Credit Finance

Building a company in a tough credit environment is not an easy task. And many companies run into financial problems not necessarily because they lack opportunity – but rather because they lack business credit.

Obtaining any form of business financing during troubled times, especially a business loan is very difficult. During hard times, most institutions tend to tighten their credit standards making business loans inaccessible to all but the most credit worthy businesses. And in part, that is how many medium and smaller sized businesses run into trouble. Without easy access to financing, they become vulnerable.

There are some forms of business financing that are available to businesses – even businesses that have problems. For example, let’s examine a recurring situation in commercial transactions. Commonly, companies extend business credit to their clients and wait around 45 days after the sales to get paid for their products/services. By doing this, you are providing your client with a short term loan. Unfortunately, you don’t have an alternative. Most clients demand payment terms as a cost of doing business with them. This is a problem because few companies can afford to wait 45 days to get paid on their invoices.

There is a solution to this issue, which may work better that a business loan. It’s called invoice factoring. A factoring arrangement provides you with an advance, secured by your invoice. Basically you get about 80% of its face value as a first installment, which enables provides liquidity to cover business expenses. The remainder 20%, less a service fee, is given to your company as soon as the invoice is paid for.

Most companies use factoring to cover cash flow shortfalls, at least initially. However, factoring’s potential comes from how it can help your firm grow. It’s a simple proposition. If you had clients that could pay their invoices in two days, how many would you take? Most owners would take as many as they can get. And that – quick payments – is what factoring financing really delivers.

The cost of invoice factoring varies based on how much funding you need, for how long, and the payment quality of your clients. Generally speaking fees can range from 1.5% to 3.5% for 30 days, but they vary broadly based on many parameters.

Factoring does not work for everyone though – it only works for commercial sales. Specifically, it works for companies that sell on terms to other businesses and who can’t afford to wait to get paid.



By: Marco Terry

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One needs top borrow money for several reasons and Car Loans are something which are commonly applied for by the people. Today there are several banks both National as well as International offering the service of Car Loan Financing. With the same people can buy new cars as well as second hand cars as per their needs.

People should go in for the Car Loans only if they are sure that they would be successful in paying back the amount without any delays as the banks offering the Car Loan Financing service can take actions if the loan repayment is not done on time. The payment can be done either together or in installments.

Before applying for the Car Loan Financing, people should find out about certain things like if the bank is credible, what is the rate of Interest it is charging etc. Different Financial Institutes lend money on different terms and conditions, thus it becomes crucial on the apart of the borrower to be well aware of the same.

Applying for Car Loan Financing is no longer a headache as you can do the same on net, by visiting Online bank sites instead of going to the banks. In order to apply for the same, one has to fill in some registration letter and provide details essential for getting the loan. People with bad credit history may not always find getting the Cars loans easy.



By: Deepak Bansal

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Do you have more purchase orders than what you can handle? Is lack of financing preventing you from fulfilling those orders? One of the most frustrating things that can happen to a business owner is to turn orders away - good orders - because you don’t have the financial capacity to fulfill them.

Of course, you can try to get a business loan. However, business loans have their limitations as business financing tools. They are hard to get and have arbitrary limits, so they don’t grow with your business.

Wouldn’t it be great to have a business financing tool that could handle all your supplier payments - provided you had purchase orders from good customers? How many orders could you close then?

That tool exists and is called purchase order financing. Purchase order financing is a financing product that is offered by factoring companies. The tool’s premise is very simple. Once you have a confirmed purchase order, the factoring company finances all supplier payments, usually by letter of credit. Once the order is delivered and paid for, the transaction is settled.

And how much does purchase order financing cost? Well, it depends on the size of the order, the complexity of the transaction and the commercial credit worthiness of the company paying for the products (your customer). On average, the financing cost will be between 2.5% and 4.5% of the order.

Although purchase order financing is a great tool, it is not for everyone. It works best if your profit margins are between 15% and 30% and if your customers are medium sized (or large) companies or government agencies. If you meet these criteria, purchase order financing can almost eliminate your out of pocket expenses.

If you own a reseller or distributor and have more purchase orders than financial capacity, consider purchase order financing as the tool that can help you close those orders and grow.



By: Marco Terry

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Building Business Credit the Right Way

            Business credit gives business owners access to sums of cash that many never thought were possible. It opens the door to an entirely new reality of business, perhaps by expanding your location or product lines, or opening new locations. Having access to cold, hard cash can turn dreams into paychecks. As a business owner, doesn’t this sound exciting? But have you taken the proper steps to start building your lines of business credit?

            Corporate credit doesn’t come easy, but neither was building your business. There are many steps to take, and they must be taken in order. Some steps are harder than others, but in the end the reward far outweighs the effort. It is possible for business owners to secure $50,000, $100,000, even $250,000 in cash to make their business dreams come true.

            One of the first steps to take is to stop paying for business expenses out of personal accounts. You must never again consider taking out a personal loan to float or improve your business. You must not “loan” money to yourself out of your personal or family’s savings, education or retirement accounts. These actions put you at high risk for personal economic hardships if your business should fail, as 95% do in the first five years according to the Small Business Administration.

            Separating family from business can be a hard task, especially for “family businesses.” However, in this case the risks do not outweigh the rewards. Many business owners, and couples, often overlook a common, avoidable mistake that “contaminates” their credit profiles. Anytime a spouse is added to a line of credit, that spouse’s credit history now becomes part of your credit history. Therefore, if your spouse makes one late payment, that delinquency affects your credit file. This matter can be complicated much further if you have not taken the proper steps to separate your personal credit from your business credit, and it could prevent you from securing the financing needed to grow your business.

            The road to financial business security through business credit can be a long road, requiring patience and attention to detail. The industry standard for building corporate credit to the point where you can secure cash loans without a personal guarantee is two to three years. If you work with a corporate credit specialist, that time can be reduced drastically. However, never rush the process by skipping steps! It will only ruin the work you have already done.

            When building business credit, you must track your progress and know when to move on to the next step, and you must keep and close eye on your credit history reports. You must be willing and able to contest any credit inaccuracies in a timely manner or risk damaging your credit file.

            On a final note, there is another mistake business owners make after they begin securing large lines of cash credit, and this mistake can be quite costly—the mistake is to overspend their cash, being lured by temptation instead of leveraging their money for greater business gains. Don’t undo your good deeds by the freedom and responsibilities of managing large sums of money. Making the right investments with your new, hard-earned monry will pave the way to a lucrative lifestyle down the road.

            Corporate Credit Concepts makes it easy to establish business credit. To obtain your free report on how to build business credit and obtain Unlimited Financing click here: http://www.freecorporatecredittips.com.



By: Trent Lee

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When it comes time to request additional funds from any bank, it is imperative for a business owner to know the difference between secured and unsecured financing. There are major benefits if an owner knows how to get one funding over the other.

For example, when a bank issues a secured line of credit, they will normally lend you money based upon what assets your business or you own personally. They will also look at your business plan and your credit history both business and personal.

To the contrary, a bank offering you an unsecured business credit line, offers you much more of an advantage. There is no collateral attached to the note and in most cases this type of credit line or loan can be stated income with little or no documentation required.

This second type of business loan is not the easiest to attain. In fact, unless you have an impeccable credit history or know the banker personally, most business owners, especially new ones will be turned down better than 93 percent of the time.

That is why an owner must do his or her diligence and prepare for such a request of financing. If approved, the money can be use for practically anything ranging from payroll to buying new equipment to expanding one’s business to investing.

If you are a start-up or new business, most banks will not offer you such unsecured business credit lines. But that is not to say that banks do not have programs for small start-up business loans. You have to ask and do the necessary research before applying for such business funds.

A word of caution: If you do get approved for such a loan, be sure to use it wisely. Most banks can review your terms periodically and if you in any way break the lending agreement, they can and most certainly cancel or revoke said credit line.

I would like to say with much enthusiasm that as with any business venture, all terms and conditions can be negotiated and at times in the borrowers favor. There are a few banks, 15 that I know personally that will give you unsecured business credit lines in the value of $20,000 to $50,000 with no credit checks all with stated income.

And yes, these are legal lending agreements from some of the top lending institutions in the United States. I would invite you to take a closer look at an amazing banking system that has been around for decades that help business owners just like you and me to ascertain business funding for start-ups, expansion, real estate and stock market investments.



By: Floyd Tapia

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It is almost like a dream come true. After working very hard at your business, you get a huge purchase order from one of your best customers. You can almost feel the sweet taste of success. Soon, however, reality sets in. If you are like most small to mid size businesses, you realize that you don’t have enough money to buy supplies because your suppliers are demanding advance payment. You now risk losing the order unless you find a way to finance it.

If your company has been in business for many years, is reasonably big and has a great track record, you will probable be able to get a business line of credit or a similar type of bank financing. If that is the case, you’ll be able to borrow money to pay your suppliers and fulfill the order. But what options do you have if you are a new business owner or if you run a small business that has no bank credit?

There is a little known and seldom used financing product that could help you in this situation. As a matter of fact, it could help you almost any time you have a big sale to a good credit worthy customer. It is called purchase order financing (also known as purchase order funding or PO funding).

Purchase order funding can provide you with the financing you need to fulfill orders from your large and best credit worthy clients. As opposed to most financial products, the only collateral that purchase order financing requires is the actual purchase order (and associated payments) from your client. The financing company will provide you with the necessary capital to fulfill and deliver the order. They get paid when the client pays for the order. This makes it an ideal product for small and mid size businesses who are growing quickly and need capital to deliver orders to their ever growing client list.

Who qualifies for purchase order funding?

Purchase order funding is ideal for companies that re-sell a finished product at a profit. For example, import-export companies, wholesalers and distributors can certainly use this type of financing. However, if your company buys a product and modifies it before re-selling it, most probably it will not qualify for this type of financing (there are exceptions).

Although purchase order financing can be affordable if your profit margins are right, unfortunately it does not come cheap. This is because most financing companies consider the transaction to be high risk. The total cost of the transaction, from start to finish, can be anywhere between 5% and 15% of the sales price. Because of this, purchase order financing works best with businesses that have profit margins of 25% or more.

Lastly, purchase order funding only works for commercial sales in which the purchasing company has a good commercial credit score (as most large businesses tend to have).

How does the purchase order funding transaction work?

The transaction itself is actually fairly simple. Once you have the purchase order in hand you contact the purchase order funding company to begin the process. The first thing they will do is verify the credit worthiness of your customer. If the credit review is good, the transaction proceeds as follows:



The financing company issues a letter of credit in favor of your supplier. The letter of credit states that payment is guaranteed, provided the supplier delivers the product according to the buyer’s specifications. Almost all suppliers accept letters of credit as payment.



The supplier manufactures the product and ships it to you, or drop ships to the buyer.



The buyer receives the product and accepts it. Your supplier gets paid by cashing the letter of credit.



Your customer pays for the order, usually 30 days or so after receipt. The financing company is paid back for its services and all remaining funds are yours.



One of the remarkable features of purchase order funding is that in most cases, the client has few out of pocket expenses. It’s truly a transaction where you can use other people’s money to grow your business.

Lastly, purchase order financing transactions are frequently integrated with invoice factoring financing. This is a widely used trick that can help reduce the cost of financing the transaction, thereby increasing your profits.

Copyright (c) 2006 Commercial Capital LLC. All rights reserved. Article may be reprinted if not modified.



By: Marco Terry

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Are you selling goods or services to companies in other countries? Although expanding your company beyond your national borders is very exciting and profitable, it will also subject you to the payment habits of your foreign customers. Many times, customers can take as long as 60 days to pay for their goods. Although large export companies can wait that long to get paid, most small and medium sized businesses can’t. This creates a cash flow problem.

Of course, you can always ask your customers to pay you immediately by bank wire as soon as the invoice is presented. However, few customers will abide by that request and you risk loosing business to the competition.

Going to the bank to get a business loan or bridge financing may help, if your business is established, can provide three years of financial statements and if your personal credit is stellar. But, what if you don’t meet banking criteria? Or are a startup? Then you should consider trade finance. Trade financing enables you to finance your local and foreign sales and can provide the working capital that your company needs.

Accounts receivable factoring, a popular trade finance tool among exporters, allows you get paid for your export invoices in as little as two days. It eliminates the 60 day payment wait and enables you to get your paid immediately. This provides you with working capital to pay suppliers and employees.

Export factoring is relatively simple to use and integrates well with most companies. It works as follows:

1. You deliver the goods or services to your foreign client and send an invoice

2. You send a copy of the invoice to the factoring company

3. The factoring company advances you up to 85% of your invoice as a first installment

4. One your invoice is paid, the factoring company will rebate you the remaining 15% as a second installment, less their fee

No two factoring companies will price an opportunity the same way, however most factoring rates go from 1.5% to 3.0% per month. Rates vary based on the commercial credit quality of your clients, your industry and the amount of financing that you need.

As opposed to most trade finance solutions, factoring is easy to obtain and can be setup in a few days. This makes it an ideal solution for small and midsize companies.



By: Marco Terry

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There would be no argument when it comes to the importance of a business owner being prepared and organized when applying for loans or an unsecured business credit line. However, most forget the tedious and necessary process in choosing a lender.

The obvious first choice would be to approach the bank or credit union you currently do business with due to the fact that you already have a relationship with that financial entity. When a lender considers loaning you money, the risk involved is the repayment of said obligation. If on the other hand the bank knows you and your payment history is adequate, this could definitely play in your favor.

Start the process by inquiring with your bank or credit union about the type of loans they offer and the options and restrictions that exist. If you decide not to use this lender, then perhaps consider one that wants your business. This would be the proper time to check the newspapers, yellow pages and research the internet extensively for special or creative financing.

Take the time to understand the different types of funding available to you. Most offer both secured business loans and unsecured business loans or credit lines. One obviously requires you to pledge some type of collateral. This in turns allows you to borrow larger amounts of money at lower interest rates.

An unsecured line of credit is one where no collateral is attached to the loan. But make no mistake. You are still under obligation to make timely payments regardless of whether your loans are collateralized or not. The advantage with the latter is that there are no risks on the assets since they were not pledged as collateral. This is in your favor. Some banks will do this; most will not consider this at all.

It’s good to note that lenders who regularly offer small business loans many times make the easier and quicker process. I would suggest that you seriously consider credit unions when selecting a possible banking relationship.

Credit unions are in most cases smaller which in turn may allow you to discuss your lending needs with upper executives that you normally would not have access to in larger banking institutions. But also realize that even if this should be the case and the person you meet with believes in your idea, your job in securing these funds is not yet finished.

Always make sure that you have a backup lender even though you may feel absolutely sure that this lender will give you the credit lines you are seeking. Keep in mind that there are scores of financial alternatives that are available to you if you do the necessary preparation at the very beginning.

A very strong advantage for you and your business would be if this bank or credit union has experience with lending to businesses that are similar or are in the same industry as yours. This lender should be one that you would feel comfortable enough in developing a strong business relationship with and at the same time fostering a mutual appropriate for you and the lender.

Ask good questions when sitting down and discussing your goals and needed funding. How long has this bank been in business? Do they appreciate small businesses and their contribution to the community and how both of you will benefit monetarily. Is the lender more of a commercial lender or a consumer lender. These answers will be pertinent when it comes to making that final banking decision.

Ultimately your decisions will also mirror what aspects of growth you expect in the future. A larger institution may offer numerous banking resources and locations even to the point of national banking. Yet a smaller bank would offer easier communication with various key personnel that may eventually have insurmountable influence in your day-to-day operations.

Now is the time to fill out a formal application for the amount of funds you are requesting. And if for some reason you are declined for your banking request, don’t give up. Go and use your backup lender. Above all else, be patient and take the needed time to follow through with your arduous task of locating additional funds for your business.

Whatever amount you receive, by making timely payments, this will undoubtedly make it much easier down the road in securing additional unsecured financing thus making your job in this area more enjoyable and profitable.



By: FJ Tapia

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The following are important terms to consider that generally should be disclosed in applications or in solicitations for credit that require no application. Ask about these terms when you’re looking for a card. Annual Percentage Rate. The APR is a measure of the cost of credit, expressed as a yearly rate. It also needs to be disclosed before becoming obligated on the account and on account statements. The card issuer also must disclose the “periodic rate” the rate applied to your outstanding balance to figure the charge for each billing period. Some cards allow the issuer to change the APR when interest rates or other indicators called indexes change. Because the rate change is linked to the index’s performance, these plans are called “variable rate” programs. Rate changes raise or lower the finance charge on the account. If you’re considering a variable rate pre-approved card the issuer needs to provide various information that discloses: that the rate may change; and how the rate is determined - which index is used and what additional amount, the “margin,” is added to determine the new rate. At the latest, you also must receive information, before you become obligated on the account, about any limitations on how much and how often the rate may change. Free Period. Also called a “grace period,” a free period lets you avoid credit card finance charges by paying your balance in full before the due date.

Most companies charge annual membership or participation fees. They often range from $25 to $50, sometimes up to $100; “gold” or “platinum” cards often charge up to $75 and sometimes up to several hundred dollars. Choice Credit gives many options. Some may include other costs. Some issuers charge a fee if the card is used to get a cash advance, make a late payment, or exceed a credit limit. Some charge a monthly fee whether or not you use the card. Choice Credit gives all the info needed to make a wise choice.

If there is not a free period, it’s important to know what method is used to calculate the finance charge. This can make a big difference in how much of a finance charge will be payed - even if the APR and the buying patterns remain relatively constant.



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