The rapid growth of previously unknown companies has created a wave of over-ambition in small businesses. They feel pressured to expand as quickly as possible and therefore tend to overlook major uncertainties or important data that should make them think otherwise. This causes the business owner to believe the company is ready for growth when in reality, there is still a long way to go.
Before considering small business funding, potential applicants should know if their companies have truly generated momentum worth investing in. If the answer is no, you will almost certainly experience great difficulty obtaining and paying back a working capital loan.
Here’s a few reasons you might be looking to grow too early:
Consistent vs Temporary
It’s easy to get excited when business is on the upswing. But is this spike in customers gradual or sudden? At first, the latter scenario suggests that all these new customers have finally realized how amazing your business is and from this day forward, will pretend your competitors do not exist. The truth is, an increase in business could have nothing to do with the quality of your products or services. It could be entirely attributed to seasonality, market fluctuation, or simply the allure of a new, local business in town. You should wait a while to determine if the change is temporary.
Seasonality is a great reason to seek working capital loans or merchant cash advances, which are designed to help prepare for the busy season during the slow season by hiring more people or launching marketing campaigns. Larger investments like additional property, however, might not necessarily be a wise choice for a business that experiences dramatic dips in revenue for several months throughout the year. This is why merchant cash advances, a.k.a credit card processing loans, are an attractive option for younger businesses with little or poor credit history.
The Nature of Customer Requests
Successful businesses learn what their customers want by listening to them, both directly and indirectly. They take heed of complaints and comb social media to gauge their target demographic’s opinions on their industry. Loyal customers will sometimes go as far as to make specific requests for new products or services. These requests, however, don’t necessarily mean your company is as popular as you might think. Asking for new releases isn’t the same as asking for more locations, hours, or a stronger online presence.
So instead of reaching for a long-term, traditional small business loan, consider a short-term working capital loan to boost productivity, hire more workers or acquire new equipment. This program supplies enough funding to cover regular business expenses while you interview and train your new hires or put your new equipment to work. Small business funding from United Capital Source carry the most flexible terms on the market, and therefore allow you to make the bulk of your payments when your new hires or equipment begins to increase your revenue stream.
Profits Don’t Just Steady Themselves
This is closely-related to the first section about regular customers. Applying for small business funding requires you to examine your business’s cash flow and financial standing. This will help you figure out how much capital to ask for as well as how much debt you can accrue without hurting revenue. Preparing financial paperwork will also show you the consistency of your profits, which is a very important piece of information when it comes to choosing the best type of small business loan for you.
The best terms are usually awarded to borrowers poised for steadily-increasing profits, even if revenue is expected to fluctuate here and there. Since a merchant cash advance is paid back via future credit card sales, the amount you receive is based on the amount of revenue you are expecting to generate with your desired investment. Accounts receivable factoring, on the other hand, supplies an amount based on how much your customers owe you. The main purpose of accounts receivable factoring is to create a steady stream of revenue for companies that would normally not be paid in full for approximately 90 days.
Your business lender buys your existing accounts, which means you basically get paid up front every time you do a deal. This is a very easy way for companies with formerly unstable finances to make investments and prepare for unplanned expenses or seasonality. The consistent revenue created by accounts receivable factoring also makes you more eligible for sizable small business loans with convenient terms. If you have large or plentiful accounts, United Capital Source can turn this into the cash flow you need to take on a new level of demand.
Prepare For Growth With UCS!
When you looked at the title of this article, you probably expected to read about credit score, net worth, or industry reputation. But as you can see, the performance of your business is the deciding factor for business funding applicants of United Capital Source. We do not discriminate entirely based on credit history, the size of your business, or how “risky” your industry is perceived to be. Our small business funding products are designed to put any hard-working company into a position for further growth. So while you might not be ready for exponential growth at the moment, we know you will be by the time your funding is paid back in full!