Working capital financing for small biz in the U.S.... easy or hard?

[paygorilla]

After reading a lot here and there and trying to finance my own start up in multiple ways, I wonder what is the true state of small business financing today in the U.S.? Factoring, Merchant Cash advances, Bank loans, SBA loans.... are the options out there working? Now we have a platoon of internet lenders coming on-line. Is that really closing the gap? Any advise on options that really work..?

[Harold Mansfield]

After reading a lot here and there and trying to finance my own start up in multiple ways, I wonder what is the true state of small business financing today in the U.S.? Factoring, Merchant Cash advances, Bank loans, SBA loans.... are the options out there working? Now we have a platoon of internet lenders coming on-line. Is that really closing the gap? Any advise on options that really work..?

Most start ups aren't tech related that get rounds of funding, and most small businesses self finance. People do get loans, but the myth that all you need is a good idea and a bank of the SBA will finance you is way overstated. It doesn't happen that way. People who do get loans have collateral like a home or borrow against the businesses assets. Short term loans happen with guaranteed receipts or to help fill large orders that are already sold.

Most businesses are just that. A business that benefits the owner. Not ground breaking ideas that have a possibility for mass appeal or that they even know how to scale with any hopes of paying anyone other than themselves and maybe a couple of employees. Very few people are going to invest in someones landscaping business or computer repair shop. There's nothing in it for them.

A lot of online lenders aren't good deals and have the same structure as pay day loans. Could work in a pinch, but people aren't out there just giving away thousands of dollars because they believe in someone.

[Fulcrum]

3rd party financing for small businesses suck. Good luck getting a reasonable loan from banks.

Factoring and merchant cash advances can work, but too many people in those fields don't fully understand how it works nor are they able to educate their potential clients properly.

[SmallBizFinancer]

Yes. I have a lot of advise on this. I'm in this business, but spend half my time trying to inform and educate the public. It is easy to get excited about an approval, but so many alternative financing sources are risky. I've put together a list of the best resources for working capital.

Depending on your situation, here's (without descriptions) the list (in order of my recommendation):

1) Boot Strapping
2) SBIR Grants
3) Economic Development Organizations: local/state
4) SBA 7(a) Loans
5) Bank Loans
6) Angel Equity
7) Hard Money - these are kind of risky.
8) PERSONAL (not business) credit cards
9) Alternative Financing - many (if not most) of these are very risky. This includes the advances you were talking about.

Also, factoring usually sounds great up front. But usually costs the same or more than advance, and is a lot harder to get out of. Let me give you an example. If the factoring company discounts your invoices by 2%. Then they have a reserve of 25%. Then your cost of money is actually closer to 30% annually. And all you gain here is a portion (75% to 99%) of ONE months cash flow. So if you do $10,000 per month in business, you may be paying 30% (forever) for $7.5k to $10k of working capital. And the only way to stop factoring is to finance a months worth of cash flow until they go away. So it will cost you, again, to get out of it.

[Qbicle]

I wonder what is the true state of small business financing today in the U.S.? Factoring, Merchant Cash advances, Bank loans, SBA loans.... are the options out there working? Now we have a platoon of internet lenders coming on-line. Is that really closing the gap? Any advise on options that really work..?



Inforgraphic literally titled, "The State of Small Business Lending (http://info.kickfurther.com/the-state-of-small-business-lending)". It's mostly focused on traditional lending but I hope it still helps!
http://cdn2.hubspot.net/hub/554658/hubfs/kickfurther-small-busine-1.png?t=1457733590735&width=780&height=1941

[Harold Mansfield]

That's a good inforgraphic. Hope you don't mind that I edited your post to enlarge it.

[Multimediatech]

Look for the options your credit card processing service provider has to offer. So far I already got 5 loans I already repaid all of them for a very low fee.

[jtohkell]

Hi!

I'm working on a project for one of the biggest lenders to small businesses in the US. I would love to have the opportunity to talk to small business owners in search of financing. If you're willing to have a quick chat, please hit me up!

Regards