Businesses with less than two years operation record may experience hard time in getting business credit.
Banks are not that aggressive to lend their money to newly established businesses, as majority of new business fail in its first two years of operation.
In fact in some countries like United States, almost 90% of small businesses cannot acquire financing assistance from banks.
All businesses need to access an operating capital that will grow for them to overcome seasonal fluctuations of revenues.
Many new businesses fail because of common reason “cash flow issues”, so if you don’t have financing access with your banks, what will you do?
Every businessman is a “risk taker”, some business owners use their personal savings and even their personal ownership at high risk or even involve their family and relatives in order for them to run their business. But this one should not be the right thing to do.
There are methods that every business owner can maximize for their business to operate and even use working capital even without bank loan, investment from your family and friend and personal investments.
There are financing methods, for instance you can acquire equipment by lease, cash advances on merchant, the invoice factoring, and the purchase order financing.
If a newly established business cannot acquire capital to procure certain equipment, leasing it will do. Leasing method is the most viable way of securing needed equipment, vehicles or even computers.
There are leasing platforms that can be used by those who have just started their business and even to those individual that suffers from marginal credit. To tell you frankly, leasing has flexible plans in terms of payment in order to protect cash flow.
Some leasing company even offers a 90 day deferral payment if your credit rating is strong, so business owners can use the equipment for them to accomplish the job before making payment. Leasing with equipment requires lower credit score than borrowing money to purchase equipment.
New business operating as restaurant or in retail is one of the most difficult industries that can secure loan from banks. Reason, this type of business has very little assets for them to secure their financing and they are categorized as higher risk.
If new business receives large purchase they can use purchase order in to obtain funding needed for the firm to purchase the supplies to fill in the business contract.
Financing on Purchase order can provide 100% funding needed in to get things done. Usually this financing system is for those firms engage on import/export or on distribution companies where product is purchased and then resold at a certain profit.
On the other hand there are lenders will look at the covering labor and its associated cost, all depends how credit worthy a customer is and the type of industry they have.
Almost all firms need additional working capital in order to enable growth and survive unforeseen fluctuation of revenues.
Small business owners have seen this as impossible task as banks turn down their financial request. So as business owners, you should know possible options when your bank answers no. Also remember that the survival of their company depends on it.