Alternative Business Loans

Creative Financing For Your Business

Alternative Business Loans come in many shapes and sizes! Many family business owners enjoy the flexibility offered by these creative financing options.

The "home town banker" was the traditional loan maker to family businesses. But as local banks were gobbled up by the larger regional banks, the ability for a family business to call his/her friend down at the bank for a short term loan are days gone by!

"Smart family businesses have found that there are many other financing options - it is just a matter of finding the best financing option to meet the needs of your business," according to top family business expert Don Schwerzler.

Schwerzler has been studying and advising family business entrepreneurs for more than 40 years and he is the founder of the Atlanta-based Family Business Institute.

One of the most popular alternative business loans is Equipment Leasing An equipment lease can give the family business owner long-term flexibility in controlling the useful life of equipment in your business. As an example, with technology equipment, rapid advances and changes can occur in two or three years causing obsolescence. The business can protect themselves from obsolescence by setting up their lease structure so that when their lease expires, they can either return the equipment and get newly updated models or purchase what they have under lease at fair market value and continue using it.

A lease can expand a company’s budget because affordable monthly payments can mean the difference between improving your business now or waiting for a time when more cash can be made available for acquiring that equipment.

The leasing company can provide the business with terms from 6 TO 84 months with flexible payment plans to suit the requirements of the business. Some businesses may have requirements to work around the seasonality of their business and need payment schedules that allow them to skip a payment in a certain month or even reduce payments over a specified time period because that time of year may be slow for them. The lessor will then provide level or structured repayment schedules for the business as needed. Structured repayment schedules can include: moratoriums, skip payments (as in skip the July payments every year), graduated payments to start slowly then build over time giving the time for the business to grow from use of the equipment. These options can all be combined with varying end of lease options, such as: fair market value, 10%, 5%, etc.

Leasing allows a business to establish additional credit lines because their existing bank lines are not touched and can continue to be utilized for other financial needs of the business.

Leasing offers significant tax advantages because the lease payments may be deductible as an operating expense, depending on how the lease is structured. A lease professional or accountant can assist you in defining the specific advantages for your business.

Leasing can be a good move to hedge against economic changes such as inflation. When a business leases equipment, they pay for it as they use it. When purchasing, they pay in current dollar values for future use of the equipment. So as inflation occurs, leasing provides protection against future decreases in dollar value.

Another example of alternative business loans are Vendor Financing Programs For vendors and manufacturers, having a financing program for your customers simply makes good sense. At the top of a long list of benefits is the ability to help you increase your sales by offering financing. Just think of how it would impact the success of your business to be able to provide your customers with 100% financing to include freight, installation and soft costs such as services and training. The benefits include having joint marketing information and financing options branded as your own or dealer demo unit programs allowing you to finance demo units.

For many family businesses, another source of alternative business loans are Asset Based Loans(ABL) Often family businesses have multiple assets at their disposal and simply need to unlock those assets to help grow the business.

Traditionally, a business will obtain bank lines of credit with accounts receivable serving as primary collateral for their loans – but there are other options. A family business may also secure additional funding with loans on inventory, equipment, trademarks, and other assets.

Dating back to the 1500's, one of the oldest forms of alternative business loans is Factoring Cash flow problems? Factoring offers immediate cash flow solutions using the receivables of a family business. The factoring approach can “financially bootstrap” a family business - getting through tough times or through times of rapid growth and expansion. Simply put, factoring is where a business sells their receivables at a discount for immediate cash flow.

Factoring enables a family business owner to sell their invoices and receive a cash advance within 24 hours. Generally the cash advance will be within the range of 75%-95% of the value of the invoice. When the customer pays the invoice (30, 60.or 90 days later), the family business receives the balance of the invoice minus the factoring fee.

Many family businesses provide alternative business loans to their customer using Business to Consumer Finance Programs If you are a family business selling products through installment contracts to consumers, you understand the complexity and frustrations of financing, servicing and collecting on those contracts.

Outsourcing the financing, servicing and administration of these contracts might make sense. Firms that provide outsourcing services can purchase in-house portfolios or ongoing consumer contracts as they're generated. They can also create consumer finance programs for all types of retail installment contracts, promissory notes and other instruments that more traditional lenders refuse to handle. The advantage of selling contracts is that your family business can receive immediate cash. Sometimes getting immediate cash, versus waiting for monthly payments, can help business operations.

Alternative business loans can be “industry focused" like Healthcare Funding Physicians, dentists, medical practices, nursing homes, home healthcare companies, physical therapy and rehab clinics – all can benefit from industry focused alternative business loans. Because they are industry specific, these alternative funding resources are often better than using traditional banking or finance companies.

Alternative business loans can help your family business develop international business relationships Import/Export and Trade Financing We are now a global economy – and family businesses need to be prepared to deal with businesses located in foreign countries. Alternative business financing can establish international trade financing or obtain letters of credit. Many of these alternative business finance companies now have offices in countries like China and can help family businesses identify strategic trade partners in the Far East.


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