Here’s What You Need to Know About Expansion Financing

If you’re a new business owner unfamiliar with your options for expansion financing, it’s a smart idea to get acquainted with them now. Proactively educating yourself on this subject will help you avoid scrambling and trying to figure out how expansion financing benefits you in the future when you need it.

Launching an upstart requires as much capital as it does tact and dedication. And while starting a business is one thing, profitably maintaining it over the long term is an even trickier task. It’s no secret that roughly half of all small business shutter within five years, and to offset this risk, business owners must get a handle on their growth strategies sooner rather than later.

The good news is that 50 percent of the businesses that haven’t failed fail are succeeding. The reason why these companies continue to thrive is that they understand how to leverage business financing to drive their long-term strategic growth initiatives.

Running a modern small business demands more than tight budgeting and an effective marketing strategy. These fundamental elements are undeniably important, but they are hardly useful if your organization hasn’t tactically positioned itself to grow alongside market demands.

Why should you be thinking about expansion now?

If, for example, you operate a physical warehouse site, eventually, you’ll need more space. Businesses in the healthcare and manufacturing sectors always need new equipment and the latest software tools.

Growth is hardly a bonus feature of doing business. It’s a necessity. For those organizations that haven’t sufficiently prepared themselves to expand their operations, workforce, and existing customer base, the odds of these companies developing a sustainable long-term platform are low.

The sooner you start thinking about expansion financing the better. With the rising costs of labor, materials, and real estate, the longer you put off your strategic growth initiative, the more it will cost you to successfully execute it.

Organizational growth is known for boosting company morale while assuring your staff that you haven’t checked out of the company and that your organization remains on profitable trajectory. Stagnancy in business is never a good sign and is usually a reliable indicator of bleak times ahead.

Of course, expanding your operations is never cheap. Most businesses need access to outside financing. The trouble with this is that most conventional lenders have been reticent to lend to smaller companies since the 2008 financial crisis.

By many indications, the global economy may be headed for a similar downturn, which means you can expect the credit market to tighten even further. That’s why it’s advisable to get started on your expansion plans now as opposed to waiting.

Expansion financing and alternative lenders

Fortunately, alternative business lenders like New Bridge Merchant Capital have started filling in the business financing void that was once occupied by traditional lending institutions before 2008.

Alternative lenders are far more likely to approve business expansion loans in the current economic climate. These lenders can get you the funds you need at a pace much faster than if you had a pursued more conventional financing path.

What is expansion financing, and how does it work?

Put simply, expansion financing capital helps growing upstarts increase their balance sheets and add the valuable company assets required to keep their operations on a positive growth path.

Business expansion can entail any number of objectives. Most commonly, expansion involves the introduction of new assets that bolster areas such as research and development, marketing, and operational productivity.

Expansion refers to any activity that leads to securing a larger customer base, including substantial transactions that involve mergers and acquisitions. So, how do businesses finance their expansion plans? There are several ways to go about it, from crowdsourcing to private equity loans, but the most common methods are equity and debt financing.

What is equity financing? This method of funding requires businesses to issue stock shares in exchange for the infusion of extra capital. The primary downside to equity financing is that it often involves business owners relinquishing some aspects of control over their operations. In exchange for this, the company owner is released from any obligations to repay the debt.

Debt financing, on the other hand, applies more traditional lending concepts in which funds are dispersed by a bank or non-bank with the expectation that the borrower repays the balance over a fixed term with interest. Under this model, business owners aren’t required to give up management control over their companies, but they may need to offer up business collateral to secure the proposed expansion loan.

Regardless of which path you take, it’s important to be confident that the expansion will lead to profits before financing the project. You should also make sure that your business is on firm ground pursuing any expensive growth strategy.

Lastly, conducting sufficient research into your financing options is crucial. You always want to find the best loan for your business and confirm that you’re not missing out on better financing opportunities.

Choosing an expansion finance lender

The first thing to look for in an alternative financing offer is lender transparency. If you’re working with a creditor that is upfront about all its fees and repayment terms from the outset, this is a pretty good indicator that you’re dealing with an honest financier that is well-vested in you having a positive borrower experience.

While business loans for expansion are often hard to come by, this is hardly a good reason to not hold the prospective lender to high service standards. Excellent communication, attention to detail, and a supportive attitude are all qualities you should be seeking in a business banking partner.

Getting started with your next business expansion loan

Understanding how to finance business expansion isn’t overly complicated, as long as you understand the basics and don’t put your growth plans off until it’s too late. The last problem you want to encounter is a spike in customer demand that you’re unprepared to meet.

Expansion can be an expensive and complicated undertaking. Working with the right alternative lender can make all the difference in guaranteeing a successful outcome.

New Bridge Merchant Capital’s senior business finance professionals have decades of experience helping small businesses like yours execute their strategic growth initiatives.

For more on how our business lending experts can help you expand your company’s footprint and boost your annual revenues, apply now on the New Bridge Merchant Capital website or call us at 844-228-0593.

In today’s highly competitive business milieu, a loan denial can carry significant consequences for any organization that needs speedy access to additional working capital. Many small business owners are just now discovering they must expand to survive, and that they need access to reliable alternative lending solutions to avoid shuttering in the near term.

While a business loan application denial invariably presents business owners with a set of new challenges, these obstacles aren’t always insurmountable. The first step after a denied loan approval is to understand why your application was rejected.

The rejection letter will tell you how to start repairing your credit profile. You don’t want to risk running multiple hard credit inquiries the next time you apply. If your approach here is faulty, you could worsen your score to only find out you’re still unqualified for the desired loan.

Applying for business financing differs considerably from the process a standard wage earner endures after applying for a conventional bank loan, so it’s important to prepare accordingly.

If you’ve been running your company for a significant time, surely you’ve seen your ups and downs, and you know that your projected revenues are just that -predicted income and unassured.

Given that banks are in a position of taking substantial risk granting business loans, it’s not uncommon to find your loan application denied because you don’t meet all the necessary criteria for approval. When this happens, it can be disheartening, to say the least, and it might impact your existing growth strategy.

Fortunately, there are a few reliable steps you can take, which we’ll discuss below, that can improve your personal and business credit profiles so that you find better results in your next loan application.

If you’re wondering what to do if the bank turns down your loan, here’s a bit of advice on what steps you should take after your business loan is denied:

Start by understanding the underlying issues with your application

We’ve touched on this briefly in the introduction, but the first step after a business loan application denial is always to understand why the bank issued it in the first place.

When a loan application gets rejected, a competent lending consultant will likely advise you verbally on why your loan was kicked out of approval status. This notification is usually accompanied by a formal bank letter that reiterates these specific details.

You might discover that your debt-to-income ratio is too high, you don’t have enough seasoning on your business, or the proposed collateral assets values are too low. If you lack previous experience as a business borrower, some of the reasoning you’ll find in the denial may require further explanation. But, generally speaking, these details are usually straightforward enough for the typical business owner to understand.

One of the advantages of working with New Bridge Merchant Capital is that we do everything within our means to ensure that you’re qualified for the loan products you are interested in before formally submitting an application to underwriting. If it appears to our team that you’re not quite ready, we’ll work with you to establish an action plan that gets you back on track to receive a full approval.

The reasons a business loan was denied are often as numerous as they are diverse. However, our team of small business finance specialists can help you understand how to successfully prepare for getting your next loan application approved.

Start taking action to address the faults in your rejected application

Once you’ve discovered the bank denied your business loan application, proactively addressing the reasons for the denial you can control is crucial. Starting this process sooner rather than later is the key.

It’s worth pointing out that your loan could’ve been denied for reasons outside of your control, such as declining economic conditions or your wider industry recently destabilized. In these instances, there is little else to do but wait until circumstances improve, or you can pursue alternative lending solutions.

With that mentioned, concerning the faults within your application, there are a few that might simply fall outside of your control. If business seasoning is an issue, this would be a matter of waiting out the necessary time interval. Or, if documented cash flow is the problem, you can always adjust your invoice procedures so that you’re getting the funds owed faster and it’s easier for a third party to understand how much your business earns.

In most circumstances, your denial comes down to a less-than-favorable credit profile. If your application was rejected for a low credit score, the best practice is to start working on improving your personal and business credit scores now.

There are several ways to go about this process, many of which we’ve touched upon in previous articles. Without going into too much detail here, one of the most effective approaches for improving your credit score fast is by paying down your existing debt.

Ensure you’ve applied for the right loan product

If your business loan application was denied for factors outside of your personal control, company seasoning, for example, there’s a chance you could have applied for the wrong loan product.

In situations like these, communication with the financing institution is critical. After discussing your situation in-depth, you might discover that you qualify for lending products more suitable to businesses like yours.

Traditional small business lending and alternative specialized financing approval guidelines can differ considerably. Work with your lending professional at the bank to determine if there are any alternate paths to pursue after a denial.

Start a new loan application

Once you’ve addressed all the red flags in your bank rejection letter and increase your chances of approval, you’ll be ready to reapply for business credit.

Start by gathering all the relevant documents, assembling them neatly and coherently, in a way that doesn’t invite doubts or additional questions from the bank’s underwriting department. Work closely with your lending officer to ensure you have everything in order before formally submitting the loan application.

Finally, make sure that your plans for using funds from the business loan are intelligible and that the loan will add value to your business, enhancing its future profitability. You’ll also need to demonstrate a sufficient capacity to repay the proposed loan amount under the established payment terms.

Presenting an effective business plan and marketing strategy goes a long way in assuring the bank that you have all your bases covered and can repay the loan.

Need to speak with a business credit professional after a denial?

The team of business finance experts at New Bridge Merchant Capital has helped dozens of companies like yours improve their personal and business credit profiles so they can get back and track to accessing low-cost borrowing again.

We’re happy to discuss the details of your recently denied loan application and provide further insight on getting yourself approved in the next go-round.

If you’re struggling to secure business financing, connect with a lending specialist at New Bridge Merchant Capital online today or call our dedicated customer line now at 844-228-0593.

Any small business with aspirations to scale and expand its existing footprint relies on a healthy influx of capital. Most companies today need to borrow to achieve these ends and cover unexpected shortfalls. In such a case, one in which actual revenue earnings are considerably less than projected, quick access to short-term financing is crucial.

Short-term business loans help companies deal with a sharp economic downturn and unforeseen geopolitical events. These fast and convenient lending options let businesses continue making payroll and driving their strategic growth initiatives to ensure long-term stability.

As you start searching for short-term business financing, you’ll encounter two main loan products to address your fundamental needs. The first product is called an asset-based loan, and the second borrowing option is known as cash-flow lending. The primary difference between these two loan products is the path to approval or the qualification process.

Before deciding which loan is right for you and your current credit situation, understanding the difference between asset-based lending vs cash flow lending is vital. This article outlines these specific details on your behalf to help you make an educated decision about which loan is right for your business.

Asset and cash flow based lending: how do they differ?

You’ll need a solid working definition of each loan type described above before you can fully grasp their fundamental differences. Let’s start by exploring what each loan type entails and which core elements define these lending instruments.

What are cash flow loans?

Cash flow-based lending is an unsecured loan many small businesses use to cover their day-to-day operational expenses. Under most circumstances, cash-flow loans are used principally to finance working capital that covers your operating necessities. These could be items such as:

• Payroll
• Inventory
• Lease payments
• And more…

Once your business receives the incoming cash flow, the loan is then repaid, and this process repeats itself as required. Essentially, whenever you take out a cash flow loan, you’re borrowing against demonstrable future cash flows.

In other words, a representative at your preferred bank has analyzed your forecasted revenues and deemed them reliable enough to provide short-term financing on the basis of these figures. Even though the loan itself is formally unsecured, you’re still, in a sense, borrowing against future revenues. At the same time, these funds represent your ability to repay the loan.

As you conduct your search for short-term working capital loans, it’s worth pointing out that these lending instruments are drastically different than the loans you’ll encounter at a conventional retail bank.

The traditional loan types provided by the major financial institutions dealing in personal banking necessitate a fairly stringent analysis that looks for more than just a healthy stream of incoming cash flow. At traditional banks, loan officers and underwriters will conduct a more thorough analysis of your business’s finances in addition to reviewing your personal credit and payment history.

On the other hand, while alternative banks may want to examine your credit history, particularly your business credit history, before issuing a cash flow loan, your eligibility for these products is almost exclusively tied to your business’s ability to generate a reasonably predictable stream of future revenue.

What are asset-based loans?

Unlike cash flow loans, your eligibility and approval for an asset-based loan depend on the liquidation value of your company assets. This information is displayed on your balance sheets, and the banks write their loan products based on the estimated appraised value of your existing assets.

The most common examples of assets used as collateral in an asset-based loan are:

• Real estate
• Personal property
• Equipment and machinery
• Inventory
• Accounts receivable
• And other business assets

Asset-based loan products cater to companies that demonstrate a healthy balance sheet but either cannot or do not wish to borrow against future profits. Some larger enterprises occasionally leverage asset-based financing to meet short-term working capital needs, but this isn’t typical.

However, for the most part, this product is more common among small businesses that aim to grow, but their historic and forecasted revenues aren’t sufficient enough to warrant a cash flow-based loan product at the time of application.

Both loan products have their pros and cons. Before you agree to either one, conducting a careful analysis to determine which option between the two is more profitable is crucial.

Now, in the sections below, let’s take a more detailed look at the distinctions between asset-based lending and cash flow lending and explore which option might be better suited for meeting your business needs.

Collateral requirements

The upside to cash flow loans is that you don’t need to stake any of your hard assets as collateral. As mentioned, cash flow loans depend almost explicitly on your historically proven ability to drive future income.

While your forecasted revenue is important, most alternative lending institutions will likely want to see that you’ve maintained a positive credit rating -from both a business and personal perspective.

If your credit score is sub-par, this could be a determining factor that removes you from eligibility for a cash flow-based loan, even if you have the historical data to warrant an approval. In this case, business owners who need access to short-term financing will start exploring their options for an asset-based loan.

Since asset-based loans take into account the assets on your balance sheet and use them as collateral, this improves the prospects of a bank approval. Should you fail to pay the loan back, the loan is secured. The lender has the option of placing a lien on your assets, giving the bank a chance to resell your assets and recover the funds in the unlikely event that your business fails.

Loan compatibility

You may find yourself in a scenario demonstrating that you are well qualified for either an asset-based loan or a cash flow loan. In this situation, it’s really a matter of determining which loan product is right for your specific application.

Under most circumstances, your credit rating is a significant factor in determining how much money you can borrow at the outset. Cash flows are typically reserved for business owners with prime credit ratings, but surely not always. Business loan approvals, unlike retail lending products, are almost always case-by-case.

If, for some reason, you don’t qualify for an unsecured cash flow loan, the lender will look at your eligibility for an asset-based loan and establish whether or not it can serve your business profitably.

The key to obtaining an asset-based loan is that the value of your assets must be high enough for the lending institution to offset its own risk.

Lending Criteria

The business loan approval process varies from bank to bank, but in virtually every case, your eligibility is determined by the objective of your loan. The criterion used for qualifying you as a borrower is, therefore, distinct, and largely established by your earnings before interest, taxes, depreciation, and amortization or EBITDA.

EBITDA is the most common metric for analyzing creditworthiness on cash flow-based finance applications. Lenders will examine your earnings through this EBITDA in conjunction with a credit multiplier formula that evaluates changes in commercial banking deposits divided by changes in their reserves. The latter tool is used as an indicator of any potential risks that could arise during an economic downturn.

In short, if you have A-rated personal and business credit and well-documented historical revenue to support the proposed financing, a cash flow loan should be relatively simple to obtain. They won’t require you to put up collateral and largely staked in your personal track record as a borrower and business owner.

Small to medium-sized businesses will typically see out a cash flow loan after a significant shortfall. Events like these are most often attributable to unforeseen economic and geopolitical events, both of which have become more ostensibly frequent with time. If you don’t meet the qualifying criterion for cash flow-based financing, in that case, you would then start exploring your options for an asset-based loan.

Need help determining which loan product is right for your business?

If you believe you are qualified for either a cash flow- or asset-based loan, you’ll likely need to confer financial an experienced finance professional to determine which short-term lending option is best suited to meet your business needs.

While the objectives are usually the same, the focus and criteria for qualifying the two loans are substantially different. Moreover, the loan you select should be compatible with your current business applications and help your organization boost its revenue earnings.

New Merchant Capital caters to modern small businesses like yours that need quick funding to drive growth and bridge unexpected cash flow gaps. We offer various working capital solutions, including cash flow and asset-based financing to companies in various sectors, including the manufacturing, freight, restaurant, gas station, and staffing industries.

This list of businesses we serve, of course, is by no means exhaustive. No matter what industry you’re operating in, our experienced business lending professionals can help you continue driving growth and meeting your long-term objectives, even in the face of an unexpected shortfall.

Start exploring your short-term working capital finance options now by getting started online, or contact us by phone now at 844-228-0593.

Cash flow is one of the most critical factors lenders evaluate when reviewing a small business loan application. According to a Federal Reserve survey, over 50% of small business loan denials can be attributed to inadequate cash flow. Understanding your cash flow metrics and taking steps to optimize cash flow is key to securing financing.

In a competitive business landscape, small business owners often need financing to expand operations, purchase inventory, or hire additional employees. However, obtaining funding can be a challenging process. All lenders will carefully evaluate a range of factors before making a decision. While credit score, revenue, and time in business are well-known considerations, many small business owners overlook the significance of cash flow. Find out how cash flow can affect your New Jersey small business loan application.

How Does Cash Flow Affect a Small Business?

Cash flow is a crucial aspect of any business’s financial health, representing the net movement of funds in and out of the company. It tracks the inflows and outflows of cash during a specific period, providing a clear picture of how much money is available to meet business obligations. A positive cash flow indicates that a company generates more cash than it is spending, while a negative cash flow signals that the business is spending more than it earns.

Understanding cash flow is critical for small business owners since it can impact everything from daily operations to long-term growth strategies. By calculating your company’s cash flow, you can identify potential cash shortages, anticipate upcoming expenses, and plan for future investments.

Why is Cashflow Important for a Loan?

When seeking funding for your small business, there are several factors that lenders take into account before deciding whether to approve or deny your loan application. In addition to your credit score, time in business, and revenue, lenders assess your business’s cash flow, which can significantly impact their decision-making process.

Cash flow is the movement of money into and out of your business. It represents the cash available to pay your bills, employees, and other expenses. Cash flow will also show you have funds from sales and other sources. Positive cash flow is essential for the smooth operation of your business, while negative cash flow can indicate financial instability and make lenders hesitant to approve your loan application.

When considering a small business loan application, lenders analyze your cash flow statements to assess your ability to repay the loan on time. They want to see that you have enough cash coming in to cover your expenses, including the loan payments. Along with that, they want to ensure you have a solid plan for managing your cash flow in the future.

Yes, cash flow impacts your small business loan application. When you thoroughly understand your business’s cash flow, you can demonstrate your financial stability to lenders and increase your chances of securing the financing you need to grow and succeed.

When you apply for a small business cash flow loans, lenders will carefully examine your cash flow to determine:

• Existing cash flow – Is your current cash flow adequate to service additional debt?
• Future cash flow – Are your cash flow projections realistic and sufficient?
• Cash flow volatility – Do you have steady cash flow or major fluctuations?

Is It Possible to Improve Your Cash Flow?

Managing your business’s cash flow is essential for its financial stability and long-term success. Cash flow issues can arise from various factors, such as unpaid invoices, unexpected expenses, low revenue, and excessive spending habits. Addressing these issues requires a proactive approach. By conducting regular financial reviews, you can help identify the root cause of your business’s cash flow problems.

In addition to periodic financial reviews, there are specific strategies you can implement to improve your business’s cash flow. One approach is to trim your expenses, especially during a slow season. You should consider reducing non-essential costs, renegotiating supplier contracts, or finding other cost-effective solutions.

By implementing these strategies, you can improve your business’s financial health. With a focus on effective cash flow management, you can position your business for long-term success and growth. When you need additional funding for your business, think about a cash flow loan.

What Are the Pros and Cons of a Cash Flow Loan?

A cash flow loan helps small businesses address short-term cash flow challenges. These loans fund everyday operating expenses, such as payroll, rent, inventory, and other operational costs. Cash flow loans can come in various forms, but they are typically unsecured loans based on your business’s projected revenue. Lenders evaluate your business’s cash flow history, financial statements, and projected income to determine your eligibility and loan amount. Compared to traditional loans, cash flow loans may not require collateral or long credit history, making them a viable option for businesses with limited assets or poor credit scores.

One of the primary benefits of cash flow loans is their speed and convenience. Unlike traditional business loans, which may take weeks or months to process, cash flow loans can be approved and funded in as little as 24 hours. This can be a lifesaver for businesses facing urgent financial needs. In addition to quick turnaround times, cash flow loans often feature streamlined applications requiring minimal documentation. Many lenders rely on modern technology to underwrite loan applications, which can make the process even faster and more efficient.

Another advantage of cash flow loans is their flexible requirements. Unlike traditional lenders, who may require extensive documentation and collateral to secure a loan, these lenders prioritize a business’s cash flow history and projected revenue. This means that companies with poor credit or no collateral may still be able to qualify for funding.

However, there are also some drawbacks to consider. One potential downside of cash flow loans is that they can be more expensive than traditional business loans. Since they are considered riskier than other types of financing, cash flow lenders may charge higher interest rates and fees. Another potential disadvantage of cash flow loans is their repayment structure. These loans typically have shorter terms and more frequent repayment schedules than traditional loans.

When considering a cash flow loan, you must carefully weigh the benefits and risks. Assessing your business’s ability to repay the loan is important. You also want to determine whether the potential benefits justify the borrowing costs.

5 Ways to Improve Cash Flow for Financing

1. Accelerate invoice collections and keep receivables current
2. Renegotiate payment terms with suppliers to extend accounts payable
3. Reduce unnecessary expenses and overhead costs
4. Offer discounts to customers who pay invoices early
5. Lease equipment instead of purchasing to conserve working capital

Find the Right Loan for Your Small Business

Cash flow loans can be a helpful tool for businesses that need quick funding. However, you need a strong cash flow to apply for these types of loans.

At New Bridge Merchant Capital, we are committed to helping businesses secure suitable funding options to meet their unique needs. Whether you’re looking for a cash flow loan, a traditional loan, or a business line of credit in NJ, our team can assist you in selecting the right option for your business. Reach out to us to explore the financing options available to you.

The first broad-based credit scoring system, known as the FICO score, was introduced in 1989, over 30 years ago. This rating system has since played a significant role in evaluating borrower risk. However, as economic conditions tighten and downturns have become more frequent, the scrutiny on personal credit scores for business lending purposes is higher than ever.

Credit scores are integral for evaluating a borrower’s ability to repay. As a small business owner, acquiring financing for your business comes with its own unique challenges. Your personal and business credit profiles will each play a role in establishing your loan’s terms and how much you can borrow.

Applying for any loan with a poor credit score makes the loan application process even more of a challenge while borrowing costs are typically high. If you have weak credit, it’s important to conduct a self-assessment to determine how you got there.

Understanding why you have a low FICO score in the first place provides a reliable starting point for improving it. This article covers the basics of small business financing for bad credit before touching on a few reliable strategies that will help turn a weak business credit profile around. Following these simple tips will ensure you can attain more favorable loan terms in the future.

Your personal FICO score and small business financing for bad credit

How do FICO scores work, and what role do the reporting agencies play in your ability to acquire business financing? The three major credit reporting agencies, Experian, Equifax, and Transunion, all use the standardized FICO score to provide a framework and reference point for your personal creditworthiness.

Each bureau has a slightly different approach for calculating your credit score, and it’s not uncommon to see all three display different results. It’s up to the individual lender concerning which reporting agencies they prefer to emphasize for the loan approval process. Most often, potential creditors will use the middle score of the three -but not always.

How do I know if my credit is bad?

The first step to understanding where you’re at with your credit is to request a free copy of your credit report from all three bureaus. In response to online businesses charging egregious fees for credit reports in the early 2000s, a federal law enacted in 2003 granted consumers the right to a free annual credit report from all three reporting agencies.

Before visiting with any creditor to discuss additional funding for your business, request a free copy of your credit report from all three bureaus. FICO scores can range anywhere from 300 to 850, although it’s rare to find scores at the extreme ends of this spectrum.

From a risk perspective, scores below 500 are considered bad credit. However, most banks regard scores below 680 as poor, while some may even shy away from FICO scores below 720 and consider borrowers in this range as “subprime.”

Your payment history accounts for 35 percent of your credit score calculation. The bureaus also look at other factors, like the age of your open trade lines and the balances you keep on them. There’s even some speculation about whether changing addresses and jobs frequently could indirectly influence credit scores downward.

One late payment can decrease all three credit scores substantially. Expect slow-pays over 90 days, rolling lates, or accounts sent to collections to drop your rating by 100 points or more. Of course, the best way to maintain a stellar credit profile is to always pay your bills on time.

However, the reporting agencies like to see that you’re actively using credit responsibly. In other words, having no credit or maintaining open trade lines while not using them could hamper your ability to attain favorable borrowing terms.

As a rule of thumb, you should never exceed 25 percent of any revolving trade’s maximum limit. Paying those balances down in full before the due date every month is equally crucial.

If you need to boost your credit, it is advisable to use an unsecured credit card instead of a debit card to purchase some of your basic necessities. As long as you pay this balance in full every month before the due date and never exceed 25 percent of the card’s maximum limit, this strategy should stimulate your score in a positive direction rather quickly.

Applying for small business loans with poor credit

While reestablishing a positive credit rating might take some time, lenders understand that unexpected shortfalls can happen. If you don’t have A credit, don’t exclude the possibility that you might still find yourself approved for small business financing.

While your personal credit profile will likely play a role in small business financing for bad credit, there exists a parallel system of business credit ratings. Lenders must also take this score into account upon evaluating your profile. Nearly half of all small business owners don’t know they have a business credit score, and an even greater percentage don’t understand how to interpret it.

The most frequently used business credit ratings come from Equifax, Experian, and a company that deals exclusively in business credit reporting called Dun & Bradstreet. This credit ratings system doesn’t rely on standardized FICO scores. Each bureau has its own proprietary scoring engine, and you’ll need to pay to gain access to these reports.

Contesting inaccurate information on both your consumer and business credit reports is possible. Removing errantly reported trade lines and collections accounts can raise your scores substantially. Making timely payments to your suppliers, opening a business bank account, and establishing a business line of credit can all boost your business credit score.

The outlook for business loans and bad credit

There is plenty of opportunity for bad credit business loans, especially in the government and alternative lending spaces. If your credit scores are low, however, you can expect higher borrowing costs and insurance premiums.

It’s important to remember that a poor credit profile won’t automatically disqualify you from attaining the financing you need to provide additional support for your business. Moreover, remaining active within the lending system is the only way to get your credit back on track.

You’ll need access to working capital to grow your business and increase profits. The small business financing specialists at New Bridge Merchant Capital can help.

Reach out to the team of business financing specialists a New Bridge Merchant Capital now, and consider partnering with us over the long term. We can help improve your business credit rating immediately. We’ll put you on track to start enjoying the benefits of a strong credit profile in no time.

Nearly every small business will need borrower additional capital at some stage in its development. Even the most profitable companies eventually require access to external financing to gain the additional liquidity they need to expand business print and grow their operations.

The modern-day business climate is unpredictable, making demand forecasting and expense shortfall predictions more of a challenge than ever. That’s why most smaller companies demand fast access to capital that lets them cover their bills, acquire new suppliers, upgrade their equipment, and introduce new goods and services.

When businesses start searching for external financing options, whether from a bank or non-bank financial institution (NBFI), they invariably encounter two categories of financial instruments. The first type of product is described as an asset-based loan, while the second option is called a cash-flow loan. In the sections below, we’ll outline some key differences between the two loan types before weighing their pros and cons.

What are asset-based loans?

As implied in their name, asset-based loans are qualified and determined by the asset levels displayed on your current balance sheet. When small business owners opt for asset business loans to fill expense shortfalls, they can put up various company assets as collateral. A few common asset types include:

• Accounts receivable
• Equipment and machinery
• Business inventory
• Real property

Asset-based loans cater to small to medium-sized businesses that need fast access to short-term working capital. Larger, enterprise-level organizations use asset-based loans from time to time, but this is considerably less frequent.

What are cash flow loans?

Cash flow loans are established based on a business’s historical profits and forecasted sales revenue. Unlike asset-based loans, cash-flow loans don’t require assets as collateral for loans, and lenders qualify the loans based on a business’s documented cash flow data.

The cash flow loan types are the preferred (and usually the only) option for small businesses that generate predictable profits but lack the assets required to secure asset-based loans.

How do cash flow and asset-based loans differ?

Each loan type has its advantages and disadvantages. A company can benefit from one more than the other, depending on its circumstances. In some cases, companies can gain from leveraging some combination of the two types of financing.

Now, let’s explore a few key factors that can help businesses determine which financing option is the best solution for their organization.

Your collateral circumstances

As we briefly touched on above, if you have no collateral your company’s value is tied directly to its ability to produce future revenue. In this case, you’ll need to opt for a cash flow loan to cover a financial shortfall. Since nothing secures the loan, the borrower’s ability to repay must be evidenced by a personal credit rating.

Businesses that hold assets, on the other hand, could be in a better position to secure short-term financing because they can use those assets as collateral. Lenders tend to feel more confident writing secured loans because the lender can use the assets to recover losses should the borrower default.

Your eligibility and credit profile

We’ve discussed some of the pros and cons of each loan, but you’ll still need a positive personal and business credit rating to qualify for either type of financing. Your company’s credit rating is crucial to how much your business can borrow and whether or not it qualifies at all.

Cash flow loans are usually reserved for companies and business owners with superior credit ratings and a documented positive cash flow. Borrowers who evidence irregular or limited cash flow and have less-than-perfect credit ratings will find themselves better suited to an asset-based loan if they possess assets. Keep in mind that the value of your assets must be adequate enough to cover the bank’s or investor’s interest in creating the loan.

The purpose of the loan

Unlike other consumer loan types, the purpose and objectives of a cash flow or asset-based loan can vary significantly. Lenders will often use specific criteria to establish creditworthiness for cash flow-based financing called EBITDA, or earnings before interest, taxes, depreciation, and amortization. This metric helps assess risks that could emerge during an economic downturn or other complications, such as industry-specific shortages.

Wondering which loan is right for your business?

Now that we’ve covered a few pros and cons of asset-based lending vs cash flow lending, you might still have some lingering questions concerning which product is right for your company. Ultimately, it comes down to your credit rating, the assets you hold, and the needs and characteristics of your particular business.

New Bridge Merchant Capital provides working capital solutions to businesses of all types with a range of credit profiles, from good to poor. To learn more about your asset-based and cash flow lending options, connect with one of our senior working capital finance specialists now.

At some point, every small business will need to access credit if they have any reasonable expectation of completing their strategic growth initiatives. Like home mortgages, equity lines, and other personal loans refinancing your business loans can be a good strategy for lowering your monthly costs and saving on interest.

Your existing loans are refinancable, and when you apply the new terms, the process is not unlike applying for a new small business loan. The purpose of the refinance loan is to pay off your existing debt. Under ideal circumstances, you’ll gain a more favorable rate and term. Aside from lowering your costs, refinancing comes with several more benefits.

Refinancing may present an opportunity to enhance your company’s existing debt portfolio in a way that allows you to streamline accounting, access more credit, and increase your monthly cash flow. Should the opportunity to refinance present itself, and it is clear that you can save on borrowing costs, it’s always wise to take advantage of it.

However, under some circumstances, refinancing may not be the best option for your business, and it’s certainly not the smartest choice in every situation. Whenever you refinance, having a productive goal in mind is essential. While there are dozens of good reasons to refinance a business loan, you always want to avoid creating a negative debt cycle, especially if you’re struggling to make payments on your existing obligations.

In this comprehensive guide, we’ll explore the best strategy for refinancing your current business loans. We’ll also discuss how your should approach the refinance process in a way that ensures that you optimize savings and improve your monthly cash flow.

Why should you consider refinancing business debt?

When you refinance, it’s important to remember that you’re not modifying an existing loan. Instead, you’re applying for a new loan with new terms to pay off your existing debt. You may have several options for refinancing which could involve your current lender or an entirely new small business creditor.

Generally speaking, when business owners refinance their current debt, the ultimate goal is to reduce interest, lower payments, and boost their average monthly cash flow. So, how can business debt refinancing help you achieve this? For a refinancing proposal to make sense, it has to present more desirable terms than the loan you’re obligated toward now. Some common advantages of refinancing your existing debts include:

• Lower interest rates
• Smaller monthly payments
• A longer repayment period
• A shorter repayment period (with a lower rate)
• Fewer payment intervals

If you’re considering business loan refinancing, keep in mind that you’ll have more than option to explore. For instance, you can pursue a traditional bank loan through various commercial funding options, apply for financing online, or seek refinancing credit from the Small Business Association (SBA).

While there are several paths you can follow for refinancing business debt, whether or not you qualify depends on your credit circumstances and if they fall within the lender’s specified underwriting guidelines. Conditions for establishing creditworthiness vary from lender to lender, especially in the world of commercial financing. Moreover, determining whether you qualify depends on the standing of your current loan and your business details.

While, for instance, the SBA does allow you to refinance existing debt into its program, your business still needs to fulfill a specific set of criteria that outlines the use of the loan proceeds, your available collateral, and current business loan rates. If you currently have an SBA, it’s possible to refinance it through the SBA, but rarely does this happen.

Borrowers who want to remain in their SBA loan will typically pursue a loan modification option if they want access to additional capital or a lower interest rate. If, for some reason, a modification isn’t possible, and better SBA loan terms exist, then, theoretically, you might be able to pay off your existing SBA loan and refinance it into a new one.

What’s the difference between business loan refinancing and loan consolidation?

Even though consolidation is technically a refinance process, it’s not the same as refinancing a business term loan or line of credit. When consolidating your business loans, you’re combing multiple debt obligations into a single loan used to pay off those debts.

There are several advantages to consolidation over paying several loans separately. For one, you simplify debt management by pulling all your current obligations into one loan. Secondly, if you’re carrying high-interest lines of credit, for example, you may save on interest by paying them off with a new low-interest term loan. Depending on your circumstances, consolidating could free up the credit lines and gives access to more revolving business credit.

However, debt consolidating doesn’t always present a savings opportunity. Some businesses pursue these consolidation options on the mere basis that they allow them to gather all their debts under one payment to simplify debt management and make their credit obligations more manageable.

How to refinance business debt

There are several ways to go about refinancing your business loans, and it’s ultimately up to you to determine the best approach to lowering your monthly expenses and increasing cash flow. Nevertheless, there are a few strategies for getting started.

Before you can even begin exploring loan pricing and lender options, you should first establish why you need to refinance and what you aim to achieve by so doing. Are looking for a better interest rate and lower monthly payments. Or are you looking for a loan program that allows you to make payments less frequently than your current loan? If you do refinance, will current lending conditions allow you to reduce the cost of your debt?

If you can reliably answer the series of questions listed above, then you should arrive at a reasonably sound conclusion about whether or not it makes sense to refinance. At this point, you can move and start diving into the specifics regarding current interest rates and the most favorable loan terms.

As you start shopping for your best business debt refinancing options, remember to take stock of how much you currently owe on the loan you’re refinancing. You should also pay attention to the remaining time left on the loan term, your interest rate, and amortization schedule.

Some creditors impose refinance penalties. If you’re subject to one, you should factor this into the cost of refinancing your business loan to ensure there’s still a benefit to taking out the new loan. Before you get too far along with researching prospective lenders, you should conduct an independent evaluation of our current loan and your business’s eligibility for the loan types you are interested in to avoid getting too far ahead of yourself. If you follow this approach, you won’t find yourself wasting valuable time that’s better invested elsewhere.

A vast majority of small business creditors will want to look at your personal credit score in addition to the length of time you’ve been operating and how much revenue your company generates annually. Loan underwriters will also examine any available assets you hold, such as your office building if you own it, average cash flow, and the amount of capital you’re holding in financial accounts.

To determine if there’s a benefit to offering you a refinance loan and evaluate risk, creditors typically want to see that you’ve improved your financial situation and credit profile since you first originated your current loan.

Ready to start refinancing your business loan?

Once you’ve followed the steps above, and you feel confident that refinancing benefits you, getting started with the business refi process is reasonably straightforward. All you need to do is gather your documents and submit a new application.

To find out more about current interest rates and whether or not refinancing your existing business loan now benefits you, contact New Bridge Merchant Capital today for a more in-depth analysis of your business credit profile.

Developing a healthy business credit profile is essential for any new smaller company with sights on long-term growth. Even if you’re not currently looking to expand your small business operations and add more employees, there will come a critical tipping point at which you’ll need to expand your product and service offerings to keep your revenue objectives on track.

Whenever you build some aspect of your business that presumably leads to improved cash flow, you should expect significant expenses that, more often than not, require a weighty investment of upfront capital. It’s at this stage, where small business owners begin strategizing their next steps, that they start exploring the advantages of commercial financing to support this new phase of growth.

However, before accessing any new credit for small business you’ll need to set aside some time to develop a strategy for building a positive credit profile. So, how do you established business credit when you don’t have it in the first place? It’s a fair question, especially if this is your first time applying for commercially orientated financing.

So, how is business credit established? Just like in the consumer lending world, business creditors want to see that you’ve taken small steps to build a trustworthy credit profile. There are several lending and commercial banking options, which we’ll discuss in further detail below, that can help you achieve this. If you follow these steps, you’ll begin developing a positive business credit profile in no time. These tips will place you on a path that tells business creditors you’re unlikely to default on your obligations anytime soon.

Even if you have already established some business credit, continue reading. The following tips can help raise your score even higher while positioning you well for receiving the most favorable lending offers. A positive business credit history is vital to the growth and health of your company. After putting these few simple pointers into action, you’ll be well on your way to a stellar business credit rating.

1. Incorporate your small business

Before you access business credit, ensure that you identify as a business first. Legally incorporating establishes your company as a legal business entity. The primary advantage of incorporating is that it offers means of lawfully separating yourself from your business assets. The three main types of business corporation are as follows:

• C-corps
• S-corps
• Limited Liability Corporations (LLC)

2. Establish a business bank account

Lenders like to see that your business assets have been legally detached and separated from your personal assets. This includes your personal finances. For a number of reasons, if you aim to establish a positive credit rating, using a consumer bank account to manage your business funds is always ill-advised.

For starters, opening a separate business banking account to exclusively manage your business capital comes with several accounting and financial tracking benefits. Business lenders like to see that you’ve taken the steps to open a business banking account. At the same time, it shows that you’re serious about managing your finances.

In addition, when you prove to potential creditors that you’ve opened a business banking account, you are also telling them that you’re sufficiently incorporated and have been working on your business credit profile. Likewise, you’re establishing a clear paper trail for your business payment history. This always comes in handy when applying for a business loan.

3. Always make timely payments

If your business is still in the early stages of development and you haven’t opened a commercial line of credit yet, be sure to pay all your bills on time. This action plan must include business utility bills, commercial rents, payments to vendor accounts, and especially any unsecured credit cards used for either personal or business purposes.

Small business owners are busy people. It’s easy to errantly miss a payment or overlook a bill. To ensure that your bills never lapse due to an oversight, set up automatic bill-pay for each account that offers the service.

Lenders often ask for non-conventional payment histories from utility companies and suppliers. It’s, therefore, wise to never fall behind on any bills you have from third parties. Remember that any delinquencies that end up in collections will show up on a credit report. Always stay on top of every bill, including all personal obligations outside the business.

4. Open a business line of credit

As the age-old adage goes, you’ll need credit to establish credit. Once you have your personal finances separated from your business finances, and presuming you’ve been staying current with all your existing financial obligations, you should apply for a business line of credit.

A great place to start is with a business financing lender like New Bridge Merchant Capital. We make applying for small business lines of credit fast and simple. Our lines of credit help business owners like yours leverage a revolving account of up to $150,000 so they can add new products and services while expanding their business footprints.

Not unlike consumer trade lines, a revolving business line of credit from New Bridge Merchant Capital lets you continue borrowing money until the account reaches its credit limit. Whenever you use the line to make purchases or access funds, this sum is subtracted from the maximum limit. As you make payments and pay the balance down, you always can access more credit after paying the additional interest, if any.

For more on our business loans and line of credit services, contact us now to discuss how we can help put your small business on the fast track to profitable long-term growth.

Working capital is a type of short-term financing that small to medium-sized business leverage to manage their cash flow and ensure they don’t encounter expense shortfalls that could disrupt their normally functioning operations. Working capital loans are typically smaller in size when compared with other business financing types. At the same time, they have shorter repayment periods that rarely exceed 12 months.

Businesses may use working capital to cover daily operational costs like payroll, utilities, supplies, and commercial lease payments. Working capital loans provide small businesses with an extra layer of security that allows them to temporarily cover operating expenses when they’re unable to make these payments with their cash on hand.

Does my business qualify for a working capital loan?

Upon first analysis, being unable to cover operating expenses would seemingly point to an unhealthy operation or a business owner that’s failing to adequately manage company finances. However, this isn’t necessarily true. Just because you’re experiencing an expense shortfall doesn’t mean you’re business isn’t profitable or that you won’t qualify for a working capital loan.

Many enterprises depend on seasonal sales cycles for profits, while others are subject to slow-paying receivables over which they have little control. The point being, there are often times when times a thriving business may not have enough working capital on hand to cover all its expenses. Without access to working capital loans, organizations that fall into the above category risk shuttering permanently if they can’t make payroll.

With that in mind, let’s take a closer look at why business owners should be aware of their options for working capital loans to bridge cash flow gaps, upgrade to new equipment, and meet other unexpected challenges that go along with operating an expanding small enterprise.

What are the different types of working capital loans?

When lenders refer to “working capital financing,” this is actually a generic term that refers to a range of financing options that are used by businesses that need access to smaller amounts of capital to cover temporary disruptions to their normal cash flow. While it’s always a good idea to conserve excess capital, it is possible to accumulate excess savings to an extent where businesses miss out on key growth opportunities because they’re not reinvesting profits.

For instance, in the manufacturing sector, companies could face grave long-term consequences if they don’t upgrade to the latest automated machinery and execution software to keep pace with their closes competitors. If businesses like these don’t immediately change, they risk falling behind their industry counterparts indefinitely, and they may never recover the lost ground.

This is where working capital loans come into play. It allows businesses to make timely upgrades to their operations, acquire new real estate, and keep themselves afloat during off-season months when demand is low. Likewise, one-off geopolitical and weather events could disrupt a business point where it needs swift access to additional working capital to get its cashflows back on track.

Here are a few of the most common working capital loan types that creditors provide to small businesses:

Short-term working capital loans

Small business owners typically apply for short-term working capital loans from banks and credit unions. They differ from lines of credit in that they’re fixed-rate term loans and the total sum of which is dispersed all at once. The repayment period on short-term working capital loans usually doesn’t exceed 12 months.

Short-term working capital loans are rarely unsecured, meaning they require attached collateral before they’re approved. In some cases, if the business has maintained a positive relationship with its preferred lender over the course of years and has established a strong business credit profile, some banks and credit unions may waive collateral requirements.

Unlike your typical home loan, business credit is usually negotiable. Final loan approvals are almost always case by case, with businesses with positive established credit history gaining the most favor.

Small Business Administration (SBA) Loans

Many businesses turn to the US Small Business Administration when they need access to short-term working capital. The SBA guarantees its SBA7(a) to small businesses in need of low-balance working capital loans to bridge unexpected financial gaps. Dispersed balances on these loans can range anywhere from $5,000 to $5 million.

You’ll still need to access SBA working capital loans through one of their approved lenders since the government agency does not make loans directly. SBA loans are among the most desirable because of their low-interest rates and favorable repayment terms.

Bank overdraft protection

Sometimes called a bank overdraft facility, this is a prearrangement for working capital that allows companies to draw against their business bank account when they encounter expense shortfalls. Dissimilar to some consumer checking accounts, businesses are not penalized with overdraft fees. However, they are subject to paying interest.

This type of working capital funding is beneficial to companies with slower accounts receivables because it ensures they make payroll and cover their bills until they’re in receipt of the funds they’re owed.

Merchant cash advances

Businesses that accept credit card payments for goods and services can leverage the merchant cash option for working capital. In this case, credit card processors or their associated financing companies advanced working capital based on the merchant’s historical sales figures.

The credit card process access this data from the transactions documented at the point of sale. The advance is based on sales volume, and any additional formulas the credit card processors might use to determine which working capital amount to disperse.

Invoice Factoring

Working capital loans under the invoice factor model entail selling a portion or all unpaid invoices to a third party at a discount in exchange for the funds. This provides the businesses with an immediate cash injection in exchange for the outstanding unpaid invoices.

Invoice Factoring is decidedly one of the least favored ways to access working capital because the company must commit to giving a portion of its earned revenue in exchange for the additional support. It’s among the most expensive options, and rates can vary significantly from lender to lender.

Need working capital?

For more on working capital and it is a smart option for your business, connect with New Bridge Merchant Capital now for a free consultation.