What You Might Not Know About Applying for a Small Business Loan

How to Prepare for a Small Business LoanYou May Never Learn Why You Were Rejected for a Business Loan

With personal credit, you always know why you were turned down. It’s mandatory for lenders to provide you with credit report disclosures and let you know where you can obtain the credit report. It’s not as transparent with business credit. Lenders don’t have to directly inform you of the reasons. Instead, they can tell you where you can obtain the information.

Applying for a Business Loan Can Impact Your Personal Credit

While personal and business credit are separate, they do overlap. Lenders often use personal credit scores as criteria when deciding whether or not to extend business credit. One unpleasant fact about personal credit scores is that any inquiry into a credit report can have a negative impact on the score. In other words, applying for business financing can actually lower your personal credit score, though this is seldom by more than a few points.

You Don’t Get Free Business Credit Reports

It’s common knowledge that consumers can easily obtain free credit scores or credit reports. You’ve probably seen hundreds of ads telling you where you can get these. In fact, when an individual applies for credit and is turned down, he or she must be informed of which credit reporting agency provided the report. The applicant can then order a free copy of the report. Unfortunately, the same isn’t true for business credit reports. Many small business owners don’t even know that business credit reports exist. There are separate business credit scores but you have to dig a little deeper to get them.

What to Know Before You Apply for a Small Business Loan

Keeping the above factors in mind, it’s good to be prepared before you apply for business financing.

  • Review your personal and business credit scores before applying for loans so you know where you stand. While lenders don’t provide free business credit reports, you can get these. The major credit reporting agencies will provide them for a fee. There are also resources online that tell you how to get free business credit reports.
  • Study the lender’s qualifications before applying for a loan. This saves you from wasting your time and possibly adversely affecting your credit score.
  • If you do apply for a business loan and are turned down, do whatever is necessary to find out why.

Small business loans are one way to obtain necessary capital and improve your business’s cash flow. Another way is to use invoice factoring, which provides you with immediate cash based on accounts receivable.

Invoice factoring is the purchase of accounts receivable for immediate cash. Invoice factoring gives businesses the power to ensure growth without diluting equity or incurring debt. After invoices are submitted and verified, they are funded by Riviera Finance within 24 hours.

To find out if your business might benefit from factoring, call Riviera Finance for a free quote at 800-872-7484.

Translating the Finance Jargon

How to Understand Finance JargonThe worlds of business and finance are full of jargon. If you don’t have a business degree or many years of experience, you may be confused or intimidated by some of the terminology. This is especially true when it comes to areas, such as factoring and business financing.

Often, you’ll see terminology with slight variations and you may wonder if two terms are referring to the same thing or if there are differences.

Here’s a brief description of some finance jargon you’re likely to encounter:

Trade Finance – This is a broad term that refers to any type of financing for commercial transactions.

Factoring – This is the practice of a business selling its invoices or accounts receivable to another business, called a factor, at a discount. This allows the business to receive immediate cash.

Invoice Factoring – This is the most common type of factoring that is commonly discussed today and refers to the type of arrangement mentioned above.

Discount Factoring – Another term that is often used interchangeably with factoring and invoice factoring, but most often outside the United States.  The factoring company “discounts” the face value of the invoice and retains the discount as its fee.

Accounts Receivable Financing – This is an umbrella term that includes factoring and accounts receivable lending.  Whereas factoring is an outright purchase of receivables, accounts receivable lending involves a loan secured by receivables as collateral.

Working Capital Financing – Any type of financing that is used to provide ongoing working capital for a business.

Inventory Financing – A loan or line of credit made to a business so that it can buy essential products or inventory for eventual sale.

Revolving Line of Credit – A specific amount of credit that is available on demand to a borrower.  Once the loan is repaid, the business can borrow again. The terms may change over time, but the basic arrangement remains steady.

Asset-Based Lending – Any type of business loan that’s secured by assets or collateral.  Assets include inventory, accounts receivable or anything of value that the business owns.

Purchase Order Financing – Also called purchase order funding. This practice is usually confined to businesses that sell products rather than provide services. It allows such businesses to obtain financing for purchase orders that they couldn’t otherwise fund.

It can be confusing to understand finance jargon because many of these terms are quite similar. Furthermore, you’ll find that different financial institutions may use them in slightly different ways. It’s always important to make sure you understand the specific terms of any arrangements that you enter into.

Invoice factoring can be a beneficial practice to help businesses improve their cash flow. Riviera Finance is one of the most trusted companies in this field, with experience in business financing since 1969. If you think that your business might benefit from factoring, visit the Riviera Finance website or call for a quote at 800-872-7484.

How to Grow Your Small Business

10 Tips to Grow Your Small BusinessIf you want to grow your small business, you need a clear strategy. Small business growth is a result of doing many small things right on a regular basis. Let’s look at some of the top grow small business tactics that you can start implementing today.

  1. Identify Your Niche

Do you know exactly what your niche is? It’s important to carve out your place in your industry and differentiate yourself. This helps you choose the right products for your customers and price them accordingly. Additionally, look for products and service to upsell and cross sell within your niche.

  1. Create a Business Plan

If you’re applying for a loan you need a formal business plan. However, this is something all businesses really need, even if you aren’t submitting it to anyone. A clear plan identifies your goals, business model, target audience and long-term objectives.

  1. Value Your Team

The people who work with or for you are your greatest strength when it comes to growing your business. Cultivate their loyalty and show them that you’re in tune with their needs. A team that works in harmony towards a common goal is the best recipe for growing a small business.

  1. Target the Right Customers

One of the most fundamental grow small business guidelines is to know your customers. You want to identify exactly who is the best audience for your products or services. Research the demographics of your market and find out as much as you can about who can benefit most from your products.

  1. Manage Cash Flow

While a plan is great for long-term goals, you also have to focus on the short term. This means, more than anything else, cash flow. Make sure you have the right amount of inventory, stay on top of accounts payable and do everything you can to get the best possible terms from suppliers. Many businesses run into trouble before they ever become profitable because they don’t properly manage this issue.

  1. Understand Your Profit Margins

Another essential quality of small business growth is understanding which products are most profitable for you. This isn’t always the products you sell in the greatest quantity or at the highest price. Identifying the most profitable products provides a valuable clue about the direction you should take in the future.

  1. Adjust Your Prices

Small businesses usually start with certain assumptions about how much to charge. In many cases, raising your prices is a simple way to make your business more profitable. Consider the real value you’re offering and, if appropriate, start charging more.

  1. Manage Your Finances Monthly

A monthly management plan is one of the best ways to effectively control and understand your business on a day-to-day basis. Work with your accountant or whoever is in charge of finances and work out a system to manage your accounts monthly.

  1. Know Your Best Customers

In every business, some customers are more profitable than others. These may be the customers who buy from you most frequently or who recommend your business to others. When you identify these customers, it’s wise to make a special effort at cultivating them.

  1. Automate Your Operations

By automating as many aspects of your business as possible, you free up your time and make it easier to scale up. Look for tools and services that help you do things faster and more efficiently.

Small business growth depends on many factors. The above guidelines are a good place to start if you want to cover all of your bases and make steady progress in building your business.

Developing a Cash Flow Analysis

Develop a Cash Flow AnalysisNothing is more vital to small businesses than cash flow. Managing the flow of cash for your business is essential for managing your operations, maintaining adequate inventory and expanding. Many businesses struggle in this area as they fail to develop cash flow mastery. This often comes down to a lack of knowledge. If you don’t perform cash flow analysis, you may not recognize problems until it’s too late. The process can be broken down into two main parts.

  • Inflow – This is money coming into your business, whether from selling your goods and services, asset sales, loans or lines of credit. Obviously, your objective is to maximize inflow.
  • Outflow – This is money flowing out of your business. This includes business expenditures such as purchasing inventory, payroll, loan payments and purchasing items and services needed to run your business.

While the general idea is simple enough, it’s more complicated to thoroughly understand how cash is flowing in and out of your business from day to day. For this, you need a system in place.

Cash Flow Analysis

Before you can improve your financial situation you need a thorough understanding of how cash is moving in your business. Breaking everything down with cash flow analysis is important for understanding the health of your business. This includes:

Tips to Manage the Flow of Cash in Your Business

  • Net Income and Losses – By analyzing all of your operating activities, including sales and expenditures, you come up with a net figure for all non-cash items.
  • Financing – Loans are part of the inflow and outflow of cash for your business. When you take out a loan, this is inflow. Making payments is outflow.
  • Investments – If your business has investments such as property, securities, equipment or other assets, this is included in the inflows and outflows of cash. Purchasing assets is part of outflow, selling them is categorized under inflow.

Here are some ways to improve cash flow for your business.

  • Collect receivables consistently. Make sure you don’t lose track of customers with outstanding invoices. Offer customers incentives to pay faster.
  • Seek ways to reduce outflow. Always look for ways to cut costs without compromising quality. This may involve downsizing the size of your space, using more economical services or cutting back on ineffective marketing campaigns.
  • Keep cash reserves. Many businesses fail due to lack of cash reserves. Be careful not to overextend yourself and keep some cash on hand during shortfalls.
  • Arrange favorable arrangements with suppliers. By extending payables as long as possible, you increase the amount of cash at hand.

For any business to succeed, it must develop cash flow expertise and understand the short-term and long-term inflow and outflow of money. One extremely effective way to gain control of your cash flow is to use invoice factoring so you get immediate cash for accounts receivable. Riviera Finance is an experienced leader in business financing since 1969.

How to Improve Your Business’s Financial Position

How to Improve Your Business's Financial PositionThere are many factors that determine your business’s overall financial state. To make improvements, you have to assess every aspect of your business and identify areas that need improvement. There are also certain actions you can take right now that can give you better results.

Here are the top 10 ways to improve your financial business position.

Lower Your Expenses

One of the best ways to improve your financial situation is to reduce expenses. Take a look at every area of your business and see if you can find cheaper alternatives for supplies, equipment and services. See if you can find better terms for bank accounts and insurance policies. For larger expenses, find out if you can arrange periodic or deferred payments to keep more cash available for you.

Recover Outstanding Payments

Unpaid invoices can really harm your cash flow and the overall health of your business. If this is a recurring problem for you, it may be time to use a debt collection agency. In the meantime, make sure you regularly remind debtors of their obligations. Also, when making sales agreements, make sure the terms are clear about when the payment is due and terms for overdue payments.

Sell Unused or Unwanted Assets

Do you have items that you no longer need that are just taking up space? Selling them gives you immediate cash. If you’re paying for storage, you also save money on this expense. If you have a large number of such items, consider putting them up for auction. There are auction houses that specialize in business items. Or sell items yourself online with eBay or another online auction or retailer.

Consolidate Debt

When seeking ways to improve business finances, it’s important to look at your current debt. If you have significant debt, it may be advantageous to consolidate it. It’s often simpler and more economical to refinance your debt into a single payment. Do some research and compare different plans before committing to a new arrangement.

Lower Your Prices

When it’s feasible, lowering your prices is always a good way to drum up business. Of course, you have to make sure you’re not losing money. However, in some cases, even a slight markdown helps make your products or services more appealing to customers.

Raise Your Prices

While lowering prices often helps you get more customers, in some cases, the opposite strategy is a better option. Some businesses offer prices that are below market, perhaps because they haven’t adjusted them in a few years. If you can increase your prices without losing too many customers, you may find that this is a good way to improve your financial business position.

Give Customers Multiple Payment Options

The more options customers have to pay, the more chances you have to make sales. In addition to credit cards, some people prefer to pay via personal checks or payment systems such as PayPal. Some businesses now accept Bitcoin as well. See how many new payment options you can offer.

 Raise Money With Grants or Crowdfunding

Do some research on any grants for which you may be eligible. The Small Business Administration, for example, provides grants and loans for small businesses. Another option worth looking into is crowdfunding, which is especially suitable if you have an innovative new product or service on the horizon.

Apply for Business Financing

Applying for a loan can help you acquire some needed capital and improve the condition of your business finances.  If your business credit isn’t established yet, if your growth rate makes your bank uncomfortable, or if you simply want to avoid debt, explore invoice factoring.  If you can raise some money on your own, perhaps from savings, friends or family, you’ll be in a better position to negotiate terms from institutional sources.

Improve Your Marketing

If your marketing isn’t up to date, this is a good time to look for ways to improve it. Consider all of the latest marketing options and platforms, such as email, social media, video and retargeted advertising. Make sure you test all of your ad campaigns to make sure you are getting a solid ROI.

Whatever your situation, Riviera Finance is ready to discuss your cash flow needs.  Contact us today.  If we can’t help you with invoice factoring, we’ll do our best to find a source for you.