How Acquiring Working Capital Through an Alternative Lender Can Help Your Retail Business Fix Cash Flow Issues
Written by Chad Otar, Managing Partner/Co-Founder of Excel Capital Management.
All retail business owners understand that they will run into some hurdles over time due to slow growth periods, seasonality, economy troubles, and unforeseen circumstances. Despite these issues, payroll, expenses, and overall business operations must still be taken care of. Rethinking business strategies, regrouping with your team, and enforcing some positive thinking helps to lift spirits, however, sometimes you just need a little extra working capital to turn things around. Many business owners will opt to apply for a loan via a traditional bank. This is a great idea, however, due to strict guidelines and requirements, retail business owners who have less than perfect credit, low monthly sales, or minimal time in business will more than likely be declined. Even seasoned business veterans can run into these problems. In addition, obtaining a working capital loan through a traditional bank is a lengthy process, and one that can take too long for businesses that need capital fast, but there are options.
These days, thousands of retail business owners are seeing the advantages of acquiring working capital through an alternative lender. Alternative lenders offer working capital funding solutions through various platforms such as the Merchant Cash Advance, ACH Loan, Equipment Financing, and more. Typically, all that is required by the lender in order to generate an approval and offer is a simple application (usually only one page long), four months of recent business bank statements, and 4 months of recent credit card processing statements (if your business accepts credit cards). Many business owners are approved within 24 hours of applying and can be funded in 72 hours or less. This means you now have access to the capital you need quickly, and can focus on what’s important – your business. Alternative lenders understand that this is what matters most to you, not filling out piles of paperwork.
Last month, we discussed a few of the alternative funding options available to retail business owners to obtain working capital. Let’s recap:
ACH Advance: A form of a merchant cash advance that is repaid on a daily basis by direct ACH debits rather than a merchant account. These are still a purchase of receivables and the amount debited via ach are determined by the amount of credit card processing sales that are batched out the previous day.
SBA Loan: The US Small Business Administration 504 Loan or Certified Development Company program is designed to provide financing for the purchase of fixed assets at below market rates.
Term Loans: A loan that is backed by a bank for an exact amount that has a specified repayment timetable and interest rate that are adjusted accordingly. Terms mature between 1 and 10 years.
Business Lines of Credit: A rotating loan that gives business owners access to a fixed amount of money, which they can use day-to-day according to their need for cash. Interest is only paid on the amount of the advance actually used.
Asset Based Loans: A business loan secured by collateral.
So, once you decide to take advantage of one of these various funding solutions and are funded, you now have the capital needed to fix cash flow issues. Let’s take a look at how:
New Hires: Many retail business owners may opt to hire new staff during slow periods to help generate growth. Maybe you need someone to hand out flyers on the weekends. Maybe you need to hire a marketing professional to update your marketing campaigns and generate new business.
Inventory Purchases: Unforeseen circumstances to arise from time to time. For instance, natural disasters. Does your beauty supply store need to purchase newly released styling products or re-up the inventory of combs, scissors, hair color, style books & magazines after a recent flood? This can all be done with your newly acquired working capital.
Purchase New or Fix Existing Equipment: Unfortunately, sometimes cash flow issues arise to new competition. Does your clothing store need an updated screen printer to continue to compete with the store down the block? Maybe your jewelry store needs to fix it’s soldering kits and engravers to offer more customized items. You can use your working capital to purchase new equipment, make repairs, and stay competitive in your industry.
Employee Training: Not everyone is set out to stay with a company forever. When your star employee leaves, business may take a turn, especially if they were responsible for important tasks within your company. While productiveness and morale may slow down a bit, you can always use your newly acquired working capital to train your existing employees on new systems, techniques, and jobs previous employees may have done. Doing this will allow for growth within your team and business overall, and hopefully in turn, the ability to generate more revenue.
Cash Flow issues will arise at one point or another for your retail business. Having access to additional working capital when you need is key to rectify these problems. When the big banks can’t do it for you, consider an alternative lender. You may be surprised with the results!