Business Credit Cards – Financing Made Easy

Admin — Mon, 11 Jan 2010 14:47:27 +0000

It can be extremely difficult to finance a business, particularly when you are just starting out. Most of the time, traditional methods of funding are not overly excited about giving you money to start a new business because it’s a fact that over 80% of businesses fail within their first year of operation!

If you are hoping to start a business out of your home, you may have reduced costs as compared to financing a retail establishment, but you will still need some form of start up capital or access to money to get things rolling. Have you considered using a credit card to finance your business?

Many businesses have been completely financed with credit cards. It is best if you designate one card as your business credit card; and then use that for anything you can’t pay out of pocket for. Remember to keep up with your payments and pay as much of your balance as possible each time you get a statement in order to keep (or get) a strong credit history that will make it easier for you to get additional financing in the future- for both personal and business purposes.

Why would anyone want to use a credit card to finance their business? There are a number of advantages- first of all, the money is available when you want it once you get the card. You don’t have to apply for a loan and wait for approval; then wait for the funds to be available. Instead, you just take your credit card out of your wallet and swipe it when you need the extra cash flow. Another way that using a business credit card can speed things up for you is when dealing with vendors. Often, if you work with a supply vendor, you have to supply them with check payment forms as a new business. If you choose to pay with credit card, you just give them the details of your card one time, and then they can make each of your purchases automatically paid for using that card information.

Another advantage of using a credit card to finance business purchases is if you know what your grace period is (the time you are allowed to make payments interest free) and you know when your billing date is, you can make purchases right before the billing date and give yourself 25 days (or whatever your grace period is) to pay it back without paying interest or finance fees. This saves considerably and if you were to use a loan, the interest is included in the amount you pay back so you never get the option of paying it off without interest.

Another reason many people enjoy using a credit card as business financing is because of the option to select from rewards programs that earn you items or cash back from all of your purchases. Rewards programs include things from airline miles to a percentage of each purchase returned to your card, to the ability to purchase merchandise from the rewards points you’ve earned.

Finally, when you buy items on credit card, you are protected. Sometimes you receive an item that is damaged, or not what you expected. Sometimes, you could order something and never actually receive it. Most credit cards will cover you against these losses and offer you protection you wouldn’t otherwise have if you paid with cash or check.

Credit cards may not be the ideal way to finance your business expenses, but if you have difficulty obtaining a business loan, this is an alternative option for business financing that provides you with access to additional cash when needed and a variety of benefits that you wouldn’t otherwise have.

Business Financing Is Still Available But It Is Not Cheap Or Easy To Obtain

Admin — Sun, 06 Dec 2009 04:23:48 +0000

Let’s face it, Banks are just not lending. It does not matter that they received over $350 billion of your money with more to come. It does not matter how strong your business is or how great your credit history. They just are not lending.

Most financial institutions have pulled back credit to businesses. Nearly every well known financial company has stopped offering business programs – be it business credit cards, trade and supplier financing, commercial loans or working capital lines of credit.

These establishments cite poor market conditions and unfavorable economic outlooks.

The quandary comes when businesses, facing the same market conditions, are looking for ways to survive and in some cases grow. In the past, healthy, established businesses could always turn to their banks for needed financing; be it for a short term line of credit or to restructure existing debt; freeing up needed cash flow. Just not so today – especially since part of the blame of our economic toils rests on the shoulders of these same banks.

So if businesses cannot fall back on their bank or other financial institution, what are they to do?

The only real viable financing option for many businesses in this market is private, non-bank lenders. I am not talking about equity capital or private placements. I am talking about investors who have pulled their money out of a falling stock market and are looking to lend it to solid companies in hopes of substantial interest rate returns.

What is this you might ask? There is always a struggle between supply and demand and the arbitrage opportunities that open to investors who know where and when to look.

A few years ago, banks and other financial institutions were lending at rates below or at market level in comparison to potential opportunities – they were offsetting lower returns with fees and deal structure (e.g. ratcheting rates). This left most private investors out of the lending market.

Today, banks are not lending and investors are taking their place. If banks are not lending and businesses need capital – there is a funding gap. This funding gap is wide and does not have many players or competition. Further this gap has huge barriers to entry as capital to invest is not easily obtained or easily given away. What I am saying is that some very smart investors have realized that there is an opportunity here for them to earn substantial returns from lending money to proficient businesses and their owners.

Thus, they are filling the gap left by banks and remain the only real source for business capital. But, they will only do so at very high interest rates.

What I am trying to say is that there are non-bank lenders that will fund companies. But, the power (thus the arbitrage) is in their hands – not yours – making your ability to receive funding both hard and costly.

The products they offer come with high interest rates, huge fees, and deal structures that are extremely favorable to them. These lenders want to see strong (very strong) credit histories, low debt-to-income ratios, and very high repayment abilities. Additionally, should a business have collateral, the property (equipment, machinery, inventory, A/Rs, purchase orders, sales receipts, etc) must be valuable and easily saleable. Gone are the days of 80% and more loan-to-values. Most of these lenders will only lend 50% to 60% against such collateral – especially if it involves a cash out or cash advance option.

Now, I know this does not seem fair – but what is fair in this market? Banks are not lending – businesses need money. You and your business must either take what it can get or get nothing. These investors – the only entities that are still providing money to businesses – could also stop lending if they feel the returns are not there. Then, there would be no business funding at all.

Private investor lending or advance options include:

Accounts Receivable Factoring, Purchase Order Financing, Business Cash Advances, Equipment Loans & Leases and Personal Loans. There also remains a few investor back lenders that will finance the acquisition of a business (without real estate) – all provided the business is cash flow positive, has excellent credit histories (both owners and business) and can provide adequate financials and tax returns to prove it.

Just remember – these are not cheap and by no means easy to obtain – you and your business must still demonstrate a willingness and ability to repay these loans and advances as well as provide (in most cases – Business Cash Advances do not apply here) collateral values that are very favorable to the lender.

But, if this is all that is available – when banks and other financial institutions are not lending to businesses – private non-bank lenders may just be the answer you need to get you though.

By: Joseph Lizio

Finance Made Easy » Business Credit Cards

Business Credit Cards – Financing Made Easy

Business Financing Is Still Available But It Is Not Cheap Or Easy To Obtain