Insights, Ideas, Results
Anyone who offers credit to small companies faces a standard business decision of adding new revenue with taking a risk for default and debt collection. If credit terms are set too tight to minimize risk, profitable revenue can be lost. On the flip side, offering terms that are too generous can increase the default rate and hurt profitability.
Here is the dilemma. You have this great business idea that you feel strongly that it will succeed. However, you have no credit and no collateral. What do you do? How can you get much-needed loan so that you can jump start the business? Well, here is some good news. While many lenders may not feel comfortable with giving you money solely on the idea there are some lenders and investors who will base their decision to lend you money largely on the strength of your business idea. If you have cash flow, a great idea, and can prove your concept, you may be able to get the money you need. How? Read on to find out.
According to economic pundits, the primary reason for the Great Recession of 2008-09 was the climate of easy credit and greed. There was an assumption that property prices would continue to rise so that loans against real estate was a certain winner. It proved to be gross miscalculation, and as the recession kicked in an increasing number of households and businesses suddenly found that they were not in a position to meet their financial commitments. The result was repossessions on a huge scale and many business failures. Fortunately, economic recovery has set in during the last 4-5 years and the questions in need of addressing revolve around whether business should be able to borrow in order to develop and what price should it be paying?
The recession affected those living in the United States in number of different ways. Some people lost hours at work, which made caring for their families difficult, and others found themselves drawing unemployment and scrambling to find a new job. The recession also did lot of damage to the housing market. More homes went on the market than there were buyers, which led to homes selling for well below market value. As many found themselves trying to rebound from the recession, they often looked at equity lines to cover the costs they have.
Probably the definitive manual for any business looking for funding in the UK is a new Business Finance Guide, jointly launched by the Institute of Chartered Accounts in England and Wales (ICAEW) and the British Business Bank, and promoted by the Department of Business, Innovation and Skills and 18 major finance and business organisations.
Economy is headed in the right direction after recovering from the Great Recession. Unemployment is falling slowly, but steadily creating many job opportunities for those who had left work for several years. This has improved consumer confidence, which in turn is helping small businesses who were hit really hard in the recession. Small business owners are feeling quite optimistic about the future of overall economy and hence their own business. They have started to spend money on their service needs and are looking for new financing to grow their business. This virtuous cycle is expected to help US move in the right economic direction for the foreseeable future. Look at the Infographic below to see how this optimism by small businesses is creating growth opportunities for everyone.
Cash flow crisis is the primary reasons most small businesses fail. If you don’t watch cash flow like a hawk your business will end up in trouble sooner rather than later, and in many cases this may prove fatal. Nevertheless, many small businesses will encounter cash crunch at some point in their existence. How you deal with can determine whether your business will be able to survive or meet the graveyard. The immediate action you need to take when facing cash flow challenge is to find found sources that can provide cash on a short-term basis and help you meet your cash obligations to your creditors and employees. Below we describe 7 options you can explore to find cash needed to keep your business going.
For small business owners cash flow is equivalent to a blood flow. If it stops or is even constricted it can wreak havoc on your body and your business. Still the reality is every business runs into cash flow problems once in a while. A large customer delays a payment for few days and you will be scrambling to meet the payroll that is coming up. You may need additional cash flow if you are looking to expand the business with new products or locations. No matter how you come across the need for additional cash you need to have a plan in place to meet emergency cash needs.
If you have not paid much attention to business credit the time to do it is now. For small business owners, business credit is like a lifeline, an insurance against unexpected expenses that might come out of nowhere. Business credit gives you peace of mind with the knowledge that you will not have to scramble to borrow money on a short notice to meet emergency financial obligation.
Look no further than what Ford did before the great recession of 2009 hit the world. Ford had established a huge line of credit by mortgaging pretty much everything they had, including their namesake blue logo! When recession did arise and all the banks shut their doors to business loans Ford could borrow from the line of credit and continue investing for the future. When both, GM and Chrysler, filed for bankruptcy protection, Ford was not only able to avoid it, but position itself to take advantage of upturn.
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We have discussed in the past how challenging the last 2 years have been for small business owners who want to borrow money to start or expand their business. The Great Recession of the century has made banks jittery about taking on risk and lending money to small businesses. We have also mentioned some creative ways you can use to start business with little money.
Recently we came across a new startup that aims to help small business owners find lenders who are willing to give them money. The startup is called Lendio The goal of this web start up is to “help small business owners find right business loans in a matter of minutes.” According to their web site they can do this with a simple 3-step process – 1) Business owners answer simple questions about themselves and their business. 2) Lendio looks for a match between your loan needs and over 3,000 banks and other lenders. 3) Business owners apply to multiple lenders on the web site and get status updates.
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