With so much responsibility, small business challenges will arise, and many of them require additional financing (such as a term loan or business line of credit) in order to be resolved. Having access to more financing can help your business overcome hard times while building a better future.

The Top Challenges That Business Owners Face

As a business owner, you’ll likely face challenges on the road to success.

In this post, we’ll detail five common small business challenges, and reveal how working capital from an alternative lender can improve your business’s daily operations, regardless of industry.

Limited Cash Flow

Running a small business entails paying for a wide variety of consistent costs. These operating expenses can be paying rent and other bills, purchasing inventory, compensating employees, in addition to other operating expenses. This is why many business owners find themselves lacking extra cash flow for last-minute costs. On top of these initiatives, you also have to pay rent and ensure that you meet payroll, among your other monthly expenses. Without working capital financing, you won’t be able to execute these plans that are necessary to your success. That way, you won’t have to worry about taking away funds from certain expenses to afford emergency costs or growth plans.

Overworking Staff Members

Having happy employees matters when running a small business. It’s exciting if your small business is receiving an influx of business, but it’ll be hard to manage if you don’t have enough employees to serve your customers. Apply for a small business loan, and you’ll be able to hire some new faces to join your growing team.

Having Broken or Outdated Equipment

It can be extremely stressful to have your business’s equipment or tools break. Even if the equipment isn’t broken yet, you might be working with outdated equipment that isn’t performing as it once did.

By neglecting these repairs or updates, the quality of your service or products may suffer. Due to this, your business would benefit from additional working capital to replace broken equipment or afford regular tune-ups.

Increased Rent and Physical Location Costs

If your business’s physical appearance deteriorates, it may affect your sales. Most likely, patrons will prefer to visit a competitor that has a better, more attractive business location.

In addition, rent increases can cause financial issues. You’ll receive financing in an amount that reflects your business’s needs so you can pay for physical maintenance, rent increases, or moving costs.

Limited Resources to Invest in Marketing

Marketing is especially pivotal for small business owners, as they need to keep existing customers engaged, while recruiting new ones. However, many small business owners want to advance their marketing efforts, but don’t have the means to make it happen.

A successful small business marketing strategy can include anything from online advertisements, promoted social posts, or printed flyers. If you’re interested in improving your marketing plan, first reflect on what’s working for your business and what isn’t. Then, you can determine the marketing tactics you should be investing in. Also, don’t disregard new marketing ideas because of financial needs; pursue a working capital loan and start promoting your business!

After reading about these small business challenges, which ones resonated with you? Perhaps you’re ready to purchase new equipment, invest in more inventory, or want to hire and onboard new employees. Applying for working capital financing can help your business accomplish goals, and have cash available for trying times!

Turning Business Problems Into Business Solutions

You Don’t Need A Bank To Borrow

When your business makes a profit, some or all of that profit can be put back into the business to allow you to grow and scale.

Sometimes, your business may need additional funds from a reputable lender. Many business owners run to the bank in order to secure financing. However, banks aren’t your only solution. In the following article I will present 6 different solutions available to finance your business needs.

Small Business Alternative Loan Type

Banks are a common financial platform for small businesses. Yet, banks often have stricter lending policies than larger alternative lenders. Due to this, small businesses find it difficult to obtain immediate financing from banks to help with investment or operate their businesses.

Luckily, banks aren’t the only financing source available to business owners.

Lines of Credit

In order to be successful, a business owner must responsibly manage their cash flow. Although cash flow management requires numerous factors, timing is arguably the most important component. There are numerous reasons why this can happen, but one underlying reason is that a business may extend credit to its customers to attract more business. The more credit a business extends, the less cash is available during that time. That’s why a line of credit can help these businesses with their cash flow management.

A line of credit (LOC) is a set amount of money that a business can use when it needs cash. Usually, the business can use some or all of the cash from the LOC but it must be paid back in a reasonable period. Financial institutions will monitor how the business uses the cash and raise any concerns when extraordinary situations occur.

Pros

  1. LOCs are flexible and can help businesses experiencing temporary cash flow shortages.

  2. The use of LOCs will help businesses to predict their future operational cycles.

Cons

  1. The interest charged on LOCs can be high, depending on the situation of the business.

Merchant Cash Advances

From a bank’s perspective, small businesses are riskier to lend to than larger companies. These stringent lending standards have left small business owners with fewer options to obtain the much-needed cash to keep their operations going. However, entrepreneurs still have access to other financing options, such as merchant cash advances.

With a merchant cash advance (MCA), a business owner will receive lump sum financing, in exchange for a percentage of their future credit card sales.

Once you receive a cash advance, the provider will take a percentage of your credit card sales until your balance is remitted. This helps your business meet short-term financial obligations without putting excess pressure on your cash flow.

Pros

  1. Payments aren’t fixed and are based on your business’s credit card sales at the time. This helps you to maintain cash flows based on how much your business is making via credit card.

  2. It’s one of the quickest ways to obtain funding.
    Payments are taken directly from your account, reducing the chances of late fees.

Cons

  1. Cash advance terms can be restrictive, and it’s crucial for business owners to read them carefully.

Working Capital Loans

A loan that is used to fund a company’s core operations is known as a working capital loan. Still, businesses in various industries can experience working capital shortfalls at some point during their history.

Companies should understand that working capital loans aren’t meant to be used for long-term capital expenditures. Working capital loans are meant to provide a cushion, helping companies get through periods when cash isn’t readily available, with the cash expected to arrive within a few days or weeks.

A working capital loan isn’t a specific loan type, but more of a category of loans. Any loan that helps a business meet short-term operational obligations could be considered a working capital loan. This includes lines of credit, term loans, and invoice financing, all of which are examples of loans in this category.

Pros

  1. Since this type of financing is a loan, business owners can retain equity in their businesses. However, unsecured loans will require businesses to be creditworthy.

Cons

  1. It is a loan, which could affect the credit rating of your business.

  2. If collateral is required, it could put your business and even personal assets at risk.

Equipment Loans

Many businesses require equipment to produce the products they sell. These businesses rely on that equipment to work, and when the equipment fails, it can derail the business.

Without financing to fix or replace the equipment, business operations can be affected. Unfortunately, many small businesses lack the capital required to maintain equipment.

Equipment loans are amongst the best small business loan options, as they can help companies obtain funding when crucial equipment breaks down. Owners can often get financing for a large percentage of the cost of the equipment since it is a secured loan. Tractors for farms are an example of equipment that could leave farmers without the ability to till the land or harvest crops. These lenders will cater to specific businesses, as is described in our article on Business Equipment Loans.

Pros

  1. The financed equipment is the collateral, making this a secured loan. Typically, secured loans are easier for businesses to obtain.

  2. Rates are usually attractive, although the type of the business and its creditworthiness play a role in determining the rate.

Cons

  1. Many lenders require a significant down payment for this type of loan. It could be difficult for smaller businesses to meet this requirement.

Professional Practice Loan

Professional practice loans are a class of specialty loans for medical, legal, and accounting professionals. The majority of these loans are for medical practitioners as their financing needs are often greater due to the cost of medical equipment.

The loans could be used for initial equipment purchases or acquiring other professional practices.

Professional services companies must spread the word about their offerings in order to attract customers, and a professional practice loan can help them do this. If the business owner isn’t skilled in marketing, the funding could be used to hire a marketing firm.

Pros

  1. The rates for these types of loans are attractive as professional services businesses have low default rates.

  2. Lenders specializing in professional practice loans tend to understand the risks associated with them.

Cons

  1. Practitioners may spend too much of the capital from the loan on non-core functions such as marketing and advertising. This could cause the core business to suffer when it needs a capital infusion.

  2. Practitioners may find themselves upgrading too frequently, requiring more funding.

Invoice Factoring

Invoice factoring is one of the oldest forms of business financing.

A factoring company will agree to buy the receivables generated by invoices. In this way, factoring isn’t considered a loan; The factor pays a discounted cash amount based on the value of the receivables, and often takes a role in the collection on behalf of the company.

Factoring is different than asset-based lending, where a loan is generated. With factoring, as no loan is generated, the credit profile of the company remains intact. With recourse factoring, the business owner continues to assume the risk of a customer defaulting. With non-recourse factoring, the factor assumes most of the risk. Due to this provision, non-recourse factoring is often more expensive than recourse factoring.

Pros

  1. The processing time for factoring is quick. Business owners can often get funding in a week or less.

  2. Business owners with bad credit can receive funding as the factor analyzes the risk of the business owners’ customers.
    Factors often take on the role of the creditor on behalf of the business.

Cons

  1. Factors will be involved with the day-to-day operations of the business.

Conventional VS Alternative

Established small businesses with pristine credit will have more options than companies with less-than-stellar credit. However, there are lenders who will provide bad credit small business loans. These small business owners may not receive the best rates, and the terms may not be as attractive as ones for businesses with good credit.

Capital is the lifeblood of a business, and as long as your small business has the potential to generate a profit, you can access the capital you need to keep the business running.

At SBFunding, we offer business owners tips to help manage their businesses. We work with many businesses to help them find the right funding options, and we are confident we can help your business.

Applying for business financing is often time consuming, but it can be necessary to keep your business up-and-running. Due to this, if your application for a business loan was denied, it can be extremely disheartening. In this post, we’ll explain what you can do if your small business loan application was denied.

7 Steps to Take If Your Small Business Loan Application Was Rejected

Determine The Why

If your application for a business loan was rejected, it doesn’t mean you can never apply for a loan again. Many business owners apply for a loan, only to get declined and have to apply again in the future. But before you start the loan process again, you should ask the lender why your application was denied.

Once you understand the lender’s requirements, wait until you meet all these standards before starting the loan application process again. That way, you can increase the chance that your loan application will be approved.

Improve Your Credit

Do you know what your business credit score is? In addition to personal credit scores, lenders also evaluate business credit history when deciding whether to grant a loan. They do this because by reviewing your personal and business credit scores, they can get a clear picture of your finances. Just like a personal FICO score, your business credit score rates your firm’s credit based on factors like payment history. Avoid funding your business through personal loans, which don’t contribute to your business credit history.

Try a Different Approach

If your business is struggling with working capital, a term loan may not be your best bet. Something smarter would be to leverage your firm’s future credit card receipts to secure a merchant cash advance. Another viable option is business credit cards. Just like a personal FICO score, your business credit score rates your firm’s credit based on factors like payment history. Improve it by applying for credit cards in the firm’s name and working with vendors who report payments. Avoid funding your business through personal loans, which don’t contribute to your business credit history.

Get an SBA Loan

If you can prove that you have exhausted all other financing options, you may be eligible for help from the government. The SBA has several programs that supply entrepreneurs with funding. They partner with commercial banks, who act as a guarantor on SBA loans.

However, owners should note that business credit scores still matter when seeking an SBA-backed loan. You typically require at least a 140 out of 300 to qualify for a 7(A).

Find Another Way

If you’re unable to obtain funding from a financial institution, it may be time to start looking for angel investors. They are more likely to trust you and could be willing to invest in your business, even if financial institutions aren’t.

Take a Break From Applying

Sometimes, the best thing you can do is to wait for a certain length of time before applying again. If you were declined due to your time in business, this will enable you to meet this requirement next time. However, if you’re struggling to qualify, taking a break from applying to work on improving your business may be your best bet.

In Conclusion: Don’t Get Discouraged

Remember, a declined business loan application isn’t a death sentence. If your application for a business loan was declined, you can try obtaining a different loan product from the same lender.

Ultimately, you can improve your chances of getting approved by building your credit and improving your business plan. By growing your business and operating a financially responsible business, you can be confident that you’ll receive financing eventually.

What To Do If Your Business Loan Application Was Rejected

Benefits of a Merchant Cash Advance

Small business owners in every industry need capital to survive, and although there are various working capital options available, not everyone is eligible for a loan. Unfortunately, new businesses typically don’t have the credentials to prove themselves trustworthy in the eyes of many traditional lenders, thus making it difficult to procure business funding.

What are the Benefits of a Merchant Cash Advance

You Will Get a Lump Sum of Cash Very Quickly

When applying for a cash advance, you probably won’t have to wait more than a week to have the money deposited in your account. Timing is a critical component for any successful company and having improved cash flow could be beneficial. In this situation, you’ll need quick and easy funding, and a merchant cash advance could be the best way for you to receive a lump sum amount.

You Don’t Need Perfect Credit

Typically, your odds of getting approved for merchant cash advances are higher than a loan or even some credit cards. The most important requirement that cash advance providers have is that the applicant makes a certain amount in business credit card sales each month. So, if your business makes frequent credit card sales, a cash advance could be a viable option.

There is No Set Payment Amount

A merchant cash advance isn’t a loan. Instead, you’re agreeing to a lump sum of cash in exchange for a portion of your business’s future credit card sales. Due to this, by taking out a merchant cash advance, you aren’t borrowing money; Therefore, if you have a slow sales month, you’ll be remitting a smaller amount than you would if your business’s sales were booming.


Use the Money However You’d Like

Small business loans can come with restrictions on how you can use the money. For example, the Small Business Administration’s 504 loan program can’t be used to purchase inventory, while SBA Microloans can’t be spent on paying off debt or buying real estate. When you get a lump sum from a cash advance provider, you can spend it however you’d like. This flexibility can be extremely beneficial to your business, especially if you’d like to utilize a cash advance for a few different costs.


You Aren’t Risking Your Assets or Your Credit Rating

In addition to usage restrictions, other types of business financing could require you to put your financial health on the line. After you’ve been funded, you’ll likely have to repay a certain amount each month, or you’ll face financial (and legal) repercussions. Because a cash advance is a sale of future revenues, you don’t need to prove your worth with a 750-credit score and binder full of balance sheets. What you remit depends on your credit card sales, so you won’t have to worry about a merchant cash advance provider seizing your assets.

Before Applying for a Merchant Cash Advance Consider the Benefits

Merchant cash advances may not be the right choice for every business, but they have numerous perks, especially if you don’t qualify for traditional financing options. Every business owner faces different circumstances, but a cash advance is and one of the easiest way to get additional financing.

You should always ask questions before any financial transaction, and a merchant cash advance is no exception. However, the questions you must ask before accepting an offer are unique to this specific product.

Is a merchant cash advance the best option for my business?

Not every financing product will fit a borrower’s needs, so ensure that a merchant cash advance will work for your business. Merchant cash advances work best for businesses that receive a high volume of credit card sales. If you don’t receive consistent credit card sales, it’ll be difficult for you to remit, and instead you might be better off applying for a different product.

Will I Continue to Receive Significant Credit Card Sales?

When you receive a merchant cash advance, you’ll fulfill your obligations through future credit card transactions. The rate at which you remit the balance slows down when the amount of credit card sales you make lessens, and vice versa. If you receive a high volume of credit card sales, a merchant cash advance could be a great fit for you.

Is the Cash Advance Lump Sum Enough

Most likely, you’re looking for a cash advance because you have bills to pay or investments to make.

Depending on the lender, the amount you’re eligible to receive may vary. It’s important to shop around, so if you’re unsure if the lump sum from your cash advance is enough, try talking to an alternate lender, or pursuing a different financing option.

Do I have Expensive Debt to Pay Off?

In the right situation, a merchant cash advance can be a great way to pay off expensive debt. With the cash advance, you receive a lump sum of cash which you can use to pay off any debt you’ve acquired. if you don’t have debt, or another pressing need, you might not require a cash advance at this time.

What Other Loan Products Might be a Fit?

When it comes to business financing, merchant cash advances occupy an important niche, but there are other options. If you’re considering merchant cash advances, taking out a line of credit or using a business credit card may make sense as well. Credit and business history requirements are more stringent for a line of credit compared to a merchant cash advance, but it’s a viable option for some business owners. Similarly, business credit cards can provide an infusion of short-term capital, although carrying a large balance can become expensive, and you could risk accruing significant debt.

Conclusion

As with any type of business financing, you should be vigilant in asking deep questions before signing on the dotted line. you must also ask yourself questions about your financial situation and your business needs. Under the right circumstances, a merchant cash advance is a powerful tool that can propel your business to new heights.

Important Questions to Ask Before Accepting a Merchant Cash Advance Offer

UCC Filings and How They Affect Your Business Credit Score

“We take pride in knowing that we are the ONLY COMPANY IN THE INDUSTRY that does not do UCC filings. We want to empower small business owners. NOT SLOW THEM DOWN.”
— SBFunding

If you have reviewed your business credit reports, you may have seen reference made to something called “UCC filings.” This could be affecting your business credit score. As someone who has been involved in the fintech industry since 2012, running my own one-man sales office providing merchant financing and merchant services to small business owners, I know they cause a lot of confusion. Failing to understand them can lead to issues down the road relating to securing approval for higher quality forms of business credit.

What is a UCC Filing?

A UCC filing is a legal notice a lender files with the secretary of state when they have a security interest against one of your assets. It gives notice that the lender has an interest, or lien, against the asset being used by you to secure the financing. The term “UCC filing” comes from the uniform commercial code.

What is the Uniform Commercial Code (UCC)?

The Uniform Commercial Code (UCC) was created to govern the sale and leases of goods. As the U.S. economy grew, so did the need to regulate business transactions in a uniform way. The UCC was created to standardize the process of business transactions in multiple states by creating more harmony and uniformity.

The code in general is divided up into 11 articles, each containing language over various forms of commercial transactions:

Article 1: General Provisions (contains generic interpretation language)
Article 2: Sales (refers to the sale of goods)
Article 2A: Leases (refers to the leasing of goods)
Article 3: Negotiable Instruments (refers to commercial paper and promissory notes)
Article 4: Bank Deposits and Collections (refers to banking and collections)
Article 4A: Funds Transfers (refers to bank transfers)
Article 5: Letters of Credit (refers to letters of credit)
Article 6: Bulk Transfers/Bulk Sales (refers to asset liquidation)
Article 7: Documents of Title (refers to bailment of goods)
Article 8: Investment Securities (refers to securities and financial instruments)
Article 9: Secured Transactions (refers to the legal interests of creditors in secured transactions)

How a UCC filing may affect your business and ability to get business financing

If not properly managed, UCC-1 liens could delay or flat out deny your ability of obtaining higher quality forms of business financing. This is because the presence of a UCC filing on your business credit report may indicate to lenders that your business isn’t financially sound. Once a debt obligation is paid in full, a lot of times a lender will not terminate the lien automatically, this means that you could be closing up a financing arrangement and receive a delay or denial at the 11th hour due to the existence of UCC-1 liens that are still active.

Having a UCC filed on your business credit report can have negative effects in general on your overall credit risk, scoring and other associated risk analysis, (across all three business credit bureaus) and can even kill your chances at getting financing for your business. (You can do this by checking your business credit profile, which you can do for free on Nav.)

In addition, once a secured debt obligation is paid off, you should request immediately that the lender terminate the lien on said asset(s) through the filing of a UCC-3 form.

Final Notes on UCC Filings

Lenders competing for borrowers might use the UCC as a marketing tool—because UCC filings are public records, lenders can use these records to find customers that are already familiar with their lending products to pitch them financing offers. Make sure to vet all prospective lenders carefully as well as understand their process of filing a UCC-1.

Remember that your ability to continue expanding your business credit profile depends a lot on how your business looks in the eyes of lenders, and this includes the presence of UCC filings on your report. It’s a heart-breaking situation to be in, where you are approved for the business loan that can fund the next big growth opportunity for your business, only to have it delayed or denied due to the active existence of old or inefficiently structured UCC-1 filings.

If you run a small business, then your primary goal is likely to continue to ensure your business grows. You can grow your business, earn new customers, and expand your market share without scaling your company. That’s because as they continue to boost their revenue, many businesses will see expenses increase accordingly. In comparison, when you scale, you’re able to meet the additional customer demand without increasing your spending.

Why Scale?

If you’re in a period of rapid growth, then you may be quickly acquiring new customers and generating additional revenue. As a result, you’ll have to adjust your current systems and team to accommodate this new wave of business. Your current infrastructure can’t support all the new customers you’re earning. And you continue to earn more than you’re spending to get new customers into your business.

Here are some of the biggest signs that it may be time to scale your business:

  • Your leads spiked without any additional spending on marketing

  • Customer demand is exceeding your current capacity

  • You can delegate more mundane tasks in your business

  • You have the right processes in place

  • You have the infrastructure in place

  • You have a repeatable sales funnel

How to Scale a Business: Check These Target Areas

Before you learn how to scale a business, you must make sure you get the timing right. By scaling too early, your team members could become overwhelmed and your business won’t be able to handle the additional workload. Let’s review three key areas you need to look at when preparing to scale your business.

Internal Processes

A process is a series of steps you take to achieve a desired end result. And whether they realize it or not, most people have processes in place for nearly every task they complete. And occasionally, these processes create more problems than they solve. In addition, improving your processes is what’s going to free up your time and allow your business to eventually scale.

The best way to improve your processes is by thinking of the steps that go into delivering your product or service to the customer. Who’s involved in this process, and what do they do at each point?

Your Business Organization

Before you begin, you need to consider your current business. Namely, do you have a proven business model?

Even if you have the financial pieces in place, you still need to consider whether you have the team in place to scale. Do you need to hire more full-time staff, or could certain jobs be handled by a freelancer? When a business is trying to scale, it can put everyone in the company under a lot of additional pressure.

Make sure you regularly check in with your team and see how they’re handling the business growth and their increased responsibilities.

IT Infrastructure and Architecture

It’s important to have the right technology and infrastructure in place before you attempt to scale. The right infrastructure will allow you to let go of repetitive, low-value tasks and focus on the things that will bring the most value to your business. Fortunately, technology makes scaling your business easier and less expensive.

Having the right infrastructure in place will allow you to scale with less friction because each step will build on each other. This allows your business to operate without you needing to constantly step in and fix things.

Final Advice on Scaling

Scaling is an important milestone for any company.

It’s important to wait to scale until your business is ready. Trying to do it too early or too late can have negative consequences for your customers, your team, and your business.

It’s not always immediately apparent whether your business is ready to scale. By evaluating your systems, your team, and your infrastructure, you should be able to determine if your business is ready for this next step.

Three Areas To Consider When Scaling Your Business

Getting More Money is Now Easier Than Ever!

If you already have experience with merchant cash advances, make sure you take advantage of our UCC free loans and renewal options. We are passionate about serving small businesses, and many of our customers have received funding from us numerous times!

At SBFunding, we as a small business lending institution understand these everyday needs that small businesses incur. One of the greatest benefits of becoming a member of the SBFunding family of clientele is the direct and immediate access to our Relationship Management Staff.

Existing customers of SBFunding have the ability to utilize our hard working team in the Relationship Management department for most if not all types of account servicing inquiries:

Additional working capital needs:

  • Quick, easy and through servicing of account renewals

  • Approvals within 24 hours or less

  • Each account should be eligible for additional funding around the 55% paid-in point

  • Minimal documentation required due to the retention of existing account information

  • Lending can occur in as little as 1-3 business days

  • Balance inquiries and account status updates

  • Quick and direct access to customer service

  • NO UCC FILINGS KEEP YOUR FINANCIAL DECISIONS PRIVTE

The goal of the Relationship Management Team is to make your existing and renewing experience with SBFunding stress & hassle free, while still securing the capital that you need – when you need it.

Please do not hesitate to reach out to our team, as we are specifically here for YOU..

SBFundings relationship management staff can be reached by phone at (305) 609-4929, by email at conrad.ambroise@sbfunding.us .

We know small business, and we’re excited to continue our working relationship with you.

Which Industries Use Merchant Cash Advances

Restaurants

Restaurants can have significant ups and downs when it comes to cash flow. Due to this, many restaurant owners pursue merchant cash advances. Since most restaurants accept credit card payments, this product is a great fit.


There are many ways that restaurants can utilize merchant cash advances. More than 2.5 billion people grab meals from food trucks each day, making it a popular trend for restaurants to pursue. Using your merchant funding, you can pay for your food truck, and the extra inventory and staffing needed to operate it.

Other growth opportunities that you can pursue with restaurant merchant funding include opening a catering business, offering delivery services and opening another restaurant location. Still, many restaurants utilize their cash advances for other needs outside of expansion.

Retail Stores

Like restaurants, retail stores can experience volatile business trends. If you own a retail business that occasionally experiences a lull in sales, having added finances could help you ensure that your retail store remains operational. Since many customers pay for items with their credit cards, a merchant cash advance could be a viable option. Once you receive a cash advance, you can comfortably restock inventory, and in-turn make more sales.


In addition to paying for inventory, you could use your retail cash advance to hire additional retail employees.

Salons

When patrons visit your salon for manicures, massages, and other types of pampering, they likely pay via credit card. Having loyal customers is pivotal to the success of your salon, so try to use your merchant cash advance in ways that will lead to customer satisfaction. Of course, like the other industries mentioned, salon business owners can use their merchant cash advance to afford consistent costs such as rent, inventory, and payroll.

Auto Repair Shops

This makes repaying debt risky for small business owners in the auto repair industry. If you’re unable to repay your debt, the bank could confiscate machinery, equipment, and other expensive components that are needed to conduct business. Most likely, your clients pay for repairs with their credit cards, so you’ll be able to remit a percentage of these sales until you satisfy your obligation, eliminating the fear of not being able to meet a strict payment schedule. Auto repair shops that have additional working capital available can provide elevated services, so don’t fall behind your competitors!

Is a Merchant Cash Advance Right for Your Business

Having a merchant cash advance can help you improve your business. If your business falls under one of the industries mentioned in this post, you might qualify for this financing product. In addition, there are other businesses that accept credit cards, that could also benefit from a merchant cash advance.

Four Industries That Best Use Merchant Cash Advances

Perfect First Impressions: How to Earn New Clients

It’s a crucial component when trying to earn new clients, as people will often size up a person in minutes.

Have you ever met someone who didn’t make a good impression on you? When that happens, you’re more likely to look for ways to end the conversation.

This article will help you learn how to make a good first impression. When you know how to achieve this, you can successfully obtain new clients for your business.

Why They Matter

First impressions matter because people have choices.

When people have choices, they don’t want to waste a lot of time in the selection process. Therefore, you have only minutes to get this person to decide you are worthy of their time. When people lack trust in others, it’ll be difficult for those others to turn the situation around. People assess trust within minutes of a first encounter. It’s good advice, but people don’t often follow it when meeting others. It’s just the way people are wired.

When you master the skill of making a good first impression, everything seems to go your way thereafter. Potential clients will be more willing to listen to your pitch or to accept a future meeting with you. When someone met up with a stranger, they had to quickly decide whether the stranger was a friend or foe.

The first step of a good impression is crucial, but you should not rely on it completely. You have to keep the momentum going after that first impression.

Unfortunately, people may not always be good judges of character. However, you can counter this issue by learning how to make a good impression.

How To Make A Great First Impression

First impressions matter because people have choices.

When people have choices, they don’t want to waste a lot of time in the selection process. Therefore, you have only minutes to get this person to decide you are worthy of their time. When people lack trust in others, it’ll be difficult for those others to turn the situation around. People assess trust within minutes of a first encounter. It’s good advice, but people don’t often follow it when meeting others. It’s just the way people are wired.

When you master the skill of making a good first impression, everything seems to go your way thereafter.

Unfortunately, people may not always be good judges of character. However, you can counter this issue by learning how to make a good impression.

Master the Handshake

It may be hard to believe that a handshake matters when you encounter someone new, but it does. In fact, it’s believed that warriors extended their hands as a gesture to prove they held no weapons. The common convention is to maintain a comfortable body distance where extending your hand is easy for both parties. People who are left-handed may feel a bit out of place, but without a convention, the handshake exchange would be awkward.

It’s customary for the grip to be firm but not too firm. A suitably firm handshake denotes confidence. You also want to try to avoid shaking when your palm is sweaty, although this can be difficult when people are nervous.

Once you grasp the hand, shake one or two times with small motions.

Appearance is Important

A suit was once the standard business attire, but most businesses don’t require employees to wear them anymore. A business casual environment is more the norm for clothing. Sometimes, it’s a stretch what people will consider business casual. In a business setting, wearing a suit will always be deemed as appropriate. Occasionally, meeting organizers will specify business casual attire, which makes it acceptable. If you’re planning on meeting several people for your business, consider hiring a personal stylist. This person can put together the right look and help you keep on track when changes occur.

Always Carry Business Cards

Did you know that business cards are still a valuable business tool?

Many people believe that business cards are no longer viable due to technology. People can capture each others’ contact information with the touch of a button on their smartphones or other devices. However, business cards offer another way to get your brand in front of potential clients.

It’s often easier for people to accept a small business card than to use an app that doesn’t work as well as it should. At conferences, a speaker may ask participants to place their business cards into a container. It’s not likely the speaker will try to exchange contact information of each participant via smartphones.

Become a Small Talk Expert

A good first impression includes conversations that flow. After the initial contact, people often have nothing left to say, leaving each with the awkward position of finding a way out. When you become an expert in compelling small talk, you won’t have to worry about this situation again.

People have lost the art of small talk largely due to their obsessions with smart devices. Before these devices, it was easier to strike up a conversation.

To improve your small talk skills, understand that it’s often not what you say but how you say it.

People love to talk about themselves, so take an interest in their stories. It makes the conversation easy because they do all the talking.

It’s especially destructive in the negotiation room, where silence is vastly underrated. In fact, though popular portrayals show otherwise, many expert negotiators swear by the value of silence.

Silence: A Strong Negotiation Tool

Silence’s strength as a negotiation tool centers around how we interact. Consider how many people you’d feel comfortable sitting in silence with. With most people, whenever there’s a silence, someone will speak up to fill the gap. This makes silence a very powerful tool in certain situations. That way, you can position your offer in a way that appeals to your negotiating partner.

In their urgency to fill the void of conversation, your negotiating partner may reveal critical information. That said, silence’s efficacy as a negotiation tool isn’t just about hoping for a slip up.

Jason Patel, founder of a college and career prep company, encourages people to get comfortable with silence. He explains that filling empty space by explaining your position makes you look less confident. As a result, your words are less effective. This convinces your negotiating counterparts to pay closer attention to your words. He suggests aiming to be as concise as possible by speaking with as few words as possible. It just means that, the more precise your words are, the better. It’s a great tool to signal your willingness to walk away.

The Benefits of Silence

Silence is just like any other negotiation tool. By doing so, you’ll know when and how to negotiate pay using silence.


In addition, you’ll learn how to incorporate the use of silence into your own personal negotiation style.

To that end, in these next few sections we’ll review the benefits of using silence in negotiations. We’ll explain how it helps you build trust, earn respect, persuade others, and emphasize your position.

Build Trust Faster

It might seem counterintuitive that silence builds trust, but imagine you’re negotiating to buy a car.

All else equal, think about who you would trust more out of these two hypothetical salespeople:

The salesperson who talks continuously without giving you a chance to speak. The same thing can happen in the negotiation room if you’re not using silence effectively.

Yet trust is so critical, you can’t afford to lose it. Harvard Law School’s Program on Negotiation calls building trust one of the “most integral skills negotiators can acquire.”

This is because a lack of trust is so counterproductive to negotiations. Without trust, you and your negotiating partner will be suspicious of each other and hold back information. As we mentioned earlier, a key part of negotiations is understanding your counterpart’s situation.

If they’re withholding information because they don’t trust you, you miss out on valuable information.

Increases The Level of Respect

Just like silence helps you build trust, it also helps build respect. In many ways, trust and respect go hand in hand, whether it’s in a negotiation, or any other interaction. An obvious—but often ignored—way that silence earns you respect is because it shows you’re willing to listen.

By demonstrating that you’re a willing listener, you show respect to your negotiating partner. This will make them more likely to treat you with respect. After all, when you give respect, you’re more likely to get it in return.

Silence can increase levels of respect in indirect ways too. For example, silence gives you time to think. People tend to respect others more when they perceive them as competent and skilled. Again, this increases respect levels because it improves your competency as a negotiator.

Of course, you still have to use silence strategically to increase levels of respect. If you’re too quiet, or quiet at the wrong times, people may think they can roll over you.

Benefits of Persuasion

Negotiating without talking too much requires you to be very economical with your words. In any kind of communication, silence and economy of words are critical.

Politicians work tirelessly to come up with punchy campaign slogans that are rarely more than a few words. In the same way, comedians, writers, and speakers, all seek to communicate their message in as few words as possible.

This is because every good communicator knows their message is more clear with fewer words. Whether that message is persuasive, educational, or entertaining, it’s most effective conveyed concisely. It does mean, though, that all of your words must carry weight.

Specific to negotiations, using too many words takes away from the core of your argument. As a result, the argument becomes harder to follow, less impactful and less persuasive.

Emphasize What is Important

Human beings have a limited attention span.

You may have many relevant points, but that doesn’t mean you need all of them. At a certain point, it all becomes overwhelming noise to your negotiating partner.

Whether they’re strong points ceases to matter, because they’re not even getting across.

The same way designers use white space to draw the eyes, good negotiators use silence. The only difference is, negotiators are using verbal white space to draw attention to their most important points.

By stripping out the rest of the noise, silence becomes an emphasis to your most critical points. You ensure that the only thing your negotiating partner is thinking about is your argument.

Other Negotiating Tactics

Silence as a negotiation tactic is one of many options, and you should educate yourself on other strategies too.

Plus, negotiation is a very personal skill. Everyone develops their own personal style based on their personality and skill set.

Finally, negotiation isn’t necessarily one-size-fits-all in every industry and occupation. For example, negotiating a lease may lend itself to different strategies and tactics than negotiating a new car sale.

Which is to say, you should look at building your negotiation skills as an ongoing, educational process.

Why Its Crucial to be Silent in Negotiation Tactics

How To Apply for a Merchant Cash Advance

If your business is considering an alternative to a business loan, you may want to consider applying for a merchant cash advance. Merchant cash advances are a viable financing option that—contrary to many traditional alternatives—are relatively easy to apply for.

With a merchant cash advance, your business can receive an upfront bundle of cash that can be used for whatever your business’s needs are. Typically, the amount of money you qualify for will be based off your business’ historical sales volume. Once you receive the funds, the cash advance will be automatically remitted in the form of a percentage of your business’s credit card sales. Therefore, the product works in accordance with your business’s sales volume at that time.

If managed responsibly, merchant cash advances can be a useful source of financing. In this post, we’ll explain how you can apply for this product, so that you can get the financing that your business requires!

Step One: Know Your Options

Prior to submitting a merchant funding application, you should compare different companies. In addition, you should find out the factor rate, which will determine the portion of your credit card sales that will be used to remit the cash advance. In addition, if you don’t meet a provider’s minimum requirements, it will be a waste of your time to apply now.

Step Two: Prepare Your Bank Statements

To secure a merchant cash advance, prospective providers will need to know that you’re able to fulfill your obligations. Because the payments will be made automatically through your bank account, it is necessary to ensure that your bank account is approved by the funder. However, many businesses prefer to instead find a merchant cash advance company first and then prepare their statements if needed.

Step Three: Submit an Application

One of the best things about merchant cash advances is that the application is usually much easier than a traditional bank loan’s process. If you have accurate and well-organized financial records, applying for a merchant cash advance is fairly straightforward.

A merchant funding provider will need to review your business’ current financial situation including your total income, typical credit card revenues, and projected future performances.

Step Four: Review The Contract

Even if your business has existed for a short amount of time or has only generated a few thousand dollars in revenue, you may still be able to qualify for a merchant cash advance.

Your merchant cash advance contract will detail the amount you’re expected to return. If after reading the contract, you still believe a merchant cash advance is right for your business, then you will be ready to sign the contract!

Conclusion

Applying for a merchant cash advance is a relatively simple process. If you’re willing to surrender a portion of your company’s future credit card receipts in exchange for receiving cash in the present, applying for an advance may be in your best interest.

It’s hard to believe that scammers target small business owners, but they do. In fact, they’re likely to go after small businesses rather than larger ones. Big businesses have more resources to counteract these types of problems. And because you’re focused on building your business, you can’t waste time or money on dealing with scams.

Taking precautions can help lower the risk of getting scammed. When you recognize how scams work, you’ll be in a better position to stop them from occurring.

Scammers Are Horrible

To say that scammers are horrible is an understatement.

The problem is it’s difficult for governments to catch these scammers. There’s a growing belief that the Chinese and Russian governments turn a blind eye towards scamming and hacking. In fact, one area in China has been dubbed “Scam Town” as a haven for scammers. These scammers cause significant damage as they try to obtain access to accounts or will hold computers hostage. They’ll steal access to many accounts and sell them to other scammers. These scammers will try to gain access to the accounts or use them for identity theft purposes.

Common Scams Targeting Business Owners

The number of scams continues to grow worldwide, and the scammers performing these acts are getting more creative, too. Recognizing these themes can help you identify future business scams. Most likely, your business will experience one of these common scams, so it’s crucial to know how to combat them.

Un-ordered Products or Office Supplies

The unordered office supplies scam starts with a scammer calling your company about a recent order that was placed. The caller is skilled at countering any objections about the order. Then, the scammer will use that as a concession and agree to discount the entire order. Smaller companies, with only a few employees, will likely know whether anyone placed an order. It’s easier for employees of smaller companies to ask each other if any orders have been placed. Work with the vendors on the list to appoint one contact person from the company. If someone calls your business claiming to be an approved vendor, tell them you’ll call back from a verified phone number. This procedure should be done when someone claims an order has been placed.

Marketing and Directory Listing Scams

The scams in this category rely on methods that are difficult to measure. They aren’t trying to scam anyone, but won’t produce the desired results.

There are legitimate SEO companies that can produce superior results, which makes detecting scams more difficult. Representatives from a directory listing company offer to list your business in their directory. The list may exist but won’t do anything to help your business. Remember, there are legitimate listing companies, so research carefully before paying for a listing.

An offshoot of the directory listing scam is the domain listing or renewal scam. This scam is disguised as a domain registration renewal. The fine print will explain that you’ll be paying for a directory listing or other marketing service that won’t benefit your company.

The Fake Invoice

Most likely, your company receives several invoices per month. Usually, these invoices will be for services that are difficult to track, such as memberships.

Some invoices come with inflated costs.

You may even receive invoices from companies that have performed services on your behalf. These scammers have verifiable proof of work and demand payment, but you aren’t obligated to pay for these services.

The FTC advises consumers to never pay invoices that they don’t recognize. Larger companies may have an accounts receivable department to handle all invoices. This department would be responsible for following up on invoices.

Small businesses can take precautions by training employees to question invoices. One method to keep everyone informed is to set up a Google Sheet with received invoices. All employees can view the invoices in real-time.

Fake Government Agency

Most likely, you or your employees have received a call from someone claiming to be an IRS agent. The caller specifies that something is wrong with a recent tax return and demands immediate payment. Homeland Security, the FBI, and the Federal Trade Commission are just a few of the agencies that scammers pretend to represent.

Government agencies don’t call people on the phone; they send official letters via the United States Postal Service. These letters are valid, as the phone numbers on the letters are often the ones listed on the official government websites. However, the links they include will come from URL shortener services, which legitimate agencies aren’t likely to use. Always check an agency’s website for the proper phone numbers.

When you find the correct phone number, call and ask them if they sent a letter or called you. They should be notified of these calls or letters to alert others about the scams.

The Imposter Utility Company Scam

The utility company imposter scam relies on a sense of urgency to get victims to pay. In this situation, scammers will call and state that your utility bill is past due. Most likely, they’ll tell you that you must pay a fee immediately to avoid turning off your services.

The caller will likely use high-pressure tactics to throw its victims off guard. The best defense against this scam is to state that you’ll call your utility company directly.

Most customer service departments at utility companies won’t implement procedures such as aggressive calls. Customers know their services will be disconnected due to lack of payment, so utility companies don’t need to be aggressive.

Many states have regulations against companies using these tactics. In most cases, utility companies will work with customers who are having difficulty paying. They’ll send letters working out alternative payment methods.

With any phone calls, ask for the name of the caller. Then, call the company and ask if this person was authorized to call.

Social Engineering Scams

Legitimate companies will never ask for passwords and other sensitive, personal information over the phone. Phishing and other social engineering ploys try to get victims to reveal business or personal details, such as credit card numbers.

Phishing attacks are email scams. The scammer uses legitimate logos and company links to get their victims to click on the links. The first clue of a phishing attack is the email address you receive is often not from the genuine company.

Scammers who use phishing gather information about you, including which accounts you have. Sometimes, they can purchase this account information from other scammers.

Most phishing attacks will seem out of place. For instance, you may have already paid a bill and receive an email shortly thereafter that states your bill is due.

Social engineering attacks are often more subtle than phishing. The scammer will try to obtain information via pretext, which they’ll later use to seem legitimate when they call your bank. When the scammers know this information, they’ll call your bank to gain access.

Other Ways To Avoid Scams

Legitimate companies will never ask for account numbers, social security numbers, credit or debit card information, or sensitive data.

When you receive information about an issue with a current account, use an existing bill or trusted document from the company. Also, if you know the company’s website, find the contact information there. Companies calling about important issues with your accounts won’t use these tactics. Find the valid phone numbers and ask the company if they use robocallers. Most likely, they’ll tell you it’s a scam.

Federal agencies such as the FTC, the FBI, and the IRS publish scams on their websites. They explain why they are scams and publish warnings for people to avoid them. By visiting these agency websites often, you can learn how to avoid scams. Form a coalition and notify the association organizers to send out scam warnings.

Scams to Avoid That Target Small Business Owners

How Your Business Can Create Revenue During COVID-19

Covid-19 has wreaked havoc on all business sectors in the US. It can be nerve-racking to have your revenue reduce or in some cases, completely halted.

If your business business has been affected by this virus, it is important to think out of the box in order to create cash flow until conditions improve. Below we will point out a few industries and what they have done to create revenue during this unprecedented time.

Restaurants

Unfortunately, the restaurant industry has been hit hard during this trying time. Many restaurants have been forced to close their doors until further notice, only being able to offer takeout or delivery services. If you can afford it, consider giving patrons a discount so that they’re more likely to place an order.

In addition, you could give away small “freebies” to keep customers coming back during this time. For instance, if your establishment offers a specialty dessert, provide it as a small treat when patrons place a delivery order. Patrons will be looking forward to visiting your restaurant once it is safe to do so and having a gift card will give them something to be excited about. Plus, you’ll have some additional income to help you stay afloat during this time.

Retail Store

Like the restaurant industry, many brick-and-mortar retail stores have been forced to close their locations to lessen the spread of COVID-19. To ensure your business can still generate income, we suggest selling items on your website until locations can be reopened.

If you don’t have an ecommerce store already, post items on your website or social platforms so that customers see what’s available. This is a great way to make sales during this challenging time while also staying top-of-mind to your customers when they’re able to visit your store again.

Medical Practices

If your medical practice isn’t a general care practice, walk-in clinic, or emergency room, your office may be temporarily shut down. If this is the case, you can still serve your patients by offering virtual consultations and services.

If your practice sells products (for example, a dermatologist may sell topical solutions or an ophthalmologist could offer glasses and contact lenses), continue to provide them to your patients. Coordinate shipping or curb-side pick-ups so that patients aren’t without necessary medical care, and your office staff isn’t too over-burdened when you’re able to open your doors.

Event Services

Because of recommended social distancing, events such as weddings, funerals, concerts, and conferences have been canceled over the next few months. If your business is in the event services industry, it can be challenging to know how to proceed.

So, if your business can’t host or service events in the coming weeks or months, start working with clients on rescheduling events for a later date. Although this isn’t ideal, these changes will help your business remain profitable, and you can continue to support your clients.

Conclusion

This an unprecedented time in history. It will take a while to get back to normal. But in the meantime your business can implement new measures to generate revenue and stay afloat. By finding new was to create revenue, you will stay afloat.

The retail industry has grown steadily in recent years thanks to an improved economy and the popularity of online shopping. However, retail businesses still face serious challenges, including difficulty keeping pace with consumer demands and staying ahead of rivals in a fiercely competitive environment. Even established retail businesses face obstacles such as staying up-to-date with social media trends and out-marketing online businesses.

Getting the Right Funding

The number one obstacle retail businesses face is finding financing. This is a problem for small businesses in every industry, but the recent economic climate has made securing funding more difficult than ever. The average small business loan application takes 24 hours to complete—the process is complex and demanding, requiring in-depth cash flow research and proper documentation. The market appeared to stabilize and even thrive in 2012, with marked retail sales growths. However, there’s still much lacking in today’s economy, with the rates of savings dwindling and costs of living escalating. Financing pressures can prove to be too much for a retail business that doesn’t yet have the cash flow or reserves to afford everything a startup costs.

Create and Grow an Online Presence

Online marketing is more important now than at any other point in history, with the number of Internet shoppers reaching groundbreaking proportions. Creating a strong, user-friendly online presence isn’t easy; Many small business owners lack the resources to focus on their online presence, which can damage their success in the long run.

Launching an effective online campaign requires the cash flow to create high-quality content, including video and image content. It also requires a business to dedicate the time and energy to keeping up an online presence, which takes constant vigilance in the world of social media. Like most of the challenges impeding retail businesses, maintaining an engaging and attractive online presence comes down in large part to having the funds.

Exceed Your Customers Expectations

On top of economic and technologic changes, retail businesses must also deal with inherent changes in typical customers. As the millennial generation begins to finally outnumber the Baby Boomers and Gen X shoppers, retailers must keep up with new demands in a completely evolved marketplace. Customers can conduct plenty of online research on their own before ever entering a store, making it imperative for business owners to stay ahead of the game.

Solutions to These Challenges

Maintaining a positive cash flow is more difficult than ever, but that doesn’t mean retail businesses have to throw in the towel. For each challenge retail businesses face, there’s a viable solution.

Many retail business owners find that even with the best cash flow management strategy, they come across insurmountable roadblocks. When a business needs an instant solution to a cash flow deficit to meet payroll or pay suppliers on time, invoice factoring can help. Invoice factoring gives businesses a way maximize cash flow quickly and efficiently, without adding to existing debt or incurring expensive interest fees. Retail businesses may face a variety of challenges, but fortunately, today’s innovative marketplace offers an equal number of solutions.

Challenges Facing The Retail Industry

Secured VS Unsecured Business Loans

There are two basic types of business loans: secured and unsecured. Many business owners don’t have any collateral to pledge for a secured bank loan, and may have difficulty getting an unsecured loan as well, as the banks they do business with don’t offer unsecured loans. Unfortunately, the phrase unsecured business loan is often used in a misleading fashion. If you get an unsecured loan, you’re almost definitely still on the hook if your business fails. The difference between a secured loan and an unsecured loan, in many cases, is not as clear-cut as it may seem at the outset.

Here’s everything you need to know about secured and unsecured loans.

What is a Secured Loan

If your loan is secured, it means the lender has some sort of specific collateral to seize and, if necessary, resell in the event that you can no longer repay your loan.

Perhaps the most common example of a secured loan is a mortgage. Or, in the case of a business loan, a restaurant owner might put up their kitchen equipment as collateral. As long as you have collateral equal in value to the amount of money you’re attempting to borrow, you can get a lot of money at very good rates. Established businesses that have valuable collateral they can put up are eligible for secured loans, while startups and newer businesses usually are not eligible.

Pros Of Secured Business Loans

  1. Borrowing fees and loan terms are more borrower-friendly compared to those of unsecured loans.

Cons Of Secured Business Loans

  1. You could lose whatever collateral you put down for the loan in the event that you default.

  2. Secured loans are inaccessible to startups and businesses that don’t have any significant assets.

What is an Unsecured Loan

Simply, an unsecured loan is one that isn’t backed by any form of specific collateral, such as a vehicle, piece of heavy equipment, or your accounts receivable. The lender will base their decision to lend you money on your creditworthiness (often determined by your credit score) and/or the strength of your business’s cash flow.

Because it’s much more difficult to reclaim money if you default on the loan, unsecured loans are much riskier than secured loans. And as we all know, the riskier the loan, the more it’s going to cost you. Expect to encounter higher interest rates than you would get on a secured loan. However, there are also unsecured loan options available to newer businesses.

It’s important to realize that while a loan may be “unsecured” because it is not tied to any specific collateral, the loan may still require a personal guarantee. A personal guarantee is an agreement which states that if the business can no longer repay the loan, whoever signed the personal guarantee is, well, personally responsible for repaying the remaining balance. Know that if you’re the owner of a sole proprietorship or general partnership, you are already personally responsible for repaying all business debts. Yet, as long as a loan is not tied to any specific collateral, lenders are still able to advertise it as “unsecured.”

Pros of Unsecured Business Loans

  1. They’re easier to get—you can qualify even if you don’t have any compelling business assets.

  2. You won’t bear any personal responsibility if you default—provided that your business is structured as an LLC and provided that the loan doesn’t require a personal guarantee (though most unsecured loans do, indeed, require a personal guarantee).

Cons of Unsecured Business Loans

  1. May require a personal guarantee, which means you are personally responsible to repay the loan if you default (the same is true if your business is structured as a sole proprietorship or general partnership).

Thoughts

First of all, if you come across a lender that’s advertising “unsecured” loans, be very careful before entering into an agreement with them. Quite frankly, in the context of business loans, the word can be used in a misleading fashion.

You’re going to be hard-pressed to find a lender that will give your business any sort of capital, unless they have some guarantee they’ll get the money back. When searching for a business loan, don’t bother looking for a so-called “unsecured” loan. Instead, look for a loan that is secured in a way that works for you.

If your business can’t get a bank loan because you don’t have collateral, take a look at some of our small business loan reviews.

 
 


Here’s everything you need to know about secured and unsecured loans.

What is a Secured Loan

If your loan is secured, it means the lender has some sort of specific collateral to seize and, if necessary, resell in the event that you can no longer repay your loan.

Perhaps the most common example of a secured loan is a mortgage. Or, in the case of a business loan, a restaurant owner might put up their kitchen equipment as collateral. As long as you have collateral equal in value to the amount of money you’re attempting to borrow, you can get a lot of money at very good rates. Established businesses that have valuable collateral they can put up are eligible for secured loans, while startups and newer businesses usually are not eligible.

Pros Of Secured Business Loans

  1. Borrowing fees and loan terms are more borrower-friendly compared to those of unsecured loans.

Cons Of Secured Business Loans

  1. You could lose whatever collateral you put down for the loan in the event that you default.

  2. Secured loans are inaccessible to startups and businesses that don’t have any significant assets.

What is an Unsecured Loan

Simply, an unsecured loan is one that isn’t backed by any form of specific collateral, such as a vehicle, piece of heavy equipment, or your accounts receivable. The lender will base their decision to lend you money on your creditworthiness (often determined by your credit score) and/or the strength of your business’s cash flow.

Because it’s much more difficult to reclaim money if you default on the loan, unsecured loans are much riskier than secured loans. And as we all know, the riskier the loan, the more it’s going to cost you. Expect to encounter higher interest rates than you would get on a secured loan. However, there are also unsecured loan options available to newer businesses.

It’s important to realize that while a loan may be “unsecured” because it is not tied to any specific collateral, the loan may still require a personal guarantee. A personal guarantee is an agreement which states that if the business can no longer repay the loan, whoever signed the personal guarantee is, well, personally responsible for repaying the remaining balance. Know that if you’re the owner of a sole proprietorship or general partnership, you are already personally responsible for repaying all business debts. Yet, as long as a loan is not tied to any specific collateral, lenders are still able to advertise it as “unsecured.”

Pros of Unsecured Business Loans

  1. They’re easier to get—you can qualify even if you don’t have any compelling business assets.

  2. You won’t bear any personal responsibility if you default—provided that your business is structured as an LLC and provided that the loan doesn’t require a personal guarantee (though most unsecured loans do, indeed, require a personal guarantee).

Cons of Unsecured Business Loans

  1. May require a personal guarantee, which means you are personally responsible to repay the loan if you default (the same is true if your business is structured as a sole proprietorship or general partnership).

Thoughts

First of all, if you come across a lender that’s advertising “unsecured” loans, be very careful before entering into an agreement with them. Quite frankly, in the context of business loans, the word can be used in a misleading fashion.

You’re going to be hard-pressed to find a lender that will give your business any sort of capital, unless they have some guarantee they’ll get the money back. When searching for a business loan, don’t bother looking for a so-called “unsecured” loan. Instead, look for a loan that is secured in a way that works for you.

If your business can’t get a bank loan because you don’t have collateral, take a look at some of our small business loan reviews.

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