Dec 10
Even though longer-term business finance techniques might be appropriate for many circumstances, there are some important short-term business loan options that will be less costly in producing improved credit card processing and commercial mortgage results for business owners. Short-term business financing choices can be misunderstood because of a preference by many business owners for long-term commercial real estate loan and commercial loan programs.
Two Important Short-Term Business Finance Options
Two of the most overlooked short-term working capital business loan strategies are short-term commercial mortgage loan programs and business cash advance programs in conjunction with credit card processing. Both of these business finance options are relevant for most business owners but are frequently misunderstood.
Short-term Programs for Commercial Real Estate Investment Financing
A long-term business loan is appropriate for many businesses that own commercial real estate investment property. Business properties should normally be financed with a combination of short-term and long-term business finance funds. When a longer-term commercial mortgage is viable, it is preferable to secure long-term business financing, preferably for 30 years.
However there will be many commercial mortgage loan situations in which longer-term real estate business financing is not appropriate for the business owner. In such circumstances it is important for a business owner to realize that there are viable short-term working capital management options.
When a Short-Term Commercial Mortgage is Appropriate
If a business owner plans to sell or refinance their business within a few years, it is preferable to explore short-term business finance options. The best short-term business loan will have minimal prepayment penalties in comparison to terms commonly included with long-term commercial real estate investment property financing.
The avoidance of business finance prepayment fees and lockout fees fees in some short-term business financing programs is an important benefit of these short-term commercial mortgage approaches. The absence of these potential fees could produce a savings of up to 20% or more if the business property is sold during the period which would have involved lockout fees in a longer-term commercial loan.
Short-Term Commercial Real Estate Investment Property Financing Limitations
There are some trade-offs that need to be understood if a business owner chooses shorter-term business financing even though prepayment fees will usually be avoided with a short-term business loan. When short-term commercial real estate financing is a realistic option, the loan-to-value will usually be no higher than 70%, the commercial mortgage will not be readily available for special purpose business investment properties such as golf courses and the interest rate will frequently be in the range of about 12%.
Best Investing Possibilities for a Short-Term Commercial Mortgage Loan
Warehouse, multi-family, office, mixed-use and retail business properties are the best possibilities for short-term business financing. Business owners should be comfortable with a time period of less than three years for a typical short-term business loan.
Fewer Mortgage Lenders for a Short-Term Commercial Real Estate Loan
There will typically be a very small number of commercial real estate investment property lenders who are effective at implementing the short-term commercial mortgage loan strategy properly. There are also a number of problems to be avoided with a short-term commercial real estate loan, so choosing an appropriate provider is extremely important to any business owner considering a short-term business finance program.
Credit Card Processing and Business Cash Advance Programs
For any business that accepts credit cards as a method of payment, a business cash advance is a critical working capital management tool that is often overlooked. Even thriving businesses frequently need more working capital than they can borrow. One of the least-known business finance strategies for successful businesses is potentially the single best working capital loan strategy for obtaining needed cash for growing their business: the use of a merchant cash advance or business cash advance program.
Primary possibilities to take advantage of this business financing program are service and retail businesses. This credit card processing and credit card financing strategy uses credit card receivables to determine the amount of a merchant cash advance.
Working Capital Management: Credit Card Financing and Credit Card Processing
This business financing technique is called credit card financing or credit card factoring. Some business owners might have used a business finance technique referred to as receivables factoring to sell future receivables at a discount and receive immediate cash.
Many service and retail businesses cannot document business receivables to obtain a business loan. Businesses such as bars and restaurants do not typically have receivables to use for business financing.
What these businesses do have in many cases is documented sales volume and documented credit card sales activity. It is this documented level of sales volume and credit card sales activity that becomes a financial asset to the business and its business finance strategies. Business cash advances from $5,000 to $300,000 can usually be obtained based on a merchant’s sales volume and future credit card sales.
A business financing merchant cash advance must usually be paid back in less than 12 months. For business owners that want to renew the working capital cash advance program, it is typically possible to get more working capital after payback of the initial advance.
Limitations and Problems to Avoid with Credit Card Processing and Merchant Cash Advance Programs
As with any successful business finance strategy, there will typically be only a small number of commercial lenders who are effective at implementing this working capital management strategy properly. There are also a number of problems to be avoided with business cash advance programs, so choosing the appropriate provider of this commercial financing service is extremely important to any business owner considering a credit card financing program.
By: Steve Bush
Tagged with: Advance Programs • Business Cash Advance • Business Properties • Commercial Loan Programs • Commercial Mortgage Loan • Commercial Real Estate Investment • Commercial Real Estate Investment Property • Commercial Real Estate Mortgage • Credit Card Processing • Finance Funds • Finance Options • Finance Techniques • Loan Choices • Loan Situations • Mortgage Loan Programs • Mortgage Results • Real Estate Investment • Real Estate Investment Property • Real Estate Mortgage • Working Capital Management
Dec 06
Many business finance activities will involve the use of credit card processing decisions. These business operations should be analyzed simultaneously with business cash advance programs for several reasons. If done properly, a business should reduce their costs and improve their cash flow.
Credit card financing in conjunction with processing can be one of the most overlooked and problematic business finance issues for a merchant. An effective receivables factoring program can lessen many obstacles by implementing appropriate working capital business loan cost-reduction solutions.
These improvements can achieve dual working capital management benefits by both eliminating credit card financing difficulties and providing improved cash flow by enhanced management of working capital loan and merchant cash advance programs. The total business finance benefits of integrating credit card receivable factoring and processing services can be first-rate and significant for working capital management programs.
Working Capital Business Loan Solutions: Cost Reduction
As I noted in another business finance article, a retail-service business cash advance (obtained through credit card processing and credit card receivables management) is a vital working capital management tool that can be easily overlooked. Even thriving merchants frequently need more financial resources than they can get from a bank business loan. However, what is usually even more overlooked by many businesses is a unique opportunity to decrease their processing and management expenses at the same time that they obtain a working capital cash advance via receivables factoring.
Business Finance and Credit Card Processing Solutions: Avoiding Problems
Credit card receivables financing is an excellent business finance alternative to consider when a merchant is seeking a short-term business loan, an unsecured commercial loan and improved strategies for processing and management. However, there are a number of working capital management difficulties to be avoided. As with most successful working capital loan strategies, there will typically be only a few lenders that are effective at properly executing the combined business financing tasks.
Because of such problems, the choice of a processing provider is extremely important to any business. To demonstrate which providers should be avoided, I have written a business finance article which lists ten critical difficulties to avoid.
Working Capital and Credit Card Factoring Solutions: Best and Lowest-Cost
For businesses either dissatisfied with their current processing services or simply wondering if any cost improvements are possible, a program which eliminates all ten specific working capital business loan obstacles mentioned above should be evaluated. One of the major working capital management reasons for evaluating processing and business cash advance services in this combined fashion is that the low-cost producers of the best merchant cash advance programs are likely to be utilizing the best and lowest-cost processing and management producers.
In most cases, the lowest-cost and best providers of processing and management will not be available to an average business other than in conjunction with a working capital plan that includes both processing and business cash advance programs. But the benefits realized from the integration of these two key working capital management programs should be worth the efforts of combining them.
Working Capital Management and Business Cash Advance Solutions: Cost Reduction and Improved Cash Flow
Businesses should not overlook the substantial business finance benefits which will accrue to their business by effectively coordinating credit card factoring and credit card processing. As noted above, improved cash flow and reduced costs are key results of successful working capital business loan solutions, and appropriate combination of these business financing services is likely to accomplish both of these difficult goals concurrently.
Additional Credit Card Processing and Business Cash Advance Resources
Additional business finance reports include a discussion of more detailed business cash advance and processing factors. Separate report topics include stated income business loans, SBA loan refinancing and buying a business opportunity. Several of these reports are relevant to factors addressed in this article and will serve as effective business financing resources to provide strategies and solutions for other problematic commercial loan scenarios.
By: Steve Bush
Tagged with: Advance Programs • Business Cash Advance • Capital Loan • Credit Card Processing • Credit Card Processing Solutions • Credit Card Receivable • Credit Card Receivables • Enhanced Management • Finance Activities • Finance Issues • Finance Options • Loan Solutions • Management Benefits • Management Expenses • Receivable Factoring • Receivables Factoring Business • Receivables Financing • Receivables Management • Reduction Solutions • Working Capital Management
Nov 09
There are various business finance plans open to a new start-up, but they all fall into 2 major categories, namely, owner financing and borrowed business finance. Each of these 2 major categories has an upside and a downside that every entrepreneur seeking business finance should be aware of. The key to success in business finance would then be finding ways to exploit the advantages of one’s chosen financing option, while also mitigating against its downside.
The first major business finance category is owner financing. Owner financing refers to money that the entrepreneur and other promoters of the business contribute to start it. In most cases, owner financing comes from the entrepreneur’s savings. The main advantage of owner financing as a source of business finance for a new start-up is that it comes at no cost (except possibly its opportunity costs) . As it were, the other major business finance option – credit – can usually only be had at a cost called interest. That is, all money which is borrowed, especially for business purposes, has to be paid with interest.
But it is a common occurrence to find the interest demanded on a loan being equal to all the earnings from the loan (especially in low margin businesses), thus crippling the business. A business built through owner financing does not have to suffer this interest cost. Thus money which could have been spent on paying interest can be ploughed back into the business, further strengthening its capital base. An added advantage with owner financing is that should the business fail -which is a sad but real scenario every serious entrepreneur should think about – the owner would not be left with debts pulling them back. With owner financing also, the entrepreneur doesn’t risk messing his credit history. This could occur in the event that the business picks up but does not perform as well as initially projected, and is thus unable to meet its obligations to lenders on time. The downside to owner financing as a business finance option is that it is usually very limited in scope, and is thus usually not an option for business that require huge capital outlays.
Turning to borrowed business finance, the credit options available to new start-ups include business loans and trade credit lines. The main advantage with credit as a source of business finance option is that it opens a larger pool of capital than is typically available through owner financing. This is significant because many entrepreneurs who attempt to start a business based on its alternative – owner financing – only often find themselves severely constrained financially. This lack of proper financing is in fact one of the leading causes of failure for many new start-ups. The downside with credit as a business finance option is the interest cost it comes at, which can prove to be a major cost for the business, especially during the business’ incubation and initial growth period when the business does not earn much.
Moreover, securing credit for a new start-up can be an uphill task, as most lenders openly prefer to give business loans to established businesses or at the very least businesses that have practically proven their viability rather than to new start-ups. And then of course there is the sad reality that if you start a business with borrowed funds and the business fails for one reason or another, your credit history could be messed forever. You can, however, mitigate this by registering your start-up as a limited liability company. This way, the business stands as a legal person, and you cannot be held responsible for the business loans it takes.
By: Gary Terrazas
Tagged with: Added Advantage • Business Finance • Business Purposes • Credit History • Debts • Downside • Earnings • Entrepreneur • Finance Category • Finance Option • Finance Options • Financing Option • Lenders • Occurrence • Opportunity Costs • Owner Financing • Promoters • Risk • Start Ups • Ups
