Shopping for Working Capital should be done with knowledge and confidence but how can one do that when it seems that everyone in the world is trying to sell you money? Worse yet: You may not know that you have many alternatives to Working Capital that don’t require corporate and/or personal guarantees.
Having provided successful business financing alternatives to hundreds of businesses we found that solving people’s problems always allowed them to execute their business plan and focus on growing their business plan instead of dealing with the ramifications of having not selected the best working capital program for their situation.
As a start up or a company that has fallen out of the graces of your bank you’ll typically be left with the following choices to monetize your business:
- Cash Advance: These loans are approved in hours and funded in a few days. Once in place daily payments are made often times considered small but once they get rolling they add up. These advances have a place in the finance world BUT they need to be analyzed carefully as to how they blend into your cash flow or down the road you’ll run out of money and have to borrow again – and again – and again … and most always require a personal guarantee!
- Asset Based Loan: These are collateral based loans using accounts receivables, inventory, and equipment. Offering flexibility and growth they can be very dynamic however they require a company to have $250K and usually more in receivables etc. plus inventory plus equipment to pledge. A great “pre-bank” program: Keep these in mind as a goal in financing. Typical guarantee may be personal but might be a validity agreement depending on the corporate structure.
- Invoice Factoring: Most problems aren’t cause by selling – they are caused by not getting paid! That said: Why not sell your invoices? If you do that you can run your company COD and not borrow and not create any liability. Does your customer mind? Not if you’re delivering on time and maintain a quality product. In fact: Many large companies require small suppliers to have a factor in place because they know that once they start buying they are in no hurry to pay and they can’t afford their suppliers to fall apart under the pressure. In addition: Factoring does not require a personal guarantee – only a validity agreement which means that the business owner guarantees that they will not cheat or defraud the factor.
Which Working Capital Program works best for you? Most people like it simple and without personal guarantees … and keep in mind: Something that is designed to be delivered to you quicker than you have time to think might want you take the time to think – so give that some thought too!
We wish you well and as always we’re here to help if we can! 
Ernie Brown MBA-DCFS Business Funding Northeast Phone: 1-603-818-4778
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