product.

Unsecured term loans, on the other hand, do not require you to stake personal or business collateral. This loan type usually benefits customers with higher credit scores who are in a good position to take advantage of the lowest borrowing costs. With that mentioned, since the loans are unsecured, they traditionally have stiffer credit requirements than secured loans and, in some cases, higher interest rates.

Alternatives to inventory financing include merchant cash advances, lines of credit, and accounts receivable financing, which many often misconstrued as inventory financing. These alternatives can be more expensive than traditional inventory financing solutions. Nonetheless, they typically entail a streamlined application process for unconventional borrowers who need fast access to working capital.

Knowing the advantages and disadvantages of inventory-secured financing will help you decide on which option best suits your needs. Whether it’s traditional inventory financing or an alternative solution, business owners should take the time to consider every available loan product to ensure the best results.

Loans secured by inventory advantages and disadvantages

While traditional inventory financing is a popular option for many small business owners, the decision to pursue this type of financing must be carefully evaluated. It can provide capital for increased inventory purchases or prevent cash flow issues. It’s not entirely without its downsides, however.

Inventory lines of credit and inventory term loans are generally considered “traditional” inventory financing. Your inventory secures these loans, and the maximum dispersal amount depends on the value of the goods you’re staking as collateral.

In many cases, down payments of around 20 percent may be required before securing the financing. Borrowers must repay the loan in a timely manner, or the inventory is subject to repossession. Likewise, you may be required to use specific fulfillment centers in order to qualify for the loan.

When it comes to satisfying the obligation, you’ll make monthly installments, or the lender may collect a percentage of your sales. It’s also common for a fixed fee to be charged instead of interest, resulting in APRs (annual percentage rates) often surpassing 100 percent. Further alternatives to traditional inventory financing include alternative bank lines of credit, merchant cash advances, and secured and unsecured term loans.

Now that you have the gist of how conventional inventory financing works let’s take a look at a few different popular alternatives to traditional inventory financing:

Lines of credit

Lines of credit give you access to the funds required to replenish your inventory as needed. You can use your inventory as collateral. Or, if you qualify, apply for an unsecured line to cover your operating costs.

Lines of credit require a few more steps than inventory finance loans, however, because you’ll likely have to hand the payment over to the manufacturer yourself. This can make the option more labor-intensive than traditional inventory financing, one reason why some prefer the latter over the former.

Compared to inventory financing fees, the costs to open and maintain a line of credit are usually less expensive. Credit lines typically have an interest rate rather than a fixed fee. Nevertheless, credit lines from online lenders may have higher rates – with APRs reaching as high as 80 percent or more in some cases.

Term loans

A term loan provides a one-time lump sum to be repaid in intervals over a specified time, plus interest. A term loan is a suitable financing option for businesses that do not often require inventory financing or don’t routinely take advantage of it.

Like a line of credit, you can stake your inventory as collateral for the loan. Assuming you qualify, you might also pursue an unsecured term loan that requires no collateral and shifts more risk onto the lender than secured financing.

It’s worth noting that, while the term loan gives you access to funds for attaining additional stock, unlike inventory financing, you are still responsible for paying your suppliers directly, and it may take more time to obtain the inventory itself.

Merchant cash advances

Lenders provide merchant cash advances based on the average monthly sales for businesses that serve customers, such as retailers. Business owners will receive a percentage of their average monthly sales up front and pay it back with a portion of their daily sales plus a fixed fee.

One of the primary upsides to merchant cash advances is that creditors rarely require credit checks or business seasoning. Merchant cash advances are among the most expensive business financing types, however, accruing APRs regularly reaching 300 percent.

The daily payments can be inflexible, as well. Seasoned business owners should, therefore, consider all their lending options before committing to a merchant cash advance since the costs can be high.

How to secure inventory financing

Inventory financing is an essential and viable solution to attain working capital, but it’s equally important to remember you have access to several other effective funding solutions. Inventory loans, secured by inventory and accounts receivable, are suitable for businesses operating in competitive and cyclical markets where timely financing for inventory purchases is crucial.

This approach to borrowing can help you manage cash flow and stay ahead of your industry counterparts. While inventory financing has its benefits, there are a few disadvantages, like higher borrowing costs and a lack of flexibility with your repayment options. It’s, therefore, crucial that you weigh the pros and cons and explore all your options before securing any business financing.

The experienced lending consultants at New Bridge Merchant Capital can guide you through the process of evaluating whether inventory financing is right for you. We can help you assess a diverse range of small business financing products, including alternative bank lines of credit, merchant cash advances, and secured and unsecured term loans.

Our decades of exposure to the business lending space can put your organization on the path to success, while our financing solutions deliver creative, customized options to businesses across several industries.

Searching for the right loan to secure your business inventory needs?

If you have additional questions on how to finance inventory, dial 844-228-0593 to speak with a New Bridge Merchant Capital lending consultant or apply online now. We’ll guide you through our full suite of business lending solutions that can help you take the next step towards expanding your footprint and securing stable, long-term profits.

Personal Credit vs. Business Credit: How The Two Rating Systems Differ

Business and personal credit both play essential roles for small business owners. Every budding entrepreneur should know how to distinguish between these two credit types, how they might influence each other, and how to cultivate business credit from scratch.

In this brief guide, we’ll cover all you need to know about these two distinct credit reporting models, including a breakdown of establishing your business credit profile for the first time, a general overview of the personal and business credit reporting process, and more.

Personal and business credit scores: how do they work?

The personal and business credit scoring models share many similarities, but they’re actually two separate rating systems. Your personal credit ties to your Social Security Number and represents a standardized evaluation of your personal financial habits.

Your personal score, also known as a Fair Isaac Corporation or FICO score, gives lenders a big-picture overview of your individual creditworthiness. To establish a favorable personal credit profile, you’ll need to evidence a timely payment history, a low balance-to-limit ratio (typically less than 25%), and avoid negative reporting details such as foreclosures, judgment liens, and charge-offs.

High balances on your open credit lines, limited sources of open credit, and too many hard inquiries when applying for new credit can trigger low personal credit scores. Personal FICOs can vary substantially, ranging from 350 to 800, with scores 800 and above representing the highest score attainable.

A “perfect” rating generally requires a significant history of flawless credit performance. The different credit bureaus report personal credit scores, however, and each may have slightly different criteria for calculating your score.

The DUNS business score ratings typically correspond to the following numeric range:

80-100: Excellent payment history
70-79: Good payment history
60-69: Fair payment history
60-69: Fair payment history
Below 50: Unavailable or seriously delinquent payment history

This scoring system is considerably different than that of your FICO. While it is based on the same principles that apply to your personal credit, your business score looks solely at payment behavior pertaining to the enterprise itself, and not individual credit scores. Like your personal FICO, a strong business credit rating shows you’ve been making timely payments and satisfying your financial commitments over the past seven to 10 years.

The same general principles apply to establishing a business credit profile with a few key distinctions, which we’ll discuss further below, and your personal score may play a factor in influencing a business loan approval in some instances. The higher your business credit score, the more favorable terms you are likely to negotiate.

While both personal and business credit scores rely on the same core rating concepts, your personal FICO ties to your individual borrower habits only. It looks at credit behaviors as they relate to your personal loans and revolving trade lines. A business credit score, in comparison, focuses solely on accounts managed by the entity itself.

A good personal credit score can open the door to better lending terms and more credit opportunities on both business and personal fronts. To ensure you maintain a good credit score, you’ll need to make timely payments on your accounts and satisfy all your financial obligations as agreed.

What is business credit, and how is it different than personal credit?

While business credit and personal credit follow many of the same principles in evaluating creditworthiness, they are, as mentioned, still fundamentally different. Your business credit profile links to your business’s name and contact information -not your Social Security Number (SSN).

If you are seeking business credit, remember to use your company name and include business contact information instead of your SSN when you apply. This approach ensures you separate the two scores and keep your business credit activities from impacting your personal credit profile.

You’ll also want to verify your assigned business credit score, if you have one, before applying for credit under your business’s name. While many companies start with personal loans and borrowing against credit cards, you’ll want to transition to building a business credit profile as quickly as possible to avoid intermingling your finances. This way, a negative credit event impacting your personal score won’t affect your business credit rating and company finances.

Be aware, as well, that obtaining business credit often requires additional information about your company that you wouldn’t normally need when applying for a personal loan. You’ll have to present detailed business financials, proof of liabilities, and other supporting documents to apply for a business loan or line of credit. Expect to supply additional information beyond just a driver’s license, social security number, and documentation of two weeks’ earnings that you’d typically provide for an auto or home loan application.

Building your business credit profile

Cultivating your business credit begins with establishing a positive payment history over the span of years. This inevitably leads to a stellar profile. A well-documented record of making timely payments on your company-specific accounts and maintaining low overall debt levels in relation to your trade limits helps lay the groundwork for building exceptional business credit.

You can start this process of building your business credit by establishing a separate Dun & Bradstreet Paydex or DUNS number to differentiate between personal and business credit. This is the key to increasing your chances of landing an approval on your next business credit application.

You can also try creating accounts with partners and suppliers that specialize in reporting business credit information to the three main bureaus. Organizations like these will relay your payment history to the agencies and help you start developing a favorable business credit history. Additionally, banks often use reports from these bureaus to gauge a business’s creditworthiness.

If you don’t have a business credit score yet, consider the following tips to start building your profile right away:

Obtain an EIN to separate your personal and business credit
Ask your business to report to the rating bureaus
Make timely payments to all your business accounts
Establish inventory credit with your suppliers
Open a secured business line of credit
Avoid late payments in excess of 30 days

Aspect	Personal Credit	Business Credit
Tied To	Social Security Number	Business Name and Contact Information
Score Range	350 – 800	0 – 100 (DUNS Score)
Factors	Payment history, credit utilization, etc.	Payment history, financial commitments, etc.
Reporting Agencies	Equifax, Experian, TransUnion	Dun & Bradstreet, Experian Business, Equifax Business
Impact on Loans	Affects personal loans and may influence business loans	Solely affects business loans
Documentation Required	SSN, Driver’s License, Proof of Income	Business financials, EIN, Proof of Liabilities
Timeframe for History	Generally 7-10 years	Generally 7-10 years
Importance of Timely Payments	Crucial for maintaining a high score	Crucial for maintaining a high score
Separate from Business?	Yes	Should be kept separate

Need more info on building business credit?

Seeking sound professional advice from an experienced business lending consultant is a great place to start developing and protecting your credit. The seasoned consultants at New Bridge Merchant Capital can supply you with invaluable guidance on optimal payment habits, debt levels, and the best loan products for enhancing your business credit score.

Our team will guide you through every step of the lending process by supplying you with a comprehensive list of the personal and financial documents required to open your next business loan account. For more on our premium credit and lending services, connect with a New Bridge Merchant Capital senior business finance consultant by applying online or call us now at 844-228-0593.

The Complete Guide to Contractor Financing

If you own a construction business, you’re likely already aware that cash flow management is fundamental to ensuring successful outcomes. Since labor and material costs have risen exponentially, many contractors struggle to secure financing from conventional banks and other traditional lenders because of the increased risk.

Fortunately, if this sounds like you, the team at New Bridge Merchant Capital has put together this comprehensive guide covering everything you need to know about contractor financing so you can quickly access the required funds to finish your upcoming projects.

In the following sections, you’ll learn about the advantages and drawbacks of popular contractor financing solutions in addition to how you can safely secure the working capital you need to successfully fulfill your proposals. Whether you’re working with a tight timeline, have a complex upcoming project, or seeking contractor financing for the first time, this guide has you covered.

How does contractor financing work?

Access to capital is one of the most critical yet challenging aspects of the construction industry. Paying for labor, materials, equipment, and other expenses before invoices are collected can make all the difference between running a successful operation and permanently shuttering.

For some industries, traditional contractor financing companies offer a reliable source of low-interest working capital. However, because of the rising costs and inherent risks associated with construction, such as lengthy collection cycles and retainage funds, it can take years to secure financing, and smaller construction companies often have difficulty accessing these funds at all.

Fortunately, specialized contractor financing banks and alternative business lenders like New Bridge Merchant Capital provide funding solutions to the construction industry that help them complete their projects on time and as agreed. By taking advantage of alternative lending services, construction businesses can stay afloat as they coordinate their successful outcomes.

Identifying the right financing source and getting access to suitable financing ensures that your construction business has the capabilities to thrive in today’s ever-shifting contracting market. Working with a trusted business lender is essential for any contractor and can shave off years of unnecessary effort and stress.

Financing options for contractors

Every seasoned builder knows that accessing suitable financing for their projects is imperative. Contractors, however, often face unique challenges when seeking financing options from traditional sources. To help ease the process, business banks like New Bridge Merchant Capital now offer several specialized financing alternatives to accommodate contractors.

For builders that need financial flexibility, these funding solutions can provide quick access to capital for larger proposals, sustained cash flow, and continued growth. With a multitude of emergent lending tools available, contractors can now confidently explore their financing options to access the most cost-efficient borrowing solutions that help manage their operations and bring their construction projects to completion.

Now, let’s take a look at some of the most popular financing options for contractors:

Invoice factoring

Invoice factoring is a common financing option for contractors. This is because it delivers a quick cash injection in exchange for your outstanding invoices. The process begins when the contractor sells the invoice to a factoring company, or factor, who, in turn, immediately issues a payment of 70-90% of the total invoice. The remainder of the invoice cost, minus a small fee, will then transfer to the contractor once the customer has settled the final payment with the factor.

Invoice financing has become a sought-after solution in recent years, owing to its ability to provide contractors with a near-instant influx of cash to cover their operating expenses after a shortfall. One of the primary benefits of invoice factoring is that payments are not set in place over the long term and are, therefore, adjustable to downward fluctuations in cash flow.

The only real downsides to factoring are that you need to provide the invoices that must be transmitted before the financing can be approved, and it can cut into your profit expectations for an indeterminable time. If the contractor can’t supply invoices to warrant the funding, they would still need to come up with sufficient capital to cover all costs associated with labor, materials, and equipment.

In this type of financing, the factor becomes the mediator of all activity, collecting money from the customer on the contractor’s behalf. Some business owners perceive this method as intrusive, as it can result in customers and partners feeling uncomfortable. In some cases, they may even refuse to participate in the arrangement. Likewise, the lack of regulation could lead to excessive or hidden fees, making it paramount to research companies before entering into a factoring agreement.

However, invoice factoring, on the whole, can be an effective financing solution for contractors that need fast access to working capital. Just remember to practice your due diligence when sourcing your ideal factoring solution to avoid excessive borrowing fees.

Equipment Financing

Construction companies looking to purchase operational equipment to boost productivity should explore equipment financing as means of supplementing their budgets. A secured bank loan lets you use the equipment as collateral which could lead to a lower interest rate than what you would otherwise find with an unsecured lending product.

In most cases, the bank will require you to make a down payment and show proof of your creditworthiness by evidencing financial statements. Some lenders may finance up to 100% of the equipment’s value, and disbursement amounts depend on how much liquidity you have in the assets. When you apply for this type of financing, the better your credit, the better rate you’ll receive.

The pros of equipment financing include access to lower interest rates and the potential for increased productivity from the machinery that can help offset borrowing costs. On the downside, you may be required to make a substantial down payment and will likely be subject to a credit check before your loan can be approved. Furthermore, should you default on your payments, the lender reserves the right to seize the equipment you’ll need to continue operating.

Equipment financing can be a viable option for companies in construction and other industries that need to upgrade their equipment. However, the right choice will always hinge on your unique requirements and risk tolerance.

Project cost financing

For smaller companies operating in the construction sector, securing the best financing for contractors upfront in the current lending environment poses several unique challenges. Fortunately, emergent solutions from alternative lenders specializing in construction can provide customized loan products to meet your specific requirements. Materials financing benefits contractors who want to expand their footprint and take on larger, more costly projects that can lead to greater profits.

Material purchases play a significant role in the cost of any construction project, eliminating the need to pay out of pocket or access a line of credit. A third-party provider pays the supplier on the contractor’s behalf, granting extended payment limits of up to 120 days.

Credit checks and financial statements may be unnecessary, as well, since the provider bases approvals on the creditworthiness of the project rather than the contractor. Generally, project cost financing offers higher spending limits, allowing the contractor to take on additional responsibilities without depleting their funds.

While you may encounter financing costs for the services rendered, those looking for the flexibility of low payments and the convenience of upfront project costs will likely still find material financing an attractive option.

In many cases, suppliers will issue discounts for cash payments. So, for construction contractors needing access to financing, project cost financing can be a great way to access the requisite materials and resources needed to keep their projects moving forward.

Home improvement financing

Home improvement financing is a lending solution in which the contractor becomes an intermediary between the lender and the homeowner. Since the financing company pays the contractor up front, this type of construction loan enables contractors to provide services for projects that may be beyond the reach of homeowners with limited funds.

Often free for contractors, this financing type is especially beneficial to businesses pursuing urgent home improvement projects. Builders have the assurance that they’ll be compensated almost immediately, allowing them to focus on the job at hand instead of chasing down unpaid invoices.

However, there are certain restrictions to consider. Home improvement funding is only available for home improvement projects, and each financing package has a limited amount. Repayment terms depend entirely on the homeowner’s creditworthiness.

This means the contractor’s rate of return can be unpredictable. Home improvement financing is a viable option for contractors working with clients who have access to limited funds, however.

Lines of credit

A business line of credit is always a reliable funding source for contractors. It gives you access to capital as needed, and you only pay interest on the amounts borrowed. The ability to withdraw and repay the funds as necessary ensures that businesses can continue operating within their budget and financial capacity.

A line of credit can either be secured or unsecured. An unsecured line of credit won’t require you to provide collateral to back the loan. Although this may be a more attractive option because it is simpler and requires paperwork, you can expect to come with a considerably higher interest rate. Secured lines of credit, where you provide collateral to secure the loan, typically include a higher credit limit and a lower interest rate.

Despite its many benefits, there are a few risks associated with business lines of credit to be aware of. They generally have a higher interest rate than a traditional loan, and borrowing costs are usually higher. Likewise, before getting approved for a line of credit, lenders require you to demonstrate an exceptional financial history and a strong credit score.

A business line of credit can be an extremely effective option for virtually any construction company. It gives you instant and ongoing access to funds as required, and secured options offer attractive interest rates. Once you evaluate the risks, a line of credit can be an invaluable source of working capital.

The pros and cons of contractor financing

If you have any experience with business borrowing, you already understand the challenges associated with contractor financing. It can be a gamble for traditional lenders that consider a multitude of factors when evaluating your credit risk. However, several new options have subsequently surfaced in the lending industry in response to this phenomenon.

And while many may seem appealing at first glance, some options can prove to be cost-prohibitive for contractors operating on thin margins. Factoring and merchant cash advances, for example, are potential solutions that produce quick results. But these options fall outside the realm of traditional lending and are not subject to the same regulatory environment.

With that aside, you’ll find several constructive methods for financing your building projects, and these options can help your company become more financially sound. Working with a trusted business loan adviser who is well-versed in construction lending and has access to the latest alternative financing will be able to set you on the right path.

A proper contractor financing solution frees up invaluable working capital and improves the cash flow of your forthcoming projects. Not only does it help mitigate risk, but it also positions you better to bid on larger projects and take advantage of more seasonal opportunities.

Here are a few more pros and cons to consider:

Pros

Frees up valuable working capital
Decreases risk for large projects
Streamlines cash flow
Seasonal opportunities

Cons

Lack of regulation
Costs can be higher than expected
Credit risk analysis can be complex and time-consuming

Getting approved for contractor financing

Getting qualified for contractor financing starts by convincing a lender that you can repay the money they supply. Business loan service providers are increasingly looking at more than just financial statements and credit scores when assessing creditworthiness.

Traditional sources of financing, such as bank loans and trade credit, still require a review of the contractor’s credit score and financial statements. Working closely with your financial manager or accountant is vital to ensuring an accurate reporting process, which can eventually help builders like you qualify for low-cost financing.

Securing the best financing options necessitates developing a good credit history, staying organized, and presenting accurate financial statements to your preferred lender. When you effectuate the strategies we’ve outlined here and consult with an expert business loan advisor, you can vastly improve your odds of qualifying for contractor financing.

Need help sourcing the ideal funding solution for your construction company?

As a small business owner, you’ll find more lending options available to meet your objectives than ever before, and New Bridge Merchant Capital can help you find the ideal solution to fund your next project. For more on our complete suite of business loan products, apply online to see what you qualify for. Or, for current loan pricing, call us now at 844-228-0593.

Factor Rates and Interest Rates Compared: A Guide to Understanding Business Borrowing Costs

Factor Rate vs. Interest Rate: Understanding Small Business Loan Rates & Fees

Because there are so many terms to describe the various loan fees you’ll pay, calculating the total costs of borrowed capital can be confusing for some business owners and financial decision-makers.

Knowing how to distinguish between factor rates and interest rates plays a vital role, however, in determining your total borrowing costs. Understanding the key differences we highlight below between the two pricing models will help simplify the process of determining which funding option is best for your business.

Factor rates and interest rates account for two of the most commonly used approaches lenders use to price business loans and other forms of financing. Factor rates are usually expressed as a decimal number and represent a flat fee within your loan that lenders charge based on the total disbursement amount.

Interest rates, on the other hand, are figured as a percentage. They are calculated on the basis of the total amount borrowed. Once you understand the distinction between factor rates and interest rates, you’re in a better position to encounter cost-effective financing options for your business and keep your borrowing costs low.

In this post, we will explore the differences between factor rates and interest rates before providing a concise overview of how to calculate your total borrowing costs.

We’ll discuss the advantages and disadvantages of each, in addition to how you should compare the two and make an informed decision about which financing option is best for your business.

By the end, you’ll understand how to evaluate the costs associated with taking out a small business loan and decide if a factor rate or interest rate is best for your specific application.

What are factor rates?

The factor rate accounts for one of several core concepts in business finance. Lenders use them to establish the cost of securing capital. Factor rates express themselves as a percentage of the total amount borrowed. Creditors use this formula to calculate the total amount you’ll pay on a loan before presenting those fees to borrowers in their loan offers. The associated costs include the principal, any applicable fees, and the factor rate itself.

Factor rates are determined by the creditor, while loan pricing takes into account the borrower’s creditworthiness and the type of loan requested. Higher credit scores and shorter terms usually result in lower factor rates, and vice versa. Likewise, the amount borrowed and the industry you’re operating in also affect the factor rate.

After getting a handle on factor rates, you’ll be in a better position to explore your financing options. Knowing how factor rates work will help you evaluate the cost of obtaining capital and ensure you select the best loan terms to suit your unique operations.

Factor interest rates often vary widely between lenders, so remember to shop around and compare offers to avoid paying too much for your loan. In business funding, the average factor rates fall between 1.1 and 1.5.

What are interest rates?

Business loan interest rates are essential for evaluating your total borrowing costs. When estimating loan pricing, you need to consider the interest rate and how it impacts the total fees you’ll pay over the life of your loan.

Interest rates, like factor rates, can also differ from lender to lender and are generally determined by aspects such as the size of the loan, the borrower’s creditworthiness, and the intended use of the loan.

You can take out fixed-rate funding, meaning the rate will remain the same for the duration of the loan. Business lenders offer variable-rate products too, where the rate may fluctuate with an external benchmark. A fixed interest rate can provide borrowers with certainty and stability, whereas a variable interest product can offer the potential of lower interest payments if the benchmark rate falls.

When calculating the cost of a loan, remember to evaluate all the associated costs, including fees, closing fees, and interest rates. This approach helps you save money in the long run. Consider, as well, that the lowest interest rate is not always the best deal. As a borrower, you should analyze every aspect of your loan carefully to determine if fits your requirements.

Factor rate vs interest rate: a side-by-side comparison

Interest rates and factor rates are two different concepts, but they’re both used to price business loans. If you’re seeking capital, understanding how interest rates factor rates compare and contrast can translate to significant long-term savings.

Factor rates are the fees lenders charge based on a set percentage of the amount borrowed. This rate is determined by the lender and is usually applied as a one-time fee. Factor rates are often higher than interest rates because the lender takes on more risk by extending a loan with no interest payments. Most companies use factor rates in their short-term financing solutions, and these types of loans are typically reserved for businesses only.

Interest rates, on the other hand, are calculated as a percentage of the amount borrowed. The lending fees work themselves into the loan as periodic payments over the specified term and can vary based on the type of loan and borrower credit score. Interest rates are lower than factor rates most of the time. You can use interest-rate loans to obtain both personal and business capital.

Factor rates and interest rates, in sum, represent two distinct concepts lenders rely on to establish risk-based pricing on their loans.

How are factor rates determined?

Business lenders often use factor rates to determine how much a borrower will pay in interest and fees for financing. A factor rate is an interest rate expressed as a single multiplier as opposed to a percentage rate. Lenders base this multiplier on the borrower’s creditworthiness, the size of the loan, and the length of the repayment term.

When evaluating your borrower profile, the lender will assess your creditworthiness by looking at your payment histories and both your personal credit and business credit score if you have one. They will then determine the risk your business and you present.

To obtain your personal FICO score, the lender runs a credit check to assess the Your ability to repay the loan. Creditors also look at the size of your loan, the length of the repayment term, and your existing cash flows to establish the factor rate for the financing it intends to offer you.

You can use the factor rate to calculate the total cost of the loan. The borrowing expenses include the loan’s principal and any fees associated with originating the funding. The factor rate also tells you your total repayment amount. When you understand how the factor rate works, you safeguard yourself against overpaying for your next business loan.

To recap, factor rates are:

Determined by the lender and are based on a variety of factors, including the borrower’s credit score and financial history.
Based on the borrower’s ability to repay the loan.
Lower if your credit score is high.
Established by loan type and total loan dispersal amount.
Key factors in determining interest rates and repayment terms.

Before applying for your next business loan, be sure to have a firm grasp of factor rates because this will help you choose the best loan product that offers the most competitive terms and pricing.

What is the factor rate formula?

Businesses can use the factor rate formula to calculate the cost of a loan. Knowing this formula helps determine the total cost of a loan and whether or not you’re making a reliable financial decision. The formula takes the principal amount of the loan, the factor rate, and the duration of the loan into account to calculate the total cost of the offer.

The factor rate is expressed as a percentage and calculated by dividing the total cost of the loan by the principal amount. This rate is then multiplied by the term of the loan to determine your loan’s total cost.

For example, if a business takes out a loan of $5,000 with a factor rate of 1.2% and a term of three months, then the total cost of the loan would be $6,000 ($5,000 x 1.2% x 3 months). Knowing the factor rate formula helps you make an informed decision about the cost of a loan and whether it is the right choice for your business.

Converting factor rate to APR

The annual percentage rate (APR) is a key metric for evaluating the cost of a loan. You should understand how to convert a factor rate to APR because it gives the most reliable picture of your real-world borrowing costs. Here’s how it works.

First, make sure you comprehend the factor rate described above. To reiterate, the factor rate is a type of rate used by alternative lenders and is expressed as a multiple of the loan amount, rather than a percentage. For example, if a factor rate is 1.2, that means that the borrower pays 1.2 times the loan amount in total interest and fees.

To convert a factor rate to APR, simply divide the factor rate by the number of months in the loan term and then multiply the result by 12. To make the calculation easier, you can always use a Factor Rate to APR calculator.

Here are three examples of how to convert factor rate to APR:

For a 3-month loan with a factor rate of 1.2, the APR would be 48%.
For a 6-month loan with a factor rate of 1.35, the APR would be 45%
For a 12-month loan with a factor rate of 1.5, the APR would be 15%.

Making an informed loan decision about which loan is best for your business can be a challenge. But when you know how to convert a factor rate to APR, you’re in a much better position to select the right loan product.

How should you choose between factor rates and interest rates?

The decision between factor rates and interest rates is frequently a difficult choice for small business owners. Before you commit, you need to weigh the pros and cons of each option so you don’t overpay for your loan.

Factor rates tend to be more attractive to small business owners because they allow for immediate access to funds. Also, the total amount you’ll pay is determined by a single fee.

The rates are almost always higher than interest rates, however, making factor rates the more expensive solution over the long run. Factor rates require a personal guarantee, which means these loans a risky proposition when faced with business owners who may not be able to cover their losses if the business fails.

Interest rates, on the other hand, are typically lower than factor rates and are spread out over the duration of the loan. This is beneficial for companies that need a longer-term loan structure, as the total cost of the loan will be lower than that of a factor rate loan.

Interest rates can be effective solutions for businesses with a stable cash flow, since the loan payments spread themselves out over the loan term. The trouble with interest rates, though, is that they can be more difficult to qualify for than factor rates due to stricter lending requirements.

Ultimately, you should base your decision between factor rates and interest rates on the specific needs of your company. Consider the advantages and disadvantages of each option, and work with an experienced business banking partner like New Bridge Merchant Capital to help guide you on your decision.

Searching for alternative business funding?

Alternative lending solutions, such as merchant cash advances and factor rate funding, offer businesses a vast range of advantages compared to traditional financing options. The loan application process is more streamlined, with less paperwork, and these products often come with more lenient approval requirements.

Furthermore, the processing time is significantly reduced, with funding often available within a single business day. Alternative financing solutions ultimately offer more flexibility when it comes to negotiating the terms of your business loan.

Learn more about alternative funding by connecting with New Bridge Merchant Capital on our website or reach out to a dedicated business finance specialist now at 844-228-0593.

Is a Small Business Loan Secured or Unsecured?

Secured vs. Unsecured Small Business Loans: An Overview of the Two Business Financing Solutions

Business loan statistics show that small businesses widely use both secured and unsecured loans. In 2020, $604 billion in secured small business loans were issued compared to $350 billion in unsecured small business loans. Understanding the key differences between these two major financing options is critical for any small business owner.

Understanding the differences between secured and unsecured business financing is the first step in deciding which solution is best for you. In this article, we’ll walk you through the differences between the two options, discuss their pros and cons, and provide several key considerations to remember when selecting your next business loan.

Secured and unsecured loans are two distinct loan options available to small businesses. Secured loans are backed by collateral, such as real estate, equipment, or inventory. This business funding option allows lenders to minimize their risk so they can, in turn, offer lower interest rates.

Unsecured loans, on the other hand, are not backed by collateral and require the borrower to have a strong credit history. These loans usually come with higher interest rates. But they are often easier to qualify for and do not ask borrowers to place any of their own assets at risk.

In the following sections, we will compare and contrast secured and unsecured loans, discuss the pros and cons of each option, and provide considerations to keep in mind when selecting the next loan for your business. By the conclusion, you’ll have a better grasp of the two financing options and be equipped to make an informed decision on which loan type best meets your business needs.

The primary differences between secured and unsecured business loans

Is a small business loan secured or unsecured debt? This is a key question because understanding the differences between secured and unsecured business loans is essential for any owner of smaller company in the market for business funding.

Secured loans require businesses to pledge an asset as collateral for the loan, such as real estate, inventory, equipment, high-dollar personal assets. Unsecured loans, in comparison, do not require any collateral but may require a guarantee from the business owner.

When considering which type of loan to take out, understanding the risks associated with each product is vital. A secured loan is often easier to obtain, as the lender is assured at least partial repayment should your business default.

The downside is that your business may lose its pledged asset if you fail to repay. With an unsecured loan, the lender is taking a risk by not requiring collateral, and this risk is often reflected in higher interest rates or stricter repayment terms.

It is no less important to consider the purpose and objectives of your loan when deciding between secured and unsecured business loans. Secured loans may be a better choice for substantial investments or long-term financing, as the lower interest rates can result in significant savings over time.

In contrast, unsecured loans may be preferable for smaller investments due to their flexibility and quick access to funds. Understanding the core differences between these loan types will help you make an educated decision about which solution works best for your unique application.

Ideal Uses for Each Loan Type

Secured loans are better for:

Purchasing high-value assets like real estate
Acquiring equipment for growth and expansion
Refinancing more expensive debt
Financing large, long-term investments

Unsecured loans are optimal for:

Covering operating expenses and payroll during slow periods
Bridging cash flow gaps
Financing smaller investments
consolidating higher interest debt

What are the pros and cons of secured small business financing?

So, do small business loans require collateral? Not all the time, but collateralized loans are a good way to keep borrowing costs low. Secured business loans can be an excellent option for small businesses looking to finance significant portions of their operations. However, they come with advantages and disadvantages that should be considered carefully before committing to this type of loan.

The primary advantage of a secured business loan is that it provides a greater chance of approval. If a business can’t qualify for an unsecured loan due to poor credit or lack of collateral, a secured loan is most often the surest path to obtaining the required funds. Secured loans often, moreover, come with lower interest rates due to the presence of collateral, meaning that the business can save money over the life of the loan.

As mentioned, secured business loans are not without their drawbacks. either. For example, if the loan you fail to repay the loan, the creditor will use that collateral to recover the debt you owe. This means that the business stands to lose whatever asset it put up as collateral, which, depending on the results, could be damaging if not impossible to recover from.

Businesses must be mindful of their loan terms and payments, as a missed payment or default can cause the loan to be called in and the collateral seized. Remember to avoid borrowing more than you can repay.

Secured business loans option for small businesses can help you grow your business by leagues, but just be sure it’s the right lending solution for meeting your objectives. Weighing the advantages and disadvantages and grasping the complex terms of your loan is the most dependable way to avoid committing to the wrong loan product.

What are the pros and cons of unsecured small business financing?

Like secured loans, small businesses often rely on unsecured loans to finance their operations and expand their business. This type of financing provides businesses with needed capital without putting up any collateral at all. Despite the advantages of unsecured business loans, there are a few drawbacks to consider, as well.

The primary benefit of unsecured business loans is that they do not require the business to stake personal or business assets. This makes it easier to access the loan and gives companies like yours more flexibility in their financial options. Without collateral, lenders are more likely to deny a loan request.

The downside of unsecured business loans is that they typically come with higher interest rates than secured loans. Likewise, businesses may be subject to higher levels of scrutiny from lenders who offer unsecured financing. This makes it more difficult for business owners with less established credit histories to access these types of loans.

Unsecured business loans offer a way for small businesses to finance their operations and expansion without risking their hard-earned assets. However, you should be aware of the associated risks, like higher interest rates and more stringent credit requirements.

Understanding the pros and cons of secured and unsecured business loans helps businesses can make an informed decision and choose the financing option that is right for them.

Qualification Criteria and Getting Approved

To get approved for secured financing, you’ll need valuable assets to pledge as collateral plus a reasonable debt-to-income ratio. Minimum credit scores start around 600.

Unsecured loans have stricter requirements. You’ll need a strong personal credit history with scores over 680 plus solid revenue and time in business – typically 2+ years.

For either loan, improving your credit score, reducing debt obligations, and boosting profitability will strengthen your chances.

Small business loans secured or unsecured: how should you decide?

At New Bridge Merchant Capital, we understand the complexity of securing business funding and the importance of making an informed decision. We offer a wealth of knowledge and guidance to help you determine the best funding option for your company.

Call us today at 844-228-0593 to learn more about the benefits of secured and unsecured business funding. Our team is here to help you make the most of your business opportunities.

How to Get Working Capital For Your Business When You Need It

Small businesses across the United States are increasingly turning to alternative lenders for access to expedient working capital. With the rise of fintech, creditors in the alternative sphere now offer more options to small business owners who need fast cash than ever before.

From merchant cash advances and invoice financing to online business loans and lines of credit, you’ll encounter a wide range of funding options available to small business owners who need quick access to working capital.

So, are working capital loans a good idea? This post will attempt to answer this question by highlighting the various options that small business owners have for accessing fast working capital in the emergent alternative lending market.

We’ll also cover key considerations for small business owners considering taking out a loan from an alternative lender. By the end of the article, you will have a better understanding of the different funding options available and the potential benefits and drawbacks of each.

The challenges of attaining bad credit loans for business

The economic crisis of 2008 had a devastating impact on the global banking sector, making it difficult for businesses to secure the capital they need to continue driving revenue and growth. At the time, banks were forced to tighten their lending standards, and struggling companies had to look for alternative sources of capital.

The traditional business lending model has always been to turn to brick-and-mortar-style community banks for loans. However, since 2008, banks have been much more selective about who they lend to, making it difficult for businesses to access conventional financing. The credit crunch in the late-2000’s made it that much more difficult for companies like yours to qualify for loans. And even if they do, the terms are often less favorable than they were before ’08.

Fortunately, alternative lending solutions have emerged to fill this active void. These solutions provide businesses with a range of options that allow them to access the capital they need without the same stringent requirements seen in traditional banking.

Several alternative funding options exist, such as invoice financing, fixed loans, lines of credit, and merchant cash advances. These solutions are often faster and more convenient than conventional financing, and they provide businesses with the flexibility they need to meet their financial goals.

Alternative lending solutions have become increasingly popular since 2008. They offer businesses a viable alternative to conventional financing. These solutions give companies access to capital that is often more convenient and less expensive than conventional business loans, helping ensure their long-term financial success.

Does your personal FICO score matter in business lending?

As a business owner, you may be unaware of the full impact your personal Fair Isaac Corporation (FICO) score can have on your ability secure business funding.

Many banks and other lenders use the five C’s of credit, which include character, capacity, capital, conditions, and collateral, to assess the overall risk of a loan and determine their risk-based loan pricing. Much of this information is displayed in your personal credit profile.

Creditors look at personal FICO scores to assess the creditworthiness of borrowers, while business credit scores are used to evaluate a company’s ability to repay. Business credit scores are typically derived from an agency’s overall financial performance and credit history, while personal FICO scores are based on an individual’s credit history, payment history, and total debt load.

Business credit scores are usually rated by Dun & Bradstreet, Experian, and Equifax. Each agency has its own rating system, with scores ranging from 0 to 100 depending on the agency’s criteria.

Your personal FICO score ranges from 300 to 850 and can be divided into five categories:

Exceptional (800-850)
Very Good (740-799)
Good (670-739)
Fair (580-669)
Poor (300-579)

Conventional lenders generally characterize scores between 300 to 629 as “bad credit.”

Traditional banks frequently reject small business loan financing due to a low personal score. However, most alternative lenders are more likely to provide bad credit business loans based on a business’s potential rather than the owner’s personal credit profile.

Most banks regard your personal FICO score as a key element of the character portion of the five C’s of credit discussed above. It is an indication of your financial responsibility and provides some insight into your creditworthiness and risk as a borrower. A higher FICO score can signal to lenders that you are a reliable borrower, while a lower FICO score usually flags you as a higher-risk liability more likely to default on your loan.

In addition to the FICO score, lenders will also consider other aspects of your character when determining whether to extend a loan. This often includes looking at your payment history, business accounts, and other financial obligations. Alternative lenders similarly want to know your industry experience and background in management along with any additional evidence of your financial and professional stability.

Business creditors need a guarantee they are taking on the least possible risk when approving your loan. Your personal FICO score is an important component in the evaluation process, and it should not be overlooked. Taking the appropriate steps now to establish a good credit score and keeping a clean financial history can go a long way in helping you access the business funding you need.

Applying for alternative low-credit business financing

Applying for a low-credit business loan from an alternative business financier can be strenuous, especially if you need quick access to funds. It is, therefore, critical that you understand the application process to ensure your loan isn’t rejected.

The first step toward applying is comprehending the prospective loan’s requirements. Most alternative business financiers will have specific conditions before dispersing the funding, such as the loan amount, repayment terms, and credit score. You should also carefully research any unique stipulations for your loan, such as the necessary type of collateral or security.

The second step is to fill out an application. Expect the application to include questions about the business, the loan amount, and other financial information. Be prepared to provide details about your business and its finances. Make sure to answer every question accurately and honestly. This increases the odds of a fast approval.

The final step is to submit the loan application and anticipate a response. An alternative business funding underwriter will review the application and determine if the loan is approved or declined. Also be ready to supply additional documentation or proof of business healthy operations, if requested by the lender. Once your application is approved, the funds should be available within a few days.

Applying for a low-credit business loan from an alternative business financier is a relatively straightforward process. Understanding the requirements, filling out the loan application correctly, and submitting the necessary documents for underwriting review gives you the best chances of an easy loan approval.

What are the options for securing a bad credit business loan?

Obtaining a business loan for bad credit during unstable economic times can be challenging, especially when trying to get your business off the ground. There are, however, a few practical strategies for improving your chances of success.

The first option is to put up collateral as a pledge for the loan. This could include residential or commercial real estate, stock or bond portfolios, or even a luxury boat or vehicle. The assets serve as a guarantee to the lender, indicating that you’ll repay the loan. This is a common practice for business owners with challenged credit.

Equipment financing is another proven approach. This option is ideal for businesses that need extra capital for new equipment purchases. Your equipment serves as financial collateral, ensuring you pay the loan off fully, usually after a few years.

Invoice financing is another reliable solution for businesses with bad credit. The borrower sells their unpaid invoices to the lender, who will then advance funds to cover the cost of the loan.

Finally, you can always enlist the help of a co-signer, typically a person with a good credit score and proven track record of paying off debt. The co-signer is ultimately responsible for repaying the loan if your business cannot.

By considering the above funding options, and finding the right alternative lending solutions, low-credit business owners can start taking the necessary steps toward increasing improving their credit profiles to access less expensive financing in the future.

What are the different alternative business funding loan types?

Businesses of all sizes need access to capital to finance their operations. Traditional bank loans can give companies the funds they need, but they’re hardly the only option. Alternative lending solutions provide businesses with the capital they need to succeed while allowing them to remain flexible and agile at the same time.

One type of alternative funding is the working capital loan. This loan enables businesses to access funds to cover their day-to-day operations, such as payroll and inventory. Businesses can use these funds to bridge gaps in their cash flow.

Another form of alternative financing is invoice factoring. This loan allows businesses to access funds based on the value of their invoices. You can use the cash generated from these loans to cover operational costs, such as payroll and inventory.

Business lines of credit and short-term collateralized loans are also two types of alternative lending options. Business lines of credit give you access to a revolving trade line usable for any purpose. On the other hand, short-term collateralized loans require businesses to stake collateral in exchange for funds and are often dispersed in one lump sum.

Alternative lending solutions are one reliable way for businesses to access capital quickly and avoid costly operation disruptions and stifled growth. Non-traditional financing enhances your flexibility and agility, making it easier to achieve your long-term strategic growth objectives. As such, businesses should consider the available options and determine which one is best suited to their needs.

Working capital loan vs line of credit: how do they compare?

Business lines of credit and working capital loans are each popular financing options for businesses in their own right. They both have advantages and disadvantages to consider before making a final decision.

So, what is a working capital line of credit? Business lines of credit provide short-term access to funds when businesses need them. They are typically easier to acquire than a loan, and may not require collateral.

The repayment terms are also more flexible, allowing companies to draw against their lines whenever they need additional funds. On the downside, they tend to have higher interest rates and variable repayment terms that can quickly become a challenge if the loan is mismanaged.

Working capital loans are always a reliable option for businesses that need a considerable sum of money upfront. They usually provide access to more funds than lines of credit and have lower interest rates.

The repayment period is most often fixed, and the loan is usually repaid over a longer time. However, it can be difficult to obtain a working capital loan, since most lenders require you to stake a portion of your assets before approving an application.

Businesses should carefully consider the pros and cons of each option before making any decision to accept funding. A business line of credit can be a great way to access capital quickly and when you need them, but the higher interest rates are often costly.

Working capital loans tend to be the better option for businesses that need to make large upfront investments. Remember that lenders may still require collateral, even if your credit score is high. Weighing the advantages and disadvantages of each option before accepting a loan offer is no less important than ensuring you get into the right business loan product.

Competitive alternative financing solutions from New Bridge Merchant Capital

The bottom line is that exploring alternative and creative business financing options can be a great way to secure the necessary funds you need to grow your business. Whether it’s investing in new technology or expanding into another market, your company can profit from a bevy of alternative business financing solutions.

For those looking to expand their business or acquire additional assets, New Bridge Merchant Capital can help you encounter the right financing option that aligns with your long-term objectives.

Don’t let a lack of conventional funding options limit your potential. Take the first step now by applying online or contacting a senior New Bridge Merchant Capital business lending consultant at 844-228-0593 to see what you qualify for.

Why Restaurants Should Consider Merchant Cash Advances as Working Capital Solutions

The restaurant industry is fiercely competitive and often unpredictable. With ever-changing customer demands and the need to stay ahead of the curve, it can be difficult for restaurants to find the financial flexibility required to make urgent changes. Leveraging merchant cash advances is one reliable way to gain fast access to the required capital that lets you make necessary adjustments to your approach.

Merchant cash advances (MCAs) offer an alternative to traditional small business loans, providing restaurants like yours with expedient working capital solutions. When you secure a lump sum of money, as in a cash advance, you can finance your operations without waiting months for your customers to pay their invoices.

New Jersey Merchant cash advances let restaurants make necessary improvements and upgrades, purchase new equipment, and hire additional staff to support their expanding operations. The repayment process is flexible and tailored to your business. The custom solution ensures that the merchant cash advance is manageable enough for your restaurant and you don’t take on too much debt.

In this article, we’ll cover why restaurant businesses like yours should consider a merchant cash advance as a dependable working capital solution.

What are merchant cash advances (MCAs)?

If you’re a restaurant owner exploring alternative financing options for your business, a merchant cash advance (MCA) is always an effective solution. A merchant cash advance is a type of financing that allows you to access capital quickly in exchange for a fixed percentage of your future credit card sales.

When you opt for a New Jersey merchant cash advance, you will receive a lump sum of cash upfront. This money can be used to reinvest in your business and cover unexpected financial shortfalls that are outside of your control. To repay the advance, you’ll pay back a pre-determined percentage of your future credit card sales. This repayment method is beneficial because it lets you make payments as your business grows. You won’t be tied to a steep fixed monthly payment.

In addition to this, a merchant cash advance requires no hard-asset collateral. For businesses that lack the necessary assets to secure a loan, MCAs are always a good option. The MCA approval process eliminates the need for lengthy paperwork or credit checks and is typically much faster than what you’ll experience at a traditional bank.

A popular alternative financing option for restaurants, MCAs come with a fast approval process, flexible repayment structure, and lack of collateral requirements, a merchant cash advance presents an effective means of accessing the capital you need to grow your business.

What are the benefits of merchant cash advances for restaurants?

Merchant cash loans give restaurant businesses the ability to receive a lump sum of cash quickly and without waiting weeks or months for your loan to be approved. This is especially beneficial in times of economic uncertainty, when traditional lenders may not be willing to lend to smaller companies with limited holdings. Merchant cash loans are, furthermore, used for diverse applications, including facility upgrades, funding marketing and advertising campaigns, and covering real estate costs.

Unlike traditional bank loans, merchant cash loans do not depend on your borrower risk profile. Instead, lenders evaluate your creditworthiness based on your credit card receipts, meaning that companies with poor payment histories can find funding with a merchant cash advance.

MCA repayment terms are flexible, with the payments taken directly from the anticipated credit card sales. This is especially valuable for restaurant businesses because it means you can remit payments regularly as you make sales and keep your business cash flow positive.

The advances provide an invaluable financing solution for low-credit businesses. With quick access to funds, flexible repayment terms, and no need for perfect credit, merchant cash loans are a reliable solution for any company that needs to overcome an unexpected shortfall, quickly. If your restaurant needs a fast cash injection, consider a merchant cash loan from New Bridge Merchant Capital to help shore up your long-term financial success.

Merchant cash loans for low-credit restaurant owners

As a restaurant owner with a low credit score, it’s easy to feel like you’re perpetually stuck between a rock and a hard place. You realize you need additional funding to help your business succeed, but your challenged credit prevents you from accessing conventional loans that are notoriously difficult to qualify for. Fortunately, merchant cash advances offer a way of escaping this misfortunate quandary and can help you reestablish your personal and business credit profiles.

You can use merchant cash advances for quick access to working capital that allows you to modernize your kitchen and hire additional staff. Unlike traditional loans, merchant cash advances are not dependent on credit scores. Instead, lenders establish your limits based on the volume of credit card receipts your business collects. This financing option lets restaurant owners with low credit scores secure the financing necessary to keep their businesses afloat.

The advance payments factor themselves against a percentage of your credit card sales. This way, restaurant owners can repay the loan over time, while simultaneously improving their credit situation. The benefits of merchant capital advance loans certainly outweigh their drawbacks because they are an effective solution for low-credit restaurant owners who need to establish a business banking partnership.

Merchant cash advances offer more flexible repayment terms than traditional loans. This makes it easier for restaurant owners to manage their cash flow and pay back the advance on their own terms. Merchant cash advances give you the immediate financial support you need to let your restaurant thrive while, at the same time, they can help develop your business credit profile.

Explore your MCA lending options with New Bridge Merchant Capital

To sum it up, restaurant owners with low credit scores can benefit immensely from merchant cash advances because they give them fast access to working capital. MCAs can help establish or reestablish your business credit. Meanwhile, you’ll build a relationship with a trusted business banking partner and continue funding your restaurant operations.

To find out your eligibility for an MCA loan or restaurant line of credit, fill out our online application or dial New Bridge Merchant Capital at 844-228-0593 to connect with a business lending consultant now.

How to Secure Fast Low Credit Funding Solutions for Your Small Business

Positive cash flow is the lifeblood of every company. Without adequate access to resources and capital, many small businesses consistently struggle to expand their footprints, cover their operating expenses after a shortfall, and maintain a competitive posture within their respective industries.

Fortunately, alternative lending solutions from New Bridge Merchant Capital offer businesses like yours several fast, low-credit funding solutions that can get your organization back on a positive growth trajectory.

Smaller companies now have access to a diverse range of alternative business financing products, including bad credit loans for business owners. Qualification for these loans depends on your creditworthiness, the size of your business, and your respective industry.

Short-term loans, lines of credit, equipment financing, inventory financing, and other financial instruments can all provide companies with the capital they need to reinvest in their operations and continue driving business revenue and growth.

The alternative lending market offers companies like yours convenient payment schedules and more flexible funding solutions than conventional banks. When you leverage the right business funding solutions, you’ll posture your small business to remain competitive for years to come.

In the following sections, this guide will cover the various funding options available to small businesses to help financial decision-makers select the best loan products for their unique business applications.

The current landscape for small business funding

Small businesses have always been vital to the US economy, but traditional methods of accessing small business funds have become increasingly difficult since the financial crisis of 2008. The average business owner is expected to continue to face a host of challenges when it comes to securing financing that can help their companies thrive amid the ongoing economic uncertainty.

Among the most significant obstacles small business owners will face this year is access to fast working capital. Banks and other traditional lenders will likely remain reticent to lend when it comes to small businesses.

Fortunately, alternative financing options are available. Low-credit funding solutions, such as invoice factoring, merchant cash advances, and asset-based lending, each give small business owners an opportunity to access the funds they need to cover their essential expenses and expand their operations.

Alternative business lending solutions are designed to be more accessible than traditional bank loans and can provide financing quickly and with little required paperwork. These fast business funding options, likewise, provide a viable option for companies that cannot qualify for traditional bank loans. By taking advantage of these solutions, small business owners can get the funding they need to launch and expand their operations.

Evaluating the benefits and costs of small business lending

Smaller companies often need access to additional capital to keep up with the demands of their customers and the rapidly evolving economic clime. Taking out a small business loan can be an effective way to encounter fast capital. However, business owners still need to carefully weigh the benefits and costs of taking out a potentially expensive loan.

When evaluating the benefits and costs of taking out a small business loan, it’s important to consider the short and long-term implications of the finance offer. In the short term, a loan can provide the capital necessary to make necessary investments in the business, such as purchasing new equipment or hiring additional employees.

This can be instrumental in helping your company meet its short- and long-term financial objectives. This access to fast working capital solutions undeniably helps businesses become more profitable and stable while introducing technologies, such as automation, that enhance their flexibility and adaptability.

Nonetheless, it’s important to understand the potentially high expenses associated with taking out a loan, such as the interest rate, closing costs, and repayment terms. The interest rate and fees can vary depending on the lender and the type of loan taken out.

Doing sufficient research to find the most competitive loan offer is therefore crucial. It’s no less important to carefully consider the repayment terms to ensure you can pay the loan back without putting too much pressure on your operating budget. Remember that the best loan products for your purposes may not always come with the lowest rates, as well.

Small business loans can be a great way to access additional capital, but it’s no less important for business owners to carefully consider the benefits and costs of the loan before making a final decision. Doing the necessary legwork in advance and understanding the short and long-term implications of accepting a lending offer is the best approach for assuring you make an informed decision about whether or not taking out a loan is the right choice for your business.

What are the alternatives to conventional business financing

The business lending market has endured significant changes over the last three years alone. The evolution of business lending has been especially evident with the emergence of low-credit alternatives to conventional business funding.

This post-2008 shift introduced countless new opportunities for businesses to obtain additional working capital, even those that may have had difficulty securing traditional financing.

Alternative business lending is an innovative form of financing designed to help businesses access capital quickly and after minimal paperwork. These lenders focus on providing capital to business owners who may not otherwise be able to secure financing.

Those with a limited credit history or high-risk profiles will likely encounter restricted funding options through conventional lending channels, if any. The emergence of alternative lending solutions means you can still get the funds to finance upcoming expansion projects and meet other operational requirements without engaging in a lengthy and arduous loan application process at a traditional bank.

The increased cost of traditional business loans, which can be cost-prohibitive for some businesses, and the fact that most legacy financial institutions are unwilling to take in the risk has undoubtedly complicated the business lending market.

Luckily, New Bridge Merchant Capital offers more flexible repayment terms, allowing businesses like yours to streamline cash flow management and avoid the lengthy approval process you’ll encounter at traditional banks.

Trusted alternative business lending partners make it easier for their customers to obtain quick financing after minimal hassle. The extra working capital will strengthen your existing customer relationships, attract new clientele, and safeguard your business against unexpected economic events that result in a financial shortfall.

Many analysts agree that the emergence of low-credit alternatives to conventional business funding has been a wholly positive development for small businesses and the wider economy.

Access to more flexible financing options means your organization can get the capital it needs to grow and thrive under virtually any economic conditions. The extra working capital alternative lenders supply will make it easier to extend your reach and deepen existing customer relationships.

Lowering your operating costs in the post-COVID economy

The coronavirus pandemic has brought a lot of uncertainty and financial hardship to small businesses, and these impacts have effectively disqualified many organizations from attaining conventional bank funding.

With the economy still struggling from the impacts of COVID-19, implementing cost-cutting measures to reduce expenditures is paramount. There are essentially four ways your small businesses get can started on this right now.

If you’re unsure whether or not you can access funding at the moment, but know you’ll need it in the future, start trying to improve your credit and financial situation by reviewing your monthly expenses and looking for ways to cut your current costs.

Likewise, you should attempt to negotiate better terms with vendors and draft new, more favorable agreements between your external partners and you. Review your pricing structure and consider raising prices to offset your higher expenses.

The second approach is to look for ways to streamline operations and make the most of existing resources. This includes automating processes and leveraging technology to reduce manual tasks and increase efficiencies.

Thirdly, you should be strategizing to find ways to increase your existing customer base. Leverage online marketing and social media to reach new customers and create awareness about your business. You can also focus on customer retention and loyalty programs to encourage repeat customers.

And, lastly, look for ways to minimize capital expenditures and focus on more economical solutions. Consider leasing instead of buying assets and look for ways to use existing equipment more efficiently.

There are ways small businesses can optimize their resources during uncertain times. By focusing on cost-cutting measures and finding ways to increase efficiency, you can keep your operations afloat, even under turbulent economic conditions.

Alternative sources of capital for low-credit small businesses

Small businesses frequently struggle to remain competitive and profitable in today’s unpredictable marketplace. This is true even when they’ve taken steps to strengthen their financial and credit profiles. With traditional forms of financing becoming increasingly difficult to secure, small businesses can benefit considerably from exploring alternative funding solutions.

One increasingly popular option is a merchant capital advance or MCA -a reliable choice for businesses that process a heavy supply of credit card transactions. A merchant capital advance is a form of financing that lets you take an advance against future credit card sales.

This financing type is the preferred choice for many small businesses because it is easier to obtain than traditional financing, and the terms are flexible. Merchant capital advances are based on your current and future credit card sales. If you can evidence a history of profitable credit card transactions, you won’t necessarily need perfect credit to qualify for an MCA.

Business owners looking to take advantage of a merchant capital advance should keep a few important points in mind. For starters, the MCA is always structured as a percentage of the company’s future credit card sales, so the amount of financing available depends on the amount of credit card transactions the business processes.

Merchant capital advances can be an effective option for small businesses heavy in credit card transactions. It is easier to obtain an MCA than traditional financing. MCAs are more flexible than conventional loans, making the solution an attractive option for businesses seeking alternative financing.

With that mentioned, business owners should always understand the terms of the agreement before signing any contracts and be aware of the prospectively higher interest rates associated with this type of financing.

Ensure you can repay any borrowed funds

The ability to repay borrowed funds is a crucial factor in the success of any company. Whether you are a startup or a long-standing business, ensure you can repay any loans you sign. This is especially true if you’re using borrowing as a last resort attempt to keep your business afloat.

Alternative lending solutions help companies borrow funds quickly, but a struggling operation incurring more debt is hardly without its risks. The capital injection can, however, provide businesses with the necessary funds to help keep them afloat after a shortfall.

Alternative lending consultants can also offer guidance on choosing repayment options and interpreting loan terms. Their advice will help businesses get the funds they need without getting into a situation in which they’re unable to repay the loan.

Knowing that you can repay borrowed business funds before taking out a loan protects your business. Alternative finance specialists can give companies like yours the necessary capital it needs while, at the same time, providing expert consultation on selecting the most profitable loan products.

When should you consider unsecured bad credit business loans?

The initial step in deciding whether or not to take out an unsecured business loan for bad credit is to assess your current financial situation. Evaluate your current cash flows and expenses to determine if a loan is even necessary. Consider if the loan will provide enough fiscal enhancement to make a difference, and ask yourself if the borrowing costs are within reason.

Before taking out an unsecured business loan for bad credit, remember to research the lenders and compare their terms and rates. The loan should be affordable, and the creditor must be reputable with an established track record. The right decision ultimately depends on the unique financial situation and goals.

Apply for competitive low-credit funding today

Business owners should consider low-credit funding to help them break through financial hurdles. Low-credit funding can be a much-needed lifeline for businesses with bad credit and can provide the capital needed to get their business up and running again.

Are you a business owner and believe alternative low-credit funding is the right option for your company? If so, dial 844-228-0593 now to connect with a senior business lending specialist and learn more about our alternative small business lending solutions.

How to Use a Restaurant Business Loan to Finance Your Expansion

Restaurant expansion financing explained

Why do restaurant owners need expansion financing?

When should think about restaurant expansion financing?

What are the most common restaurant expansion financing solutions?

Steps to prepare for taking out an expansion financing loan

How long does it take to get an expansion loan approved?

Evaluating the best restaurant financing options

Explore your restaurant funding options with a reputable loan service provider

Should You Take Out a Second Business Loan?

What are second business loans?

Can I get a second loan?

What are the risks associated with stacking small business loans?

How many business loans can you have at once?

The most common types of second business loans

Considering all of your available options for second business loans?

What is inventory financing?

Which types of business benefit from inventory financing?

When should you consider inventory financing?

The different types of inventory financing

Loans secured by inventory advantages and disadvantages

Lines of credit

Term loans

Merchant cash advances

How to secure inventory financing

Searching for the right loan to secure your business inventory needs?

Personal and business credit scores: how do they work?

What is business credit, and how is it different than personal credit?

Building your business credit profile

Aspect

Personal Credit

Business Credit

Tied To

Score Range

Factors

Reporting Agencies

Impact on Loans

Documentation Required

Timeframe for History

Importance of Timely Payments

Separate from Business?

Need more info on building business credit?

How does contractor financing work?

Financing options for contractors

Invoice factoring

Equipment Financing

Project cost financing

Home improvement financing

Lines of credit

The pros and cons of contractor financing

Pros

Cons

Getting approved for contractor financing

Need help sourcing the ideal funding solution for your construction company?

Factor Rate vs. Interest Rate: Understanding Small Business Loan Rates & Fees

What are factor rates?

What are interest rates?

Factor rate vs interest rate: a side-by-side comparison

How are factor rates determined?

What is the factor rate formula?

Converting factor rate to APR

How should you choose between factor rates and interest rates?

Searching for alternative business funding?

Secured vs. Unsecured Small Business Loans: An Overview of the Two Business Financing Solutions

The primary differences between secured and unsecured business loans

Ideal Uses for Each Loan Type

What are the pros and cons of secured small business financing?

What are the pros and cons of unsecured small business financing?

Qualification Criteria and Getting Approved

Small business loans secured or unsecured: how should you decide?

The challenges of attaining bad credit loans for business

Does your personal FICO score matter in business lending?

Applying for alternative low-credit business financing

What are the options for securing a bad credit business loan?

What are the different alternative business funding loan types?

Working capital loan vs line of credit: how do they compare?

Competitive alternative financing solutions from New Bridge Merchant Capital

What are merchant cash advances (MCAs)?

What are the benefits of merchant cash advances for restaurants?

Merchant cash loans for low-credit restaurant owners