As opposed to a typical bank loan, Small business loans in the form of merchant cash advances do not require good credit. In addition payback payments fluctuate directly with your sales volume. This gives you the advantage of remitting less when business is slow and more when business picks up. The remittances stop when the agreed-upon amount has been satisfied. Typical bank loans require an extensive credit check, as well as a long review period prior to providing funding.  A merchant cash advance with us, however, is as easy as filling out a one-page application, and we’ll approve you in 24 and fund you within 48 hours. Funding is available from $3,000 to $2,000,000

 

Businesses access working capital centered on their cash flow and approval is based on purchase of future receivables. In this case, the future deposits of the business. Funding is based on the aggregate cash flow through the business’s operating accounts. Repayment is made by automated electronic debits (ACH) over specified terms. This allows businesses to use future cash flow in the future to obtain the working capital they need to grow now.

What Makes SBA Loans Different From a Traditional Bank Loan

SBA loans come from participating banks, credit unions, and licensed non-bank lenders but they are partially guaranteed by the U.S. Small Business Administration (SBA), a federal agency that promotes small business ownership in a variety of ways.

Small businesses are viewed as higher risk for lenders. The SBA loan guarantee program encourages lenders to work with small businesses. In return the lenders adhere to specific lending terms, interest rate caps, and other criteria set out by the SBA.

The loan guarantee is in effect credit insurance – typically, it means that the SBA will cover a portion of any loan losses incurred by the bank, up to 90%. Note: these programs don’t mean that a business owner who defaults on his loan won’t be expected to eventually pay off his or her balance.

The sharing of risk is what makes SBA loans attractive for banks, who are in turn asked to provide loans to a sector of the economy that is higher risk: small businesses.

SBA loan terms can be more flexible, meaning borrowers can be approved even if they have fewer assets than required by commercial lenders. So if you are just starting out and don’t own a home or other big ticket asset to offer as collateral, you still have a good chance at getting a loan.

Note: SBA guaranteed loans are based on a working arrangement between the SBA and the bank. The SBA doesn’t lend money, and it doesn’t interface with borrowers. Banks and other participating lenders decide whether or not to approve loan applications, and then they apply directly to the SBA for the guarantee. Note: not all banks participate with the SBA.

The (Almost) All Purpose 7(a) Loan

The most popular SBA loan program is the 7(a) loan, designed to provide funds for a broad list of businesses. These loans target “small” companies, defined according to the North American Industrial Classification System (NAICS), which determines whether a company is small by its annual revenues or number of employees.

The maximum loan amount available under the 7(a) program is $5 million.

The 7(a) loan is a general purpose loan, and the funds may be used for almost any business need, including:

  • Starting a new business
  • Funding working capital
  • Buying land and a building
  • Acquiring another company
  • Refinancing existing obligations of your business.

Most 7(a) loans are used to purchase assets, such as real estate and equipment, due to favorable terms that let you repay the loan over the useful life of the asset: up to 25 years for real estate and 10 years for equipment. These longer repayment terms keep payments lower, meaning more capital stays in your business to fund operations and growth.

SBA loans do have some restrictions on how they’re used. Funds guaranteed by the SBA can’t be used to fund an investment, or any passive business activity, like purchasing a building that will be leased to another business. They also can’t be used to reimburse a business owner for money previously invested, or repay any money owed to the government, such as taxes.

How to Know If a 7(a) Loan Is Right For You

If you can answer, “yes” to any of the below, a 7(a) loan may be right for you.

  • Are you a small business?
  • Is your business based in the U.S. or its territories?
  • Do you have capital to invest in the business?
  • Are you current with all debt payments to the U.S. government, including income taxes?

Asset based financing enables your company to capitalize its assets. It provides you with immediate funds which can be used to cover operational expenses, finance new purchase orders, or make strategic investments. Asset based loans are an ideal alternative for small and middle-market companies who need a flexible financing solution.

Our solutions are provided using a revolving line of credit structure. They allow your company to draw on a percentage of the value of your assets, as needed. The line gets paid back as the assets convert into cash, through sales.

For more information, fill out this form or call us toll-free at (201) 781-2653

HOW DOES ASSET BASED FINANCING WORK?

Most asset based lending facilities operate like a revolving line of credit that is secured by specific collateral. The collateral is used to determine a borrowing base – the amount of funding that you can obtain. The line allows you to withdraw funds as you need them, based on the value of the assets in the borrowing base. The line is paid back as the assets are converted in to cash, through your normal operations.

The borrowing base is determined as a percentage of the value of the collateral that has been pledged. Usually, companies can finance 75% – 85% of the value of their commercial accounts receivable. The borrowing base of inventory and equipment is often 50% or less. In general, the actual percentages depend on the quality of the assets and how liquid they are. The borrowing base usually changes regularly as assets – namely, accounts receivable – fluctuate.

BENEFITS AND ADVANTAGES

Asset based financing solutions have a number of advantages, including:

  • Improved liquidity for your company
  • Flexibility – lines can be used for many purposes
  • Speed – lines can be deployed faster than other solutions
  • Fewer covenants than most alternatives
  • Lower costs than comparable options

COMMON USES

We can work with companies that offer products and services to other businesses or government entities. Industries we work with include:

  • Business services
  • Manufacturing
  • Staffing
  • Transportation and Trucking
  • Logistics
  • Technology
  • Security guard companies
  • Resellers
  • Oil and gas
  • IT consultants
  • Import
  • Office supplies
  • Distributors
  • Wholesalers
  • Government contractors
  • And others…

INDUSTRIES

We can work with companies that offer products and services to other businesses or government entities. Industries we work with include:

  • Business services
  • Manufacturing
  • Staffing
  • Transportation and Trucking
  • Logistics
  • Technology
  • Security guard companies
  • Resellers
  • Oil and gas
  • IT consultants
  • Import
  • Office supplies
  • Distributors
  • Wholesalers
  • Government contractors
  • And others…

CHOOSE THE RIGHT ASSET BASED LENDER

The decision to use an asset based financing solution for your company is strategic and should be made carefully. The right financing partner can be critical in helping you achieve your corporate objectives. Consider asking the following questions as part of your due diligence process:

  1. How long have they been in business?
  2. How do they get their funding?
  3. Do they have experience financing companies in your industry?
  4. What collateral are they comfortable financing?
  5. Will clients be notified of the relationship? If so, how?
  6. How will customer payments flow?