Working Capital Help

Working capital financing efforts are rarely problem-free for small business owners, and now economic uncertainties have resulted in new and significant financial challenges. The good news is that there are effective and practical solutions for most of these commercial finance problems. Some unavoidable negative news is that successful business finance programs capable of avoiding key problems are usually difficult to find and have generally become more complicated.

With working capital loans, there is often a need for both problem-finding and problem-solving. Because there is in fact a new set of business finance difficulties to be confronted by small businesses, the importance of evaluating lending problems has assumed a new level of importance with recent bank troubles. Most of these problems are typically not apparent to the average commercial borrower, and this can produce unpleasant surprises later.

For many new commercial borrowers, their previous investment finance experience has been limited to their home. There are about 25 differences between commercial loans and residential mortgages, and this has been a major difficulty to overcome for a number of years. In a common example, even experienced commercial borrowers are often confused that they cannot obtain small business loans for the same cost, terms and interest rate as their home mortgage.

Many lenders have simply stopped making business loans, and this is clearly one of the biggest new working capital management problems seen almost everywhere. Many lenders are not informing their borrowers on a timely basis about their inability to provide commercial funding, and this is proving to be an even bigger problem for impacted businesses. There are many disappointing reports about commercial borrowers being told at the last minute that their commercial loan would not be approved after waiting several weeks to complete the commercial financing or refinancing process.

The growing shortage of lenders that will provide short-term working capital help is a critical new business financing problem. While the number of lenders providing commercial real estate loans (which require the property as collateral) is shrinking, working capital financing (which does not require separate collateral) has become even harder to find consistently. This particular problem is currently impacting virtually all businesses because even thriving businesses usually need periodic working capital management help with short term business financing.

Solutions will of course vary based on circumstances for both old and new business loan problem issues. Commercial borrowers should be encouraged to know that they have more commercial financing choices than they probably realize. With the help of a working capital expert, finding and solving business finance obstacles should be easier than tackling the challenge alone. Business owners should probably be prepared to avoid the banker and bank that caused their business financing and working capital problems in the first place when seeking commercial finance solutions.

One of the potential benefits in achieving improvements to credit card processing is reducing outlays for one of the highest variable expenses with a business accepting credit cards. Even when costs cannot be reduced, it will generally be feasible to obtain working capital that can be applied to payment of other business expenses.

Merchant loans are among the short-term financing options related to recent credit card processing volume. This business finance option is also referred to as a working capital advance, credit card factoring, business cash advance and credit card financing. The advance will be paid back gradually as credit card transactions are processed after a business is approved and receives an initial fixed amount of cash. A prudent business funding process will typically require two to three weeks. While this has proven to be a useful commercial financing approach for small businesses to obtain operating cash quickly, merchant financing can also result in several undesirable problems if executed improperly. Business cash advance and credit card factoring programs are not the same, and the differences are significant in many cases.

Many business owners are evaluating the option of business refinancing as a source of working capital help in their search for business financing choices which can provide cash flow quickly. Profitability issues, fees and extended length of time to obtain cash from refinancing business debt mean that this option is not always practical regardless of the reasons to refinance. The volume of credit card processing could permit a small business owner to obtain either a business cash advance or a working capital loan that is large enough to make refinancing unnecessary. An additional advantage of obtaining short-term working capital financing instead of refinancing a long-term commercial loan is the shorter time frame required to obtain cash (usually one to two weeks).

Some working capital management programs will make the replacement of the current credit card processor appropriate in order to produce immediate cash flow and realize the maximum cost reduction possible. As just noted, however, there are several alternative business financing options which will result in more working capital for a business without impacting the current credit card processing arrangement.