by My Commercial Capital | Aug 14, 2024 | Blog
Business lines of credit have many uses, but they are especially effective as cash flow management tools. Their unique features and wide availability make them useful for almost any kind of business, and since they are reusable, applying for one credit line can save you dozens of short-term loan or cash advance applications in the future, making access to capital nearly instantaneous when you need it.
1. Grace Periods That Reduce Interest Costs
It’s not a universal feature of all credit lines, but many of them offer grace periods of two weeks to thirty days before assessing interest on new withdrawals. That means if you take an advance and pay it off before the end of your grace period, the financing cost is zero. Sometimes these lines have small annual fees to offset this benefit, but often it is simply a perk that is balanced by the interest paid when customers carry a debt for months.
2. Cover Emergencies Immediately
You can’t always predict when a sudden expense will threaten to upset your cash flow, and it’s not always a good idea to use your reserve cash to cover those expenses because it can take months or years to rebuild those funds, leaving you under protected against market contractions. Credit lines let you expand your available capital to handle the costs of building repairs or parking lot maintenance without making other bills late and without waiting for a loan approval that could take days or weeks.
3. Credit Line Limits Grow With Your Business
When you use a secured credit line that is attached to a business asset, the two limitations on your line’s maximum balance are your income and your collateral’s value. Many small businesses could get higher limits out of the same collateral with a higher income, so asking your lender to re-evaluate your limits as you grow can get you more resources without opening additional credit lines. Even when you maximize the LTV on one property, many service providers can include multiple assets as collateral or provide lines attached to each asset you wish to use, providing you with greater and greater financial reach.
Finding the Right Credit Line for Your Business
Not all companies need secured lines of credit to operate effectively. Those are often wonderful for operational budgeting that requires a large cash reserve that could cover the entire budget period. For situations where you only need cash for a couple days or weeks, an unsecured line with a lower limit might be the best combination of costs for capital and risk exposure to your company. Check out your choices today.
by My Commercial Capital | Jul 10, 2024 | Blog
Equipment leasing is a powerful financial tool when you understand the situations where it has clear advantages over a loan or cash purchase. Understanding those scenarios is an important step to effectively managing a small company’s growth. What you might not know is that there are also a few universal benefits to leasing that make some companies opt for it just to streamline operations.
1. You Can Upgrade Easily
If you lease equipment, the financing company that actually owns the machine handles delivery and removal. That saves labor because you no longer need to market or scrap used equipment, but it also means you can control your upgrades without any additional costs. Lease terms are negotiable, so you can set yours to end when you plan to upgrade and then simply lease the new model. Your financing company takes away the old machine and leaves you the upgrade, and your only extra cost is the difference in the monthly lease between the older model and the new one, if there is any.
2. It Lowers Your Tax Overhead
Many leases are close to the same cost as an equipment financing loan, so they take the same bite out of your profits. The difference is that a lease is a flat cost of doing business. As a service fee you pay to access the equipment, it falls into the same category of business expenses that other baseline costs of doing business fit into, like inventory costs.
3. There Is a Way To Finance a Purchase Without a Loan
Equipment leasing offers you the opportunity to buy equipment even when you can’t finance it for one reason or another. This is a powerful tool when you consider the tax benefits of leasing. The baseline cost of the lease is a little higher if you ask for a lease-to-own clause, but the fee for keeping the equipment at the end of the lease is nominal because the cost of the machine is recouped over the course of the lease’s lifetime.
That can be better than a loan if you do not know whether you will need to upgrade at the end of a lease, because it does not commit you to buy but it does make sure you have the option. There are a lot of reasons why you might want to finance an equipment purchase without adding a loan to your credit report, too. For more information, look at equipment leasing options near you.
by My Commercial Capital | Jun 12, 2024 | Blog
Lines of credit are excellent financing options for small and medium-sized businesses because they are flexible revolving sources of funding. Here are four things you should know about business lines of credit.
Several Factors Can Impact Eligibility
The first thing you need to consider is the size of your company. If you’re running a small business, then you will likely be eligible. Large corporations typically are not. Start-ups and new businesses are the most common applicants because they need moderate funding quickly and want to build their credit histories. Eligibility can also vary between lenders.
There Are Four Ways To Open Lines of Credit
You can open a line of credit at four types of lenders:
- The SBA 7(a) Loan Program
- A Bank
- Investors
- A crowdfunding playform
The SBA 7(a) Loan Program and banks are the options most small business owners choose to pursue first. They are straightforward options and provide support for applicants throughout the application process. Investors and crowdfunding are more flexible and their eligibility requirements tend to be far less strict. However, they can carry more risk.
You Can Apply for Secured and Unsecured Lines of Credit
There are two main types of lines of credit: secured and unsecured. Most business owners apply for secured loans because these options provide lower interest rates and larger amounts of funding. Secured loans require collateral.
By contrast, unsecured loans do not require collateral. However, applicants must prove that their businesses are stable, that they have consistent revenue or income and that they can provide multiple repayment options. This means it’s more difficult for business owners to access unsecured loans or get their applications approved.
You Need To Be Aware of Application Requirements
Application requirements may vary depending on the lender you open your line of credit with. First, you need to be sure that a line of credit is the right option for your small business. Check that you meet the lender’s eligibility criteria. If you don’t then you should seek another lender. Most lenders require applicants to submit financial documents such as tax returns and their business plans along with their applications. Some lenders may request additional information, such as the amount of money the applicant is seeking or what he or she plans to use it for.
Depending on your financial needs, you may only seek a business line of credit or you may prefer to apply for multiple sources of funding. Lines of credit are good short-term funding options.
by My Commercial Capital | May 8, 2024 | Blog
If you casually survey resources about commercial property loans, it’s easy to get a loose impression that they are all aimed at investors, not business owners. That’s not true, but it can sometimes seem that way because real estate investment is so popular right now. The key to effective financing is finding commercial real estate loans built around the needs of small businesses.
Loans for Buying or Refinancing Properties
The most common reason for small businesses entering the real estate market is to find facilities that fit their needs. The investment makes it possible to drastically reduce overhead once the financing is paid off, because there will be no cost for the space itself beyond property taxes after that happens. Banks and private lenders alike offer commercial mortgages with terms of 10 or 20 years and amortizing payments. If those do not offer the LTV or rates you want, there are also SBA loans that often work better for small companies.
Most commercial mortgages can also be used to refinance a property that needs improvement, using the equity to secure a low interest loan. There are SBA loans for rehabbing properties, but some loan programs only authorize new purchases of assets, not renovation or rehabilitation. The key is to find the right program, because there are a lot of different types of SBA loan.
Working Capital Loans for Small Businesses
You can also find commercial real estate loans that are designed to provide you with cash when you have opportunities and you do not want to take out a long-term loan with a long approval process. These loans are often called operational asset loans or asset capital loans, but they have other names too. They basically work like bridge loans, only with lower LTVs and longer terms. Bridge loans are typically for three years or less, but many working capital loans for businesses that already own property give your repayment windows that run from three to seven years, depending on the lender.
Term loans are not the only option, though. If you want a reusable resource based on the equity you’ve built in your company’s property, there are secured business credit lines that let you tap into that equity when you need it with a self-managed solution. That way, you do not need to wait for loan approval to take a big order or load up on inventory before a high-demand event. Keep that in mind as you consider your options.
by My Commercial Capital | Apr 10, 2024 | Blog
If you have an interest in real estate investments, you have probably seen shows or heard success stories from those who fix and flip homes. However, there is more to success than you may think. It takes strategic planning and careful research to succeed in this type of investment. Therefore, these are a few tips to help you get started.
You Need a Team
First, you need a realtor who has extensive experience and knowledge about the area. These individuals are key assets because they can find you the exact right property, one that has significant potential and a price below the market. You also need at least one contractor who can provide high-quality service at a reasonable cost. This individual should be available to help on your project quickly because every day you hold your property, you have to pay for it. Therefore, you want to shorten your holding costs as much as possible.
If you haven’t purchased or rehabbed a property before, find a mentor who has been successful in the industry for some time. This professional can walk you through the process, allow you to watch several investments and help you find your first. Also, add a mortgage broker, CPA and real estate attorney to your team.
Set Realistic Goals
It may seem like you can get rich quickly after a few fix and flip investments, but that just is not the case. Although this strategy can be lucrative over time, it may take several years and properties to create a sustainable income, and the work doesn’t stop there. Therefore, you need to set realistic goals.
Identify what types of properties you plan to flip. Then, figure out how much you have to spend and how many projects you can complete at once. Learn about true rehabilitation costs and timelines and how long you can pay your mortgage before you need to sell your property. Consider how many projects you want to complete in one year, three years, five years and 10 years. You should also determine how much you plan to or need to make on each flip.
Research the Market
The real estate market has changed over the last few years, especially in some areas. You cannot just rely on your team to guide you into your projects. You also need to research current market trends and local inventories. You need to gain extensive knowledge and continuously research every market you plan to invest in. Cities and counties can have very different trends even if they are right next to each other.
Success as a fix and flip investor requires hard work, dedication and knowledge as well as reliable financing and teamwork.
by My Commercial Capital | Mar 15, 2024 | Blog
With these strategies in place, you will find your business growing before your eyes.
by My Commercial Capital | Feb 14, 2024 | Blog
If you have been seeing increases in sales volume but you aren’t seeing a proportional increase in your profits, the issue might be how you manage your cash flow. It’s entirely possible for a business to make more money than it needs and still wind up with nothing to show for it due to bad money management that creates bottlenecks in productivity and causes unnecessary late fees.
Timely Payment and Costs of Doing Business
When you establish a track record of timely payment with your suppliers, you build relationships that can lead to discounts when you buy at volume or streamlined delivery when you run low on supplies early, but if you are constantly paying late, it’s harder to stay in good standing with the companies that can do you these favors. More importantly, it will invoke penalty payment clauses in your utilities, loans, and credit lines if you have payments due and no working capital because of your own customers paying late.
Cash Flow Management Options
The key to managing cash effectively is having resources that let you meet your obligations when you have payments due but you are also waiting on payments that are incoming. There are several ways to do this, including dipping into your own cash reserves, but the most effective way is often a dedicated credit resource.
Some companies manage this with real estate bridge loans that can be paid back as payments come in. Others finance invoices directly or open credit lines that are only used when there is a temporary cash shortfall. If you do set up a reserve fund to manage your working capital, make sure it is separate from your long-term cash reserves or you will end up using your fallback burn time for everyday cash flow delays.
Streamlining Costs for Capital
Obviously, the key to maximizing your profits when you need to finance outgoing cash is to find the method that gives you the best value for your money. Often, credit lines are chosen because they have short grace periods before interest is charged, so an advance of a day or even a week might not cost anything. Others choose instruments like invoice financing because it lets them outsource a portion of their labor, adding to the value of the financing deal.
The easier you make it to pay your own bills on time when your customers pay late, the fewer unpredictable extra expenses you will have eating up your bottom line. The next step is to figure out which cash management tool fits your business model and industry the best. Often, the best way to do that is to review offerings from lenders, so start your research today.
by My Commercial Capital | Jan 10, 2024 | Blog
If you have been in business for any length of time, you understand the importance of developing and keeping to a budget. However, as a small business owner, you may find it challenging to do everything you need to do on your finances. Because you understand the day-to-day expenses, it can become easy to fall into financial anxiety. Therefore, these are some strategies you can use to reduce your expenditures and stay within your financial limits.
Use Free and Low-Cost Marketing Opportunities
Technology has provided incredible assets that you can use to increase your business. Some of the greatest tools you can use are the incredible digital marketing opportunities. As you build a strong website, you can include blog posts and other content that attract customers. You can also use your social media accounts to encourage engagement and help your target market get to know you and your business. You can also choose pay-per-click options that give you complete control over how much you spend.
The key to a successful low-cost digital marketing campaign is maintenance. You need to make the effort to consistently update and maintain your platforms and website. Constantly give your customers new information about you, your products, how to use them and other topics that interest them.
Watch Your Office Expenses
It can be tempting to overspend on your business. You want to prepare for future expansion expectations. However, you should evaluate every purchase, from new employees to new equipment and larger office space. Determine what you need immediately and what you can outsource either to independent contractors or companies that specialize in these areas.
For example, do you absolutely need an accountant or can you outsource this work to a reputable firm and reduce your costs? Can you lease some of your office space out to other companies and earn a passive income that increases your cash flows? Also, compare the advantages and disadvantages of leasing versus purchasing your equipment.
Focus on Organization
You should know where everything is at any time. You need to understand where and how much inventory you have and what orders you have to fulfill at that moment. Without organization, you can lose supplies or overspend on raw materials because you don’t think you have any on hand. It can also take time for your staff to find what they need, wasting your human resources.
To truly control your budget and expenditures, focus on organization. Then, track what you purchase every month, so you know where your money goes.
Running a small business is complicated and time-consuming, but with the right tools and a few money-saving strategies, you can make sure your company stays within its budget.
by My Commercial Capital | Dec 13, 2023 | Blog
Your organizational culture is evident in three dimensions: visible reminders that symbolize what you stand for, mindsets that reveal the beliefs and attitudes of your staff and visible and invisible behaviors within your company and what triggers them. When you find a discrepancy between these dimensions or find that they are not acceptable, you may desire a change. Therefore, consider these strategies.
Change Behaviors First
Your staff pays very close attention to the actions and reactions of your company’s management. You can share every lofty ideal with your staff, but if your actions don’t back up your words, they will not believe you, and they will follow your actions. You build corporate culture on actions. You can create programs that instill the ideals you desire. However, if you do not act and react in a way that supports and adheres to these ideals, the company will not adopt them.
Therefore, examine your behavior and that of your management. Give them feedback that creates behaviors that your staff can act on, observe, measure and repeat. Show them what actions to take during specific situations. For example, model behaviors that encourage collaboration and empowerment. However, start with a few key actions at first.
Identify and Develop Informal Leaders
You may have observed individuals within your company who do not have titles but whom your employees go to for help, advice and guidance. These individuals are valuable. They can help you motivate your staff and encourage them to seek excellence. They are role models and foster communication within their teams and the organization as a whole.
The great thing about informal leaders is that they can help you change your culture because they will be the first to adopt them. They tend to be eager to adopt new technologies, behaviors and experiments.
Avoid Changing Everything at Once
Company cultures are embedded into the company and staff deeply and are difficult to change all at once. It requires steps and degrees of change. Your culture is not a piece of programming that you can quickly change. It involves many people who have spent, sometimes years, learning how to act in your company. The truth is, no culture is completely bad or good. Instead, all need improvements.
Therefore, take time to evaluate the traits you want to keep and those you want to change. Start slowly, one value at a time. Search for those that are consistently negative or that could lead to corporate or staff harm. Start with these.
These are only three strategies you can use to change your organizational culture. Test them and seek out additional strategies to make your company great.
by My Commercial Capital | Nov 15, 2023 | Blog
The Small Business Administration is known for providing access to business loans for small companies and startups, but what type of loans? What is the range for each? That’s where a deeper understanding of the programs available to you is important, because many SBA loans cover more than you might think, based on their names.
Multi-Asset Loans: The 504 Program
504 loans are designed to group assets together so you can make one deal to finance the whole lot. That has made them popular with startups because it means getting a small shop and all your vital equipment with one down payment and one monthly loan payment. Franchise investors can also use these loans to cover franchise licensing fees alongside equipment and facilities, but the franchise has to be in the white-listed directory available from the SBA.
It’s also important to remember that you can use a 504 loan to buy a single asset. That gives you the chance to get a piece of real estate at a very good interest rate even if you do not want to buy a lot of equipment. Similarly, if there’s one big machine you need and the rest of the shop is handled, the 504 loan might be your best option because of its low interest rates and long repayment terms.
7a Loans for Real Estate
You can also buy real estate with a 7a loan, which was designed specifically for commercial properties. These SBA loans have shorter repayment terms and higher interest rates than 504 loans, but they can be used for more than just a purchase. You can also use 7a loans to cover property improvements or to refinance properties you already own. That makes them very useful for companies like hotels and motels that need to keep updating to stay competitive.
SBA Microloans
The SBA also offers small loans for working capital, without any need for collateral. Companies can get up to $50,000 to use for operational expenses, inventory purchases, or short-term needs like building maintenance or equipment repair. Microloans can have terms up to six years, which makes the monthly cost lower than most other working capital loans, and there is no prepayment penalty.
Finding the Right SBA Loan for Your Business
There are a few other specialized types of SBA loans out there to learn about, like disaster recovery loans. For most small business owners, though, these three loans are flexible enough to provide you with the resources you need to open or to keep expanding. The next step is to check out the current requirements for SBA loans in each category, so you know what you need before you apply.
