At New Bridge Merchant Capital, we understand the importance of small business loans for entrepreneurs looking to expand their operations, invest in new ventures, or simply manage their day-to-day expenses. We also recognize that navigating the world of business loans can be a daunting task, especially for those new to the financial landscape. In this article, we’ll share our expertise and provide you with essential tips on spotting and avoiding loan scams, ensuring that you make informed decisions when seeking financial support for your business.
Key Takeaways
Reputation and Reviews: Research lenders’ online reputation and client feedback.
Clear Terms: Ensure transparency and understand all loan terms before proceeding.
Licensing: Verify the lender’s credentials and accreditation.
Upfront Fees Warning: Avoid lenders demanding fees before loan approval.
Website Security: Ensure the lender’s website is secure for safe transactions.
Avoid Pressure: Be wary of high-pressure sales tactics and take time to decide.
Identifying Legitimate Lenders
One of the first steps in securing a small business loan is to identify legitimate lenders. Here are some key factors to consider:
Reputation and Reviews
Reputation matters in the financial industry. Before choosing a lender, research their reputation online. Check for reviews, testimonials, and ratings from other business owners who have worked with them. A reputable lender, like New Bridge Merchant Capital, will have a track record of satisfied clients.
Clear Terms and Conditions
Transparency is crucial when dealing with lenders. Legitimate lenders will provide you with clear and concise terms and conditions. Read these documents carefully, and if something seems unclear or too good to be true, don’t hesitate to seek clarification.
Licensing and Accreditation
Credentials matter. Ensure that the lender is licensed and accredited to provide business loans in your state or region. This information is typically available on their website or can be verified through local regulatory authorities.
Red Flags for Loan Scams
Now that we’ve covered the basics of identifying legitimate lenders, let’s delve into the red flags that may indicate a potential loan scam. These warning signs should raise concerns and prompt you to investigate further:
Upfront Fees
Beware of lenders who ask for upfront fees before processing your loan application. Legitimate lenders, like New Bridge Merchant Capital, will deduct fees from the loan amount once it’s approved, not before.
Unsecured Websites
A secure website is a must when dealing with financial institutions online. Check for the padlock symbol in your web browser’s address bar and ensure that the website’s URL begins with “https://” to protect your sensitive information.
High-Pressure Sales Tactics
Scammers often use high-pressure sales tactics to rush you into making a decision. Legitimate lenders will give you time to review terms and make an informed choice without feeling pressured.
No Physical Address or Contact Information
If a lender lacks a physical address or contact information, it’s a major red flag. Legitimate lenders are easily reachable and have a physical presence.
Additional Tips for Safety
In addition to the warning signs, here are some additional tips to help you stay safe when seeking a small business loan:
Seek Legal Advice
Consider consulting with a legal expert who specializes in business financing. They can review loan agreements and provide insights to protect your interests.
Verify Lender Credentials
Double-check the credentials of your chosen lender. Confirm their licensing, accreditation, and registration with the relevant authorities.
Compare Offers
Don’t settle for the first offer you receive. Compare loan offers from multiple lenders to ensure you get the best terms and rates for your business.
In Conclusion
Securing a small business loan is a critical step for many entrepreneurs, and it’s essential to do so with caution and awareness. By following the tips mentioned above and being vigilant for red flags, you can significantly reduce the risk of falling victim to loan scams.
Remember, New Bridge Merchant Capital is here to support your business financing needs with transparency, professionalism, and a commitment to your success. If you have any questions or need assistance with your loan application, don’t hesitate to reach out to us at 844-228-0593. Your business’s financial health is our priority.
Red Flags Checklist
Red Flag
What to Look For
Upfront Fees
Avoid lenders asking for fees before loan approval.
Unsecured Websites
Look for the padlock symbol and “https://” in the URL.
High-Pressure Sales Tactics
Steer clear of lenders rushing your decision-making process.
No Physical Address
Legitimate lenders have a physical presence and are easily reachable.
Additional Safety Tips
Legal Consultation: Consider seeking legal advice for reviewing loan agreements.
Credential Verification: Always double-check the lender’s licensing and accreditation.
Compare Offers: Evaluate multiple loan offers to secure the best terms and rates.
Note
Navigating the world of business loans requires caution and informed decision-making. By being aware of red flags and following safety tips, business owners can avoid scams and secure legitimate financing. New Bridge Merchant Capital is committed to transparent and professional service, prioritizing your business’s financial health. For any queries or assistance, contact us at 844-228-0593.
When it comes to growing your small business, securing the right financing can make all the difference. Small business loans are a valuable tool for funding expansion, covering unexpected expenses, or simply maintaining day-to-day operations. However, with various loan options available, it’s crucial to understand how to evaluate loan offers effectively. In this comprehensive guide, we’ll walk you through the key factors to consider when selecting a loan for your business, from loan evaluation to understanding small business loan agreements.
Key Takeaways
Interest Rates: The cornerstone of loan evaluation, compare to minimize the total loan cost.
Loan Amount: Ensure it aligns with your business needs and goals.
Repayment Terms: Balance between manageable payments and total interest cost.
Fees & Costs: Be aware of all additional charges to avoid surprises.
Collateral Requirements: Understand the assets at risk in case of default.
Credit Requirements: Know the score needed and improve yours if necessary.
Lender Reputation: Choose a lender with positive feedback and transparent practices.
What Should You Compare When Selecting Loans?
Interest Rates
One of the first things you’ll want to compare among loan offers is the interest rate. The interest rate directly impacts the total cost of the loan. A lower interest rate means you’ll pay less over the life of the loan. Keep in mind that interest rates can be fixed or variable, so understand the implications of each type.
Loan Amount
Consider how much funding your business needs. Different lenders may offer varying loan amounts. Ensure the loan you choose provides the necessary capital to meet your specific needs.
Repayment Terms
The repayment terms dictate how long you’ll have to pay back the loan and the frequency of payments. Longer terms can lead to lower monthly payments but may result in higher overall interest costs. Shorter terms mean higher monthly payments but quicker repayment.
Fees and Additional Costs
Examine the loan offers for any fees or additional costs beyond the interest rate. Common fees include origination fees, application fees, and prepayment penalties. Be aware of these costs to avoid any surprises.
Collateral Requirements
Some loans require collateral, while others do not. Collateral can include assets like property or inventory that the lender can seize if you default on the loan. Understand whether the loan you’re considering requires collateral and the implications if you can’t meet the terms.
Credit Requirements
Lenders will assess your creditworthiness before approving a loan. Review the credit score requirements for each loan offer. If your credit score is less than ideal, explore options for improving it before applying.
Customer Reviews and Reputation
Research the lender’s reputation and read customer reviews. A reputable lender should have positive feedback and transparent practices. Avoid lenders with a history of predatory lending or poor customer service.
Loan Evaluation
Assessing Your Business Needs
Before evaluating loan offers, assess your business’s financial needs. Calculate the exact amount required and identify how the funds will be used. Having a clear plan will help you choose a loan that aligns with your objectives.
Comparing Loan Offers
Now that you understand what to look for in loan offers, it’s time to compare them. Create a spreadsheet or chart to list each loan’s details, including interest rates, loan amounts, terms, and fees. This side-by-side comparison will make it easier to identify the best option.
Understanding Your Repayment Capacity
Determine your business’s ability to repay the loan by analyzing your cash flow. Ensure that your projected income can cover the loan payments while leaving room for unexpected expenses.
Seeking Expert Advice
Consider consulting with a financial advisor or accountant. They can provide valuable insights and help you make an informed decision about which loan offer aligns best with your business goals.
Small Business Loan Agreement
Reading the Fine Print
Before signing any loan agreement, thoroughly read the terms and conditions. Pay close attention to interest rates, repayment schedules, and any clauses related to default. Seek legal advice if needed to ensure you fully understand the agreement.
Negotiating Terms
Don’t hesitate to negotiate terms with the lender. In some cases, you may be able to secure a better interest rate or more favorable repayment terms through negotiation.
Keeping Records
Maintain detailed records of all loan-related documents, including the loan agreement, payment receipts, and correspondence with the lender. This documentation can be crucial in case of any disputes or questions about the loan.
Comparison Table
Criteria
Description
Importance
Interest Rates
Lower rates reduce the total cost of the loan. Compare fixed and variable rates.
High
Loan Amount
Ensure the offered amount meets your business needs.
High
Repayment Terms
Evaluate the balance between monthly payments and total interest cost.
Medium
Fees & Additional Costs
Identify all extra charges associated with the loan.
Medium
Collateral Requirements
Know if assets are needed as security and their implications.
Medium
Credit Requirements
Understand the minimum credit score and ways to improve it.
Medium
Customer Reviews & Reputation
Choose lenders with positive reviews and avoid those with a history of poor service.
Medium
Conclusion
Evaluating loan offers for your small business requires careful consideration of multiple factors, from interest rates to repayment terms and loan agreements. By following the guidelines outlined in this guide and seeking expert advice when needed, you can make the right choice for your business’s financial future. Remember that New Bridge Merchant Capital is here to assist you on your journey to securing the ideal small business loan. Contact us today at 844-228-0593 for personalized assistance and financial solutions tailored to your business needs.
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Q: Can I apply for a small business loan with bad credit?
A: Yes, some lenders offer options for business owners with less-than-perfect credit, but you may encounter higher interest rates and stricter terms. It’s essential to improve your creditworthiness over time to access more favorable loan offers.
Q: How long does it typically take to secure a small business loan?
A: The time it takes to secure a small business loan can vary significantly. Some lenders offer quick approvals and funding within days, while others may take several weeks. It depends on the lender’s processes and your application’s complexity.
Q: Is it better to choose a fixed or variable interest rate for my loan?
A: The choice between a fixed and variable interest rate depends on your risk tolerance and the current market conditions. Fixed rates provide stability, while variable rates can offer initial savings but may increase over time. Consider your financial strategy when making this decision.
Q: What should I do if I can’t make a loan payment?
A: If you encounter financial difficulties and can’t make a loan payment, contact your lender immediately. They may offer options like loan modification or forbearance to help you through challenging times.
Q: Can I use a small business loan for any purpose?
A: In most cases, yes. Small business loans are versatile and can be used for various business-related expenses, including working capital, equipment purchase, expansion, and debt consolidation.
If you’re a small service business owner looking to expand, manage cash flow, or handle unexpected expenses, you might have heard about revolving credit. But what exactly is revolving credit, and is it the right financial tool for your business? In this article, we’ll break down the pros and cons of revolving credit in easy-to-understand terms, so you can make an informed decision for your small service business.
Aspect
Pros of Revolving Credit
Cons of Revolving Credit
Flexibility
Allows for flexible borrowing and repayment, making it easier to manage unpredictable expenses.
Missed or late payments can negatively impact your business credit score.
Emergency Fund
Serves as an emergency fund for unexpected expenses.
Variable interest rates on some revolving credit options can increase over time, affecting overall borrowing costs.
Understanding Revolving Credit
Revolving credit is like having a financial safety net for your business. It’s a flexible form of credit that allows you to borrow up to a certain limit and repay it over time. Unlike traditional loans with fixed monthly payments, revolving credit gives you the freedom to borrow, repay, and borrow again as needed.
Pros of Revolving Credit for Small Service Businesses
Let’s dive into the advantages of using revolving credit for your small service business:
Flexibility:
One of the biggest benefits of revolving credit is flexibility. It’s there when you need it, and you only pay interest on the amount you use. This flexibility can be a lifesaver when facing unpredictable business expenses.
Easy Access: Revolving credit is easily accessible. Once approved, you can access the funds whenever you need them, making it a convenient option for managing cash flow gaps or seizing growth opportunities.
No Fixed Repayment Schedule:
Unlike traditional loans, revolving credit doesn’t come with a fixed repayment schedule. You can make minimum payments or pay off the balance in full, depending on your business’s financial situation.
Builds Credit:
Responsible use of revolving credit can help you build your business credit score, which may open doors to better financing options in the future.
Emergency Fund:
It serves as an emergency fund for unexpected expenses, such as equipment breakdowns or sudden drops in revenue.
Cons of Revolving Credit for Small Service Businesses
While revolving credit offers several advantages, it’s important to be aware of the potential drawbacks:
Interest Costs:
The flexibility of revolving credit comes at a price—interest. The interest rates can be higher than those of traditional loans, so it’s essential to manage your balances wisely.
Debt Accumulation:
Without a fixed repayment schedule, it’s easy to accumulate debt. Small business owners should be disciplined about making payments to avoid long-term financial stress.
Credit Score Impact:
Missed or late payments can negatively impact your business credit score, potentially limiting your access to future financing.
Variable Interest Rates:
Some forms of revolving credit, like credit cards, may have variable interest rates that can increase over time, affecting your overall borrowing costs.
Credit Limit:
Your credit limit depends on your creditworthiness. Small service businesses with a limited credit history may not qualify for substantial credit limits.
Conclusion
In conclusion, revolving credit can be a valuable financial tool for small service businesses, offering flexibility and easy access to funds. However, it’s not without its downsides, including interest costs and the potential for debt accumulation. To make the most of revolving credit, it’s crucial to use it responsibly, make timely payments, and carefully consider your business’s financial needs.
Before applying for revolving credit, assess your business’s financial situation and determine whether the benefits outweigh the drawbacks. If used wisely, revolving credit from a reputable source like New Bridge Merchant Capital can provide the financial support your small service business needs to thrive.
For more information and personalized financial guidance, feel free to call New Bridge Merchant Capital at 844-228-0593. Our experts are here to help you make the right financial decisions for your small service business.
Starting a new business is an exciting venture, but it often requires financial support to get off the ground and thrive. Small business loans can be a valuable resource for startup entrepreneurs. In this article, we’ll cover what you need to know about these loans in plain English.
Key Takeaways
Business Plan: A detailed plan is crucial, outlining your vision, target market, and usage of funds.
Personal Credit: Your credit score plays a significant role in loan approval.
Collateral: May be required to secure the loan, especially for those with minimal credit history.
Interest Rates: Vary widely; compare options to secure an affordable rate.
Repayment Terms: Consider the balance between monthly payments and total interest cost.
Lender Options: Choose from traditional banks, online lenders, or government-backed programs.
What Are Small Business Loans for Startups?
Small business loans for startups are financial resources designed specifically to help new businesses with their initial capital needs. These loans can provide funds for various startup expenses, such as equipment, inventory, marketing, or hiring employees. They come in different forms, each with its own characteristics.
What to Expect When Applying for a Small Business Loan as a Startup
Here’s what you can expect when considering a small business loan for your startup:
Business Plan
Lenders will often require a solid business plan. This plan should outline your business concept, target market, revenue projections, and how you intend to use the loan funds. A well-thought-out plan demonstrates your commitment and vision to potential lenders.
Personal Credit History
Since startups often lack an established business credit history, lenders will look at your personal credit score and history when evaluating your loan application. A FICO credit score of at least 680 is recommended to qualify for small business loans. Having little credit history can also impact your chances. Maintaining good personal credit and avoiding late payments on existing debts can strengthen your loan eligibility as a startup.
Collateral
For startups, lenders may require collateral to secure the loan if you have minimal credit history. Collateral acts as an assurance you can repay the debt. Common collateral for small business loans includes equipment, inventory, accounts receivable, commercial real estate, and even a cash deposit. The required collateral amount varies by lender but is commonly 100% to 200% of the loan value. Having strong personal credit can potentially reduce collateral requirements.
Interest Rates
Interest rates on small business loans for startups often range from 3% to 15%, depending on the lender, loan amount, your credit rating, collateral provided, and other eligibility factors. Online lenders may offer higher rates but faster approval, while bank rates are typically lower but have stricter qualification requirements. Compare all interest rate options to find an affordable rate for your business.
Repayment Terms
Consider the repayment terms carefully. Longer terms may result in lower monthly payments but potentially higher overall costs due to interest. Shorter terms mean higher monthly payments but less interest paid over time.
Lender Options
There are various lenders to choose from, including traditional banks, online lenders, and government-backed programs. Each has its own application process, eligibility criteria, and lending standards. Research your options to find the best fit for your startup.
Comparison Table
Criteria
Traditional Banks
Online Lenders
Government-Backed Programs
Approval Speed
Slower, due to stringent verification processes.
Faster approvals, less documentation required.
Varies, often includes additional support for applicants.
Interest Rates
Typically lower, but harder to qualify for.
Higher rates, but easier eligibility.
Often favorable terms to support small businesses.
Collateral Required
Often required, especially for larger loan amounts.
May be more lenient, especially for smaller loans.
Focus on personal credit, more lenient on business history.
Comprehensive evaluation, including business potential.
Conclusion
Small business loans can provide the financial boost needed to turn your startup dream into a reality. They come with various requirements, including a solid business plan, consideration of your personal credit history, and possibly collateral. Interest rates and repayment terms also vary, so it’s essential to choose a loan that aligns with your startup’s financial goals.
Before applying for a small business loan, take the time to thoroughly research lenders, understand the terms, and ensure that the loan supports your startup’s growth. With the right funding and a clear vision, your startup can embark on a path to success.
When it comes to inventory management, there’s a lot at stake for New Jersey small business owners. An unexpected sales slump, late invoice payments, or equipment malfunctions can leave your business vulnerable, and expose you to critical inventory shortages, and even a significant financial shortfall. Fortunately, there is a viable funding option that helps smaller companies like yours safely plan ahead to help mitigate stock issues known as inventory financing.
To help business owners better understand how this financing type works, the lending consultants at New Bridge Merchant Capital have put together the following guide covering the various benefits of inventory financing and how to apply for it. We’ll also discuss a handful of other popular alternative small business loans in NJ to consider as you search for the best working capital solutions for your organization.
What is Inventory Financing?
Inventory financing plays a vital role in running countless successful small businesses. Companies frequently leverage this financing type when they need to purchase products to sell at the peak of their seasonal fluctuations. In contrast to other familiar NJ business loans, inventory financing offers an attractive lending structure that requires no personal collateral. Instead, creditors use your existing inventory to secure the loan in the case of a default.
Inventory financing enables businesses to purchase merchandise to satisfy their large seasonal orders and capitalize on other time-sensitive opportunities. The secured loan basis for inventory financing makes it a relatively low-risk option for lenders since there is no need for additional collateral, and the inventory itself is sufficient enough to make the loan.
You can access this type of financing from several lending entities, including traditional banks, commercial finance companies, and alternative business lenders. Before creating the loan, these creditors will ascribe a value to your existing inventory used to secure the proposed funding.
During this process, they’ll also establish a basis for assessing your creditworthiness and the maximum loan disbursement amount. It is, therefore, crucial that you work closely with your preferred lender to gather all the pertinent financial documents that can demonstrate the fiscal strength of your business, the value of your inventory, and your company’s ability to repay the loan.
The terms of inventory financing vary from institution to institution and come with different processing fees, repayment periods, and interest rates. Closely examining borrowing costs and comparing multiple products and terms will give you a more comprehensive view of which loan structure is right for your specific application.
How Inventory Financing Works
Inventory financing for small businesses is a popular form of asset-based financing that gives retailers and wholesalers, especially those with a large amount of available stock, fast access to working capital. Small to medium-sized companies often lack the financial history and dispensable assets to secure the institutional-sized financing options that larger retailers can. For this reason, many smaller companies opt for inventory financing to ensure sufficient stock levels.
Smaller companies are generally private. Thus, they can’t raise money by issuing bonds or new rounds of stock. Without access to traditional financing solutions like these, businesses have increasingly turned to inventory financing as an alternative for funding their general operating expenses.
While inventory financing is an effective way to generate working capital quickly, it’s also critical for ensuring uninterrupted operations and protecting your business from experiencing an unexpected loss. Inventory financing allows companies to purchase the necessary materials to manufacture products they intend to sell at a later date and improve their cash flow management.
Inventory financing also provides both short- and long-term benefits. It allows companies to purchase enough materials to avoid losing potential sales due to shortages or limited stock. Moreover, it helps protect against overstocking. This problem can lead to a decrease in cash flow due to carrying excess inventory, which is especially important during seasonal fluctuations when overstocking becomes a burden.
Which Types of Businesses Benefit From Inventory Financing?
Whether you need to order a new line of products or boost your stock levels to support an increase in demand, inventory financing is often vital to running countless successful small businesses.
The financing solution lets smaller companies attain the funds they need to cover the cost of ordering and stocking their inventory while protecting them against the rising expenses associated with raw materials. Inventory financing can provide substantial relief for any business that faces a sudden spike in demand or needs to cover the steep costs of procuring seasonal inventory.
Retailers
Retail is a good example of one business type that frequently benefits from inventory financing. Department stores cover a range of product categories, from shoes and clothing to jewelry and housewares. Specialty retailers, on the other hand, emphasize a specific class of products such as toys, sports equipment, or greenhouse supplies. In either case, inventory financing can provide the financial flexibility needed to replenish stock during periods of peak demand.
Wholesalers
Wholesalers are warehouse retailers who sell their products in bulk at reduced prices. As a result, their inventory needs are much larger than those of other businesses. Inventory financing can provide the extra financial support required to stock up on products at scale.
Seasonal businesses
Seasonal businesses also rely heavily on inventory financing. Taking out an inventory loan lets them manage their stock levels while keeping up with the increased demand. Many seasonal companies experience a substantial spike in customers or clients during specific occasions like holidays, summer vacation, winter months, or sporting events. Moreover, by utilizing the funding, they can manage these changes without taking on too much debt at once.
Inventory Financing vs Business Loans
Understanding the differences between the various business loan types is a vital part of the decision-making process for any company seeking extra working capital. By comparing and contrasting the advantages and disadvantages of each loan, you’ll be able to make an informed decision about which financing option meets the needs of your unique business.
Inventory financing isn’t secured in the traditional sense, yet it still provides capital for companies to invest in stock purchases and continue meeting customer demand. Inventory loan rates tend to be higher than conventional financing options. The extra borrowing costs could be an expensive funding solution for some businesses. However, due to their collateral-free nature, your company can secure this financing type quickly to ensure you have the funds available when needed.
On the other hand, traditional business loans are secured capital that organizations receive from conventional banks or financial institutions. Companies typically use these loans for capital investments such as equipment and office space.
The terms for traditional business loans can vary depending on the lender, but they often have long-term repayment periods and lower interest rates than inventory loans. Additionally, traditional business loans often come with flexible payment schedules, and the qualification process can be substantially more involved than it is for inventory loans.
Inventory Financing vs Trade Credit
Inventory financing and trade credit are two of the most common small business working capital solutions. Both methods have advantages and drawbacks that we’ll touch on in more detail below.
Small businesses that lack the liquidity to purchase their inventory outright frequently use inventory financing to restock. Creditors provide these loans based on the value of the goods purchased along with any existing inventory, up to a certain percentage. The business will then use the loan to acquire the inventory and leverage it to generate revenue.
Trade credit is also a popular financing option for small businesses. It allows them to purchase inventory from vendors on credit instead of paying for it upfront. The vendor will agree to extend the business credit for a specified term, during which the business is expected to pay for the acquired inventory. In exchange for the proposed terms, vendors usually charge a fee for the privilege of using their services.
Similarities between inventory financing and trade credit include the fact that they both represent a means of financing a business’s inventory purchases. Both can be obtained from either a lender or a vendor, and they each provide a short-term solution to cash flow constraints.
The primary difference between inventory financing and trade credit lies in the source of funds. With inventory financing, the lender provides the entire amount needed to purchase the inventory upfront. Trade credit, conversely, only provides enough funds to cover the cost of the new stock purchased on credit terms. Likewise, with trade credit, there is usually more paperwork involved to establish the agreement. However, the terms and pricing are often more favorable than inventory financing.
Inventory Financing vs Asset-Based Lending
Many small businesses depend on financing to purchase, store, and distribute inventory. Two common types of financing strategies are inventory financing and asset-based lending. Each type of financing has its own unique advantages and disadvantages.
Businesses use inventory financing primarily to purchase inventory from vendors without using their existing cash resources. They deploy this strategy to expand their inventory and meet increased customer demand. When you utilize an inventory financing loan, your business will borrow a set amount to cover the cost of the new stock upfront, repaying the loan later on with future sales proceeds.
While you should consider inventory financing a type of asset-based loan, asset-based lending products typically staking non-inventory collateral to secure the loan. These loans not infrequently often put more emphasis on your personal or business collateral than your creditworthiness.
Businesses that use asset-based loans frequently to fill operational gaps that occur when short-term demands exceed long-term sales projections. With this loan type, the disbursement amount is secured by a percentage of the business’s current assets, such as accounts receivable, or other collateral like personal property and industrial equipment.
As opposed to inventory financing loans, asset-based loans provide businesses with access to larger amounts of money over a longer time. The repayment terms can be more favorable since they’re established by a set percentage of your accounts receivables, as opposed to an obligation to repay with the proceeds from your future sales.
Inventory financing is generally more suitable for businesses with seasonal demands or customers with a high need for product replenishment. Asset-based loans, in contrast, work better for companies that have to cover substantial and ongoing operational costs.
Applying for Inventory Financing
Business owners looking to increase their inventory usually find inventory financing a viable solution. Before taking out a loan like this, you’ll need to familiarize yourself with the necessary steps to apply. To ensure a successful application process, you should have a keen understanding of your liquidity, turnover, and sales history.
When applying for inventory financing, expect the lender to ask for documentation such as sales history, profit and loss statements, sales projections, cash flow statements, and a business plan. These documents will provide insight into your business’ likely liquidation value and its prospects for successful inventory sales. To ensure they find the best fit for borrowing their inventory, business owners should do their due diligence and research all available options.
If you’re planning on applying for inventory financing, here is a reliable list of steps to follow:
Research all available loan products
Gather necessary financial documents
Draft a reliable business plan
Project future inventory liquidation value and sales
Compare different offers and select a lender that meets your needs
Where to Apply for Inventory Financing in NJ
With additional inventory, businesses have the ability to produce more goods and purchase costly items while maximizing their profits. By working with a reliable financing partner, you’ll ensure your business is making the most of its available resources.
New Bridge Merchant Capital is among the leading finance companies in New Jersey. We offer best-in-class service, fast loan approvals, competitive rates, and quick turnaround times.
Whether you need to purchase inventory or just want to cover operating expenses, our team of experienced lending professionals is here to help. Contact New Bridge Merchant Capital at 844-228-0593 for current pricing, or fill out our online application to get started today.
As business owners face increasing financial pressures, a revolving business line of credit is among the more desirable options for accessing fast working capital when needed. By giving companies the flexibility to control their financial runway, small business loans in NJ like these are increasingly becoming attractive forms of financing to many small business owners in the region.
This article explains the advantages of a revolving business line of credit and the steps and qualifications required to secure such a loan. The following sections will tell you everything you need to know about this popular financing option so you can decide if it is the best funding solution for your organization.
A revolving line of credit can provide a short-term source of capital to help sustain a company during uncertain times and unforeseen circumstances. Moreover, many lines of credit are secured by collateral. This can give business access to larger sums of money than they have on their balance sheet.
Credit lines allow companies to draw funds when necessary. They can fill funding gaps brought about by short-term cash flow problems. By providing instant access to funds, your organization can continue operating and support its efforts to expand its footprint.
At a basic level, a business line of credit works in two stages. The first is the draw period, during which the borrower can access borrowed funds in smaller, periodic payments. This is usually followed by a repayment period, in which the borrower must repay the loan in fixed monthly principal and interest payments.
Lenders vary in the terms and conditions of their business lines of credit; some may convert the line of credit into a structured loan after the draw period ends. As such, familiarizing yourself with the terms of the loan agreement and understanding the fine print before entering into a contract is crucial.
Business lines of credit provide flexible access to capital for business owners, allowing them to draw funds in smaller, periodic payments to later repay them in full after the draw period ends. This loan product effectively serves as a short-term source of capital during times of uncertainty, making them a valuable tool for companies in need of fast access to capital. To get the most out of a business line of credit, remember to evaluate all the terms of the agreement and the proposed payment structure.
Key Stages:
Draw Period: Borrower can access borrowed funds in smaller, periodic payments.
Repayment Period: Borrower must repay the loan in fixed monthly principal and interest payments.
Business Revolving Line of Credit vs Term Loans
Criteria
Business Revolving Line of Credit
| Term Loans
Flexibility
High
Low
Repayment
Flexible, based on usage
Fixed term
Interest
Only on borrowed amount
On entire loan amount
Use Case
Working capital, emergency funds
Specific investments like equipment
Business Revolving Line of Credit vs Term Loans
Business lines of credit and conventional term loans are two popular financing solutions for small companies looking to extend their investment costs beyond their immediate cash flow. Both have their advantages, but they also have distinct differences when it comes to their individual structures and requirements.
For start-ups and established companies alike, it can be difficult to get the required financing to fund advancements and investments during business expansion. Depending on the size of the investment and the cash flow of the business, one of two primary loan types – business lines of credit or conventional term loans – may be used.
A business line of credit is a flexible product whereby an agreed-upon value is offered to the small business owner, who can later draw from it on demand within their pre-agreed limit. You’ll only make repayments on the borrowed portion, with interest payable only when funds are owned. Business lines of credit often provide quick access to working capital loans in New Jersey, which can be critical for cash-flow management.
Conventional term loans, on the other hand, offer an agreed amount of money to the small business owner, who then pays back the loan over an established term. Lenders charge interest from the beginning of the term through the remaining life of the loan. These loans are most often used as a one-time financing solution for a specific purpose, such as purchasing equipment or covering business expansion costs.
Now that we’ve covered the basics, let’s delve further into the unique benefits of these different financing options and examine which one may be the best for your particular applications.
Business Revolving Line of Credit vs Invoice Factoring
Criteria
Business Revolving Line of Credit
Invoice Factoring
Flexibility
High
Moderate
Repayment
Flexible, based on usage
Based on invoice payments
Interest
Only on borrowed amount
Fees charged by factor
Use Case
Working capital, emergency funds
Immediate cash flow
Business lines of credit and invoice factoring are two popular forms of business financing that small business owners can use to strengthen their finances. Lines of credit are flexible instruments that allow a business to borrow and repay funds as needed, while invoice factoring uses outstanding invoices to supply immediate working capital. Both options have their own unique benefits and drawbacks depending on the business’s current financial situation.
Credit lines are ideal for businesses that need consistent access to a set amount of working capital. With a revolving line of credit, a company will be approved for a certain amount and can withdraw at any time up to the maximum credit limit. Typically, a line of credit has two rates. The first is the “draw rate.” You use this when you withdraw the funds, while the “commitment rate” is the rate charged when funds are borrowed but not withdrawn.
Credit lines require regular payments until the balance is reduced to zero, at which point the line is ready to use again. These revolving lines of credit can provide an ongoing source of capital for a business as long as the payments remain current and the company doesn’t exceed its approved line limit.
Invoice factoring, on the other hand, is a type of finance solution for businesses with a consistent stream of invoices. Instead of relying on borrowing from a third party, factoring allows companies to leverage their pending invoices to receive immediate working capital.
Once an invoice is sold to a factoring company, the business will receive an initial cash advance of around 85 to 90 percent of the invoice value and the remaining balance once the customer pays the invoice. It’s a quick and easy way to get paid upfront, and factoring can provide an unlimited source of working capital as long as the business generates enough monthly invoices.
When comparing business lines of credit versus invoice factoring, you’ll have to look carefully at the benefits and drawbacks of each loan. Business lines of credit can be beneficial for businesses that need consistent access to funds but may not have substantial collateral to offer. However, lines of credit often require higher credit qualifications, which can reduce the number of business owners that qualify.
Invoice factoring is attractive to business owners that can’t get a loan or line of credit due to their FICO score, as the factor purchases the invoices outright. This is, of course, in contrast to lending the business money to secure the stock. On the downside, invoice factoring can be expensive since the factor will charge a fee for their services, and businesses with a very slow accounts receivables cycle won’t benefit from the quick cash advances offered by invoice factoring.
Knowing the key differences between business lines of credit and invoice factoring will only enhance your chances of getting approved for the right business loan product and ensure that you do not agree to terms that fail to provide maximal benefit.
Business Revolving Line of Credit vs Merchant Cash Advance
Criteria
Business Revolving Line of Credit
Merchant Cash Advance
Flexibility
High
Low
Repayment
Flexible, based on usage
Percentage of future sales
Interest
Only on borrowed amount
Can be expensive
Use Case
Working capital, emergency funds
Short-term operating costs
When small business owners need quick financing to cover short-term operating costs, they have two main options: business lines of credit and merchant cash advances (MCAs). Each type of loan has advantages and drawbacks. This is why understanding the difference between them as you decide which of the two will be best for your needs is crucial.
A business line of credit provides access to a specified amount of money that can be borrowed, repaid, and borrowed again as needed. A lender typically sets the maximum loan amount, and interest is only accrued when the balance is not paid in full each month. This way, the repayment terms remain flexible, giving you optimal control over how you leverage the funds. This customizability factor means that business owners can access funds quickly. Nonetheless, borrowers must maintain their creditworthiness to continue using their line of credit without the risk of losing it.
A merchant cash advance (MCA) is a type of loan typically provided to business owners by online lenders. The creditor will advance a set amount of money to the borrower in exchange for a percentage of their future sales. The business then repays the loan according to its sales. This means that the payments can vary depending on how much money the company makes each month.
The biggest advantage of an MCA is that it often entails a fast approval process. Merchant cash advances can be a great option for businesses that do not have a long credit history. One downside, though, is that the repayment terms can be more expensive than a business line of credit.
A business line of credit will generally come with more flexible payment terms that are easier to manage. However, MCAs can provide expedient access to financing and may be more suitable for businesses that do not have strong credit. Ultimately, the choice between the two almost always boils down to the individual needs of the business owner. It’s, therefore, important to look at prospective loans from all angles before making a final decision.
How to Apply for a Business Revolving Line of Credit in New Jersey
To be approved for a business line of credit, lenders typically evaluate several qualifications including:
Time in business – At least two years is ideal but some lenders may be more flexible.
Personal and/or business credit scores – Credit score requirements can vary greatly, but personal credit scores are often required to be between 620-650 and banks sometimes require scores of 680-700 or higher.
Revenues – Bank and financial statement receipts and/or tax returns will be used to confirm revenue.
Business entity – Some lenders will not lend to sole proprietors, so considering setting up an LLC, S Corp, or C Corp could be beneficial.
Secured collateral – Most business lines of credit are unsecured loans, meaning you won’t need to pledge personal or business assets such as equipment or real estate to qualify. However, in some cases, lenders may offer secured lines of credit or require collateral.
For New Jersey business owners, financial security and sustainability means having access to the right working capital solutions. Alternative lenders like New Bridge Merchant Capital offers a full suite of business lending products that are customizable to meet the unique needs of your business. By partnering with New Bridge Merchant Capital, you’ll not only start taking the steps to secure critical funding, but you’ll also have access to dedicated assistance from a team of seasoned lending consultants with decades of combined experience.
You can apply for a business line of credit to purchase inventory, expand product lines, or cover your operating costs. This type of credit also provides a safety net, especially during a financial shortfall, giving companies the flexibility to manage their operations more effectively.
Where to Apply for Small Business Loans in NJ
New Bridge Merchant Capital’s business lines of credit can be designed to fit each business owner’s unique situation. Furthermore, our revolving lines of credit come with a simple application process and a fast decision. These credit lines allow clients to take advantage of flexible repayment options and competitive terms.
We encouraged New Jersey business owners to explore New Bridge Merchant Capital’s full suite of lending products. Contact a senior business lending consultant now at 844-228-0593 for additional information and an obligation-free quote. New Bridge Merchant Capital is ready to provide you with expert guidance and advice on how to access and utilize business loan products to help your organization meet its revenue and strategic growth objectives.
Cash flow constraints are a common issue for contractors, especially since industry payment cycles tend to be unpredictable. For many small contracting businesses, this means it’s only a matter of time before they experience a financial shortfall and need to start exploring options for additional working capital.
Luckily, there are sources for small business loans in New Jersey that can give you a reliable path to overcoming delayed payments and unexpected losses. Contractor financing is an invaluable tool for securing materials and assets. The lending solutions let businesses scale their projects with confidence. Offered in myriad forms, from lines of credit to invoice factoring, contractor financing helps businesses make strategic decisions about when and where to invest, all while ensuring constant and reliable cash flows.
How Does Contractor Financing Work?
Building a successful business requires effective management of cash flow. Contractors often discover early on that while costs for a particular project may be considerable at the outset, with materials and labor, it will be several months before a project is completed and paid for. Such a cash flow issue can force contractors to seek financing to cover their costs until the next payment arrives.
Banks and other traditional lenders consider it risky to finance construction projects, leaving many builders struggling to encounter suitable financing options for project expenses like labor, materials, and equipment. In the following sections, we’ll introduce you to a range of contractor financing solutions along with the advantages and disadvantages of each.
Contractor financing is a category of financial instruments available to construction businesses that can help ease their cash flow issues. These loans are divided into two types: advances and deferrals. Advances cover material costs and other expenses before they’re paid for, while a deferral effectively lengthens payment terms and allows the contractor to fund labor, materials, and equipment more slowly.
In other industries, businesses can access traditional funding sources with minimal risk, enabling them to finance their operations at relatively low rates. Because of the risks inherent to construction, however, traditional banks and lenders are hesitant to provide financing products to contractors.
Without access to conventional financing, construction businesses have started turning to a range of emergent small business loans in New Jersey designed to meet their requirements. These specialized solutions exist to bridge the gap between the time when payments are received and when your expenses must be covered.
Through an array of alternative contractor financing options, construction businesses can rest assured in knowing that cash is available to pay for labor and materials while guaranteeing they get paid for each project. Whether through a cost deferral or an advance, you can use contractor financing to keep your business profitable.
What Are The Typical Types of Contractor Financing?
Contractors face increasingly complex challenges when seeking working capital. To overcome these obstacles, forward-looking companies have stepped into the breach with an array of options to help keep their supply chains healthy and thriving.
From invoice factoring to lines of credit, you’ll find an array of alternative financing solutions available to contractors who need capital to grow their businesses, take on larger projects, or meet predictable gaps in cash flow. Let’s take a look at a few of these options in more detail below.
Traditional Bank Loans
As a business owner, you’ve likely heard about traditional bank loans as a potential working capital solution. These loans are typically offered by established banks or credit unions; however, they may also be obtained through online lenders and creditors specializing in business loans.
A traditional bank loan is a sum of money lent to a business by a financial institution; this money must then be repaid in full, with interest, over a previously agreed upon period of time. Usually, bank loans come with fixed interest rates and loan terms ranging from just a few months to several years. Bank loans also give businesses access to the funds needed to cover their daily expenses, purchase new equipment, and implement needed marketing strategies.
However, it’s worth noting that obtaining a traditional bank loan can be a lengthy and arduous process. In most cases, banks require extensive paperwork to verify the borrower’s financial history and the current financial health of the business. Additionally, the financial institution may need to conduct a detailed review of the proposal to ensure that the owners can adequately manage and repay the loan.
For companies that qualify for a traditional bank loan, there are both advantages and disadvantages to consider. On the plus side, the loan offers a fixed loan amount with fixed interest rates. The is usually secured with collateral, ensuring that the bank will be paid back. On the downside, the process to obtain a traditional bank loan can be lengthy and requires a considerable amount of documentation. Moreover, the bank may charge additional fees for setting up the loan along with any late payments.
A traditional bank loan can provide a dependable source of working capital for businesses. If you have time to complete the necessary paperwork and have good credit scores, the odds of qualifying for small business loans in New Jersey are strong. However, remember to weigh the pros and cons carefully before committing to a loan agreement.
Equipment Financing
Equipment financing is ideal for construction companies looking to purchase large equipment such as heavy machinery, vehicles, tools, and other operational equipment that makes workers more productive. It works like a car loan or mortgage, wherein a bank loans the construction company money to purchase the equipment and then uses the equipment as collateral. Generally, the higher the amount borrowed, the higher the interest rate, which is always something to consider.
Oftentimes, the borrower would need to put down a certain deposit percentage for the value of the equipment. However, some lenders offer 100% funding. Irrespective of the deposit percentage, the loan would need to be approved with a thorough credit check and financial statement review. Moreover, the property is at risk if you miss payments, since the bank is within its rights to repossess the equipment.
The pros and cons of such financing are worth mentioning, as well. To begin with, the interest rate is usually lower since you’re securing the loan with collateral. The increased productivity from the new equipment, however, will help cover the cost of the loan. On the other hand, a down payment may be required to obtain the financing. The risk of not making payments on time could result in the repossession of your equipment, something that always hangs over the heads of those who fail to do so.
Equipment financing is a viable solution for construction companies. It can help them obtain the necessary operational tools to be more productive, however, one must be cautious of the potential risk that comes with it. Remember to factor in the deposit percentage, the interest rate, as well as the credit check and financial statement review that is typically required.
Lines of Credit
Business lines of credit can be invaluable sources of working capital for contractors and essentially any other small business owner. This lending option offers shorter-term funding than a traditional business loan, allowing for more manageable withdrawals and payments. It also provides a flexible method of borrowing money when necessary, with no need for lengthy applications or waiting periods.
A business line of credit comes in two forms: secured or unsecured. An unsecured line of credit, also known as a “revolving line of credit,” does not require collateral and carries a higher interest rate. Secured lines typically come with higher limits, but lower interest rates, since the lender can seize assets if need be.
The benefits of a business line of credit are numerous. The flexible nature of this financing means you only pay interest on the amount you borrow, giving you control over expenses without the risk of over-borrowing. You can also withdraw and repay the money as many times as you need, allowing for more precise allocations of finances.
On the other hand, business lines of credit also come with certain drawbacks. These lines of credit usually carry higher interest rates than traditional lines of credit. Likewise, the nature of a line of credit usually requires strong financial statements and a good credit score before lenders will approve your application.
Merchant Cash Advances
Merchant cash advances are an excellent option for contractors who need reliable sources of working capital. A merchant cash advance gives businesses an up-front sum of money in exchange for a share of their future revenue. This percentage of future income is usually determined by the cash advance company after analyzing the contractor’s cash flows. It is then deducted automatically on a daily basis until you pay the balance owed.
The simplicity with which cash advances can be secured makes them attractive to contractors. The entire process can usually be done in under a week. No collateral is required, as the percentage of future income serves as repayment. This can be a substantial benefit for businesses that don’t have a lot of assets.
However, while merchant cash advances are typically easier to obtain than traditional loans, the high cost of capital can be notably prohibitive. Interest rates are often higher for these advances than for traditional bank loans. Also, since the calculation of the rate of repayment can be difficult to predict, contractors may end up paying a lot more than they bargained for if business suddenly slows down.
Small Business Administration (SBA) Loans
Small Business Administration (SBA) loans can provide an advantage for contractors who don’t need instant working capital. The SBA is a federal program that supports small and medium-sized businesses providing them with access to capital and financial assistance, usually offering loan programs tailored to contracting businesses.
These lending platforms target companies in the construction industry and may provide access to the funds needed to support operations. SBA loans are backed by the government and offer borrowers lower interest rates, longer repayment terms, and large loan amounts. With an SBA loan, contractors get access to the financing required to make the necessary investments in their business. Recent federal regulations have made the process of obtaining business loans slightly easier, as well, only increasing the accessibility of this product.
However, the SBA loan application can prove lengthy and complicated. Applicants must provide documents such as financial records, business plans, and tax returns, which can take a considerable amount of time to gather and organize. Once all the proper paperwork has been submitted, you may still face months of additional waiting while your application is reviewed, approved, or denied.
In terms of pros and cons, remember that interest rates for an SBA loan may be lower with the SBA guarantee, but the repayment term might be longer than traditional loans. Also, SBA loans are for very specific purposes and are often used for working capital or to purchase equipment, buildings, inventory, etc. Businesses cannot leverage them to pay dividends, however. On the plus side, since these loans are guaranteed by the government, your credit score and other documents won’t be as important.
Which Aspects of Your Contractor Business Can You Finance in NJ?
As a contractor in New Jersey, you’ll encounter several options for financing the various parts of your business. Here’s what contractors typically finance in New Jersey:
Labor: Covering labor costs can help manage the cash flow of your business.
Materials: Taking out a loan for materials can help ensure you have all the necessary resources to complete the job.
Equipment: Financing equipment can help you acquire the tools and machinery needed for job completion.
How to Qualify for Competitive Small Business Loans in NJ
Identifying the right New Jersey small business loans for contractors is an important process. You’ll need to consider the terms, costs, and potential benefits that come with each loan. Contractors should always measure their options objectively and look for a financial partner who can provide them with the flexibility to do business on their terms.
New Bridge Merchant Capital assists contractors like yourself with evaluating their financing options to find the right fit for their business. After consulting with one of our seasoned advisors, we’re certain that you’ll be able to make an informed decision about which business financing product best meets your needs.
Complete your application online now or call New Bridge Merchant Capital at 844-228-0593 for a loan quote.
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.
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.
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.
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.
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.
