Different Methods of Financing

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Different Methods of Financing

Relying on traditional loans for expanding your business isn’t always the easiest process nor the most advantageous route to take. There are several options out there that are much less advertised but exist nonetheless. Here are some examples of different options that you can take to secure some funding or inventory to keep your business growing.

1. Vendor Financing

Companies can sometimes offer to lend some money to their customers in order to allow them to buy more products from them. Although they are lending money out to eventually have their own products bought, often enough, the purchaser will have the clientele but not enough cashflow to make the inventory purchases. On the other hand, the vendor is increasing his or her sales! There are many pros and cons to vendor financing but some of the important things to take away from it are:
Advantages to purchaser:

- There are no constraints on the how much the vendor can finance
- The purchaser can negotiate the interest, repayment rate and terms

Disadvantages to the purchaser:

- It is higher risk for the vendor, therefore may translate into higher cost of products
- The products that were a high commodity one week, may no longer be in demand a week later

2. Supplier Chain Financing

Similarly to vendor financing, supplier chain financing or supplier credit financing fall into very close realms. The idea is basically the same: some businesses need inventory but do not have the financing to match the demand. Suppliers will often offer a credit for their products and expect the repayment to be made only after the sale to allow the client not to make any purchases from money out of his or her pocket. Just like vendor financing, there are some pros and cons to keep under consideration.
Advantages:

- You can receive goods and services but only pay AFTER you have sold them
- Your cashflow increases drastically by getting goods on credit
Disadvantages:

- A new business might not be eligible for supplier financing as their history is too new
- The conditions of repayment could potentially be very stiff as they are written up by supplier

3. Merchant Cash Advance

A MCA is an alternative source of funding for small to medium businesses. The company issuing the advance purchases a portion of the merchant’s future debit and credit card sales. As opposed to having fixed payments or accruing interest, the MCA Company collects a portion of the company’s daily debit and credit card sales and applies that to the fixed amount owed. Like any other financing methods, we do have our pros and cons:
Advantages:

- The client can choose exactly where to invest the money
- The repayment rate depends entirely on the amount of sales generated
Disadvantages:

- A MCA could potentially have a higher cost than traditional financing

Spring Cleaning for your Business

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The moment you step outside and take a deep breath of warmer air, a feeling of refreshed possibility and excitement fills your body. The winter months are cold and unforgiving to Canadians, as hibernation tends to trump most activity – but that’s in the past…

It’s time for a season of renewal and regrowth. It’s time to get up and achieve the goals you’ve set for yourself and your business. It’s time to make your push.

Adequately preparing your business for the next few months starts with some Spring cleaning.

Here’s 4 ways to rejuvenate your business and make your mark this Spring.

1. Inspire and Energize your Team

Your team is your business’ lifeline. If your team is happy, they will undoubtedly spread the love and your customers will feel it. Treat them to lunch and explain where you want to bring the business. Set aside some time for some team bonding and fun.

Connect with your team on another level and show them how valued they are. Let them express their opinions and see what ideas they come up with to better the business. (read 5 easy ways to keep employees motivated)

2. Establish more efficient processes

There is always room for improvement. Speak with your team and find out where they think things can be improved. Are some tasks taking far too long to complete? What do they think is less important? This could be a good time to reinforce your reasons, and improve your processes.

Review your business and see where things can be streamlined. A well-oiled machine will help everything run smoother.

3. Take a step back and listen

When you walk by the same coffee shop every morning on the way to work, you start to ignore what’s around you.

It’s routine. It’s expected.

This tunnel vision often clouds your ability to notice the details. In that sense, stepping back and watching and listening to your business can provide a new perspective on your operations. Spend a half-day observing as objectively as possible, and make the adjustments to improve.

4. Clean up

Perception is everything. Tackle the areas that you’ve been putting off and get it done now. Could your business use a fresh look? Invest in some new coats of paint and focus on presentation.

Your business is an extension of you. Make the right first-impression to new customers and start the ball rolling on developing repeats.

 

Advanceit has helped more than 12,000 Canadian businesses – let us help you.

Call 1-866-889-9412 ext. 4305 or fill in our form, a Funding Specialist will call within 1 business day. 

Small Business Financing

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We received a lot of questions in the last weeks asking me specifics about what a Merchant Cash Advance entails and how it works exactly. We decided to take a minute and explain just what it is in a nutshell.

business financing

What is a Merchant Cash Advance?

A MCA is an alternative source of funding for small to medium businesses that have difficulty getting funding from traditional banks. Due to rigid prerequisite requirements and in most cases, unattainable qualifications for small businesses, a merchant cash advance is more than just a viable option.

 

Why exactly would you choose to get a Merchant Cash Advance?

Although MCAs are only one a few alternative financing methods like franchise financing or investors financing, MCAs have in fact helped a lot of small businesses survive during a very difficult recession. The moment that tight cash flow or the desperate need for a large amount of money is an issue for the continuation of the business, MCAs can definitely help.  These kinds of cash advances are expected to be paid within 6 to 8 months which is why this wouldn’t be ideal for a long term goal unlike other forms of business financing.

 

How does a Merchant Cash Advance Work?

Keep in mind that MCAs are specifically designed for merchants, therefore, everything from the application process to the actual funding process, all the way to the repayment method are catered to merchants. The company issuing the advance purchases a portion of the future receivables of the the merchant’s debit and credit card future income. As opposed to having fixed payments or accruing interest, the lender simply collects a portion of the company’s daily debit and credit card sales. This process continues until the entire balance  is repaid at which point, there is usually the opportunity for more financing.