Most people thing that having bad credit disqualifies you to obtain business financing. This white paper provides information to alternative financing options many people do not know are available.

1. 7 [Type text] to Finance a Small Business
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You can’t drive around the corner to the 7-Eleven and back for a Slurpee
without a tank of gas. American small business owners need fuel.
They’re standing in line at the gas station of banks and credit unions
begging, near dying to get their business moving. Washington knows it.
They know without capital, our economy will continue to slump, as it
has for the last four years. Washington has tried boosting the lending
market, of course, with a flop, a belly-dive into that empty pool that’s
left Main Street still asking, “Where are the funds?”
They’re out there. Believe it or not, they’re out there. Not around a dark
corner, or in a dark alleyway from some shady dealer, they’re in the
swamp of misinformation. The funds are out there. In many ways, there
is more funding available than ever. Business owners merely need to
know where to find it. While there is no question that securing financing
has changed over the last few years, other forms of financing have
emerged to help business owners. Business owners just need to know
their options, the types of capital they can pursue, and how to position
themselves to grab those funds.
According to the U.S. Small Equipment Financing is used
Business Administration, exclusively to acquire business-use
85% of all companies lease equipment, but can also be used to
equipment. 89% of those obtain cash on paid-off equipment.
companies will lease Approvals are typically based on credit
equipment again in the
score, collateral, financial history, and
future.
value of the equipment.
Equipment loans and leases can be obtained as an SBA or Sale-
Leaseback. Typically they require collateral. Approvals are based on
credit score, collateral, financial history and strength, and the market
value of the equipment.
Some equipment financing programs may help replenish cash flow, and
more closely match the monthly revenue and expense associated with
the purchase. Many equipment leaseback programs are good options
for those who have purchased equipment and wish to use the proceeds
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2. 7 [Type text] to Finance a Small Business
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from new financing as a source of additional working capital, or to pay
off existing high interest debt Cash-starved businesses may want to
consider leasing equipment to get access to things like computers, copy
machines, fax machines, trucks, and more. Securing financing for your
equipment, instead of buying, can reduce the amount of cash you’ll
need to operate, start or raise funds for your business.
When you lease equipment, a manufacturer, dealer, or lender either
buys or already owns the equipment you want. In exchange, you make
monthly payments to the owner (lessor). The monthly payment
structure allows you to treat the payments as tax-deductible business
expenses.
Short-term leases might cost you less than buying new equipment every
year, and some even have yearly computer upgrades built into them.
A merchant cash advance is a funding
option that can provide a small-
business owner with fast access to
working capital by selling a portion of
their business’s future credit card sales
to a cash advance provider at a
discount. A merchant cash advance is
also sometimes called credit card
factoring or credit card receivables funding and is typically provided by
specialty finance companies rather than banks or credit unions.
There are many advantages of a merchant cash advance over a
traditional business loan. For example:
 There are no fixed monthly payments and no fixed maturity
dates since it is not a loan.
 Payments to the cash provider can fluctuate based on the
merchant’s sales volume. This is ideal to help manage cash flow
during slower seasonal trends.
 Approvals and funding are quick – the entire process can be
completed in as little as 3 business days, which is much less
time than a typical small-business loan takes.
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3. 7 [Type text] to Finance a Small Business
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 Large advance amounts are available – merchant cash advance
amounts typically range from as little as $5,000 up to $200,000
per business location. Typically, business loans are much smaller
due to their structure.
 No personal guarantee is required – all small business loans
usually do require one.
Many Companies have the From time to time, companies may need a revenue source to get
majority of capital tied up in through a rough spot, or to finance a project that is expected to yield
inventory. Accounts large dividends. When these types of situations arise, there is the option
receivable funding allows a
of accounts receivable financing as a way to continue operations while
company to free up capital
resolving the issues that created the temporary crunch.
tied up in inventory.
There are two distinct alternatives when it comes to accounts receivable
financing. Lenders may use the average monthly accounts receivable
revenue as the basis for extending a loan. The amount of the loan will
take into amount the average aging of the account debtors, consistency
of the monthly billed revenue generated by customer accounts, and the
usual amount of payments received per month.
Along with the total amount of the loan, these factors will also be used
to determine the amount of the monthly payments on the loan. With
this alternative, the company retains all control of its receivables and is
responsible for handling collections, posting payments, and all the usual
accounting functions. Generally, this is a workable alternative for a
corporation that is in a short-term money crunch for some reason, and
needs funds to get through six months to a year.
For companies that are attempting to
regroup after some sort of major crisis,
such as using up resources to fight off
a takeover attempt, the concept of
factoring as a means of accounts
receivable financing is a common
practice. Lenders who specialize in this
form of accounts receivable financing
usually charge a flat fee per billing period, plus a fixed percentage of the
total billed revenue for the period. In exchange, they factor the total
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4. 7 [Type text] to Finance a Small Business
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billed revenue, less their percentage, and advance that amount to the
company.
With this sort of arrangement, the lender assumes control of receiving
all payments on the invoices issued by the company, takes over the
collection process, and supplies the company with periodic reports on
payments received. This allows the company to still post payments in
their billing system, so there is an accurate record of what is paid and
what is outstanding.
Typically, the account debtor cannot be released from an accounts
receivable financing arrangement until the terms are completely
settled. While the loan form of accounts receivable financing has an
obvious end point when the loan is paid off, the factoring type of
accounts receivable financing may be more difficult to arrange. Working
with the factoring lender to determine when the last batch of invoices
will be factored and making arrangements to pay off any outstanding
invoices that were factored will keep the process ordered, so customers
are not confused about where to remit payments.
Unsecured small business loans are the ultimate solution to the
perpetual problem of lack of funds for small business and
entrepreneurs. While secured loans have played their rounds,
unsecured loan is becoming the preferred choice for more and more
small business. An unsecured small business loan comes with a host of
advantages, the main one being they do not require any type of
collateral. Though unsecured loans would attract a higher rate of
interest the flexibility with the terms and conditions and ease of
availability makes them the first option for all small business.
As the small business owners have often seen people falling in trap with
secured loans they are more inclined to go for unsecured small business
loans offered by lending companies at flexible terms and easy interest
rates to satisfy their need for finance. Unsecured business loans are
gaining from the general aversion towards secured loans that has been
growing in businessmen and common people over the years.
Though unsecured small business loans would come with a higher rate
of interest, it is pretty reasonable and logical. The lenders put their
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5. 7 [Type text] to Finance a Small Business
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money at stake by offering loans without security, so they need to
charge this higher interest rate to set off the higher degree of risk
involved in the whole process. However, in most cases the lender would
like to confirm about the credit history of the borrower before offering
an unsecured small business loan.
Borrowers appear to prefer A major source of financing for small
the ability to refinance businesses in the United States is the
existing debt, and the U.S. Small Business Administration
relatively low rates & fees
(SBA). Thousands of small enterprises
associated with SBA 504
who were unable to secure loans from
Loans.
lending institutions on their own were
supported by the SBA's various loan
programs. Businesses cannot solicit
loans from the SBA unless they are unable to get funding independently.
The main component of the SBA loan system is its 7(a) programs that
annually accounts for the vast majority of the loan guarantees
distributed to small businesses. Loan guarantees made through the 7(a)
programs totaled $10.5 billion in FY 2000, accounting for approximately
91 percent of the total of all SBA loans made during that time.
Under the 7(a) Loan Program is the most popular of the agency's
programs. Under this program, the SBA does not actually make direct
loans to small businesses. Instead, it assures the institution that is
making the business loan—usually a bank—that it will make payment
on the loan if the business defaults on it. Since the SBA is taking
responsibility for the loan, it is usually the final arbiter of whether a loan
application will be approved or not.
The 7(a) Loan Program was formed to meet the long-term financing
needs of small businesses. The primary advantage of 7(a) loans is that
business enterprises are able to repay the loan over a very long period
of time. Ten-year maturities are available for loans for equipment and
working capital (though seven-year terms are more commonplace), and
loans for real estate and major equipment purchases can be paid back
over as long as 25 years. The SBA can guarantee 75 percent of loans up
to $750,000, and 80 percent of loans of less than $100,000. The interest
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6. 7 [Type text] to Finance a Small Business
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rate of 7(a) loans cannot exceed 2.75% over the prime-lending rate. The
SBA maintains several individual loan programs under the 7(a) umbrella.
These include CAPLines, LowDoc, SBAExpress, EWCP, DELTA, and an
assortment of other lending initiatives targeted at specific sectors of the
small business world.
If you need funds to buy another business, this is your option.
Acquisition Loans can be used to acquire, refinance, or purchase a
business or franchise. There are several eligibility factors which can
include the value of the business, experience of the owner, and the past
performance of the business.
A business acquisition loan is used for financing a new acquisition,
refinancing, or franchise purchase. Oftentimes an SBA guarantee is used
to secure the funding for the lender. The lender will examine the
business’s performance, the experience of the borrower, and the value
of the business. Lenders generally want to see a new business plan and
financial projections.
4 things to know about an acquisition loan:
 Lenders are looking so see if you have industry experience
 Need down payment (more the better, but minimum of 10%)
 Lenders will look at cash flow of business you’re trying to buy
 A lot of moving parts since you’re buying a new business
Bridge loans can be very Commercial bridge loans enable you to
useful in commercial real have access to short-term funds that
estate, for people who have bridge cash flow timing gaps allowing
to acquire quick funding in
you or your Company to execute some
order to save a piece of
sort of interim task. For example, if you
property from foreclosure.
have to pay a balloon payment that's
soon to be due on an existing
commercial loan, you could deal with
that balloon payment until you receive permanent financing. Or if there
is only a limited time-frame during which a particular piece of
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7. 7 [Type text] to Finance a Small Business
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commercial property is available, you can utilize bridge financing to get
that asset, then repay your bridge loan with funds from your permanent
commercial mortgage. So, fundamentally, commercial bridge loans are
short-term commercial real estate financing vehicles that you have the
option to use for temporary financing until you improve, refinance,
lease up, sell, or complete the property.
As a way to compensate for their short-term nature and their greater
risk level, bridge loans are inclined to have greater rates of interest than
permanent commercial mortgage loans. Generally, commercial property
bridge loans have terms that range from six months to one year. Quite a
few commercial bridge lenders actually allow you as the borrower to
extend your bridge loan for an additional 6 months to 1 year for a fee
that usually ranges from a half-point to 2 points on a case by case basis.
Commercial property bridge loans are generally repaid when the
borrower places permanent financing on the real estate, after
improvements are finished and new tenants move in. As a consequence
of their short-term attribute, bridge loans usually don't have any
prepayment penalties.
Here's a typical commercial real estate bridge financing scenario: Let's
pretend that you've got a 275-unit less-than-perfect apartment complex
running at 40% vacancy in a seriously nice area under contract at $10
million. You’re in depth due diligence has demonstrated that the
property will likely be worth $22 million after just $3 million in
renovations that can take seven months to finish, after which you
should be able to raise the rents to warrant the higher post-renovation
valuation. Consequently, you collateralize the subject property to get a
$13 million commercial bridge loan to cover the purchase plus
renovations, complete the work, lease-up the apartment complex to
over a 90% occupancy rate, then 7 months in the future, you refinance
the property with $22 million permanent financing generally in the form
of a conventional commercial mortgage loan based on the greater post
renovation valuation from which you pay back your original bridge loan
in full.
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8. 7 [Type text] to Finance a Small Business
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A variety of sources for financing is available for businesses. Depending
on how the business is organized and its overall financial condition the
best available sources can be sought. In the different phases of the
business cycle where a business exist a classification of financing with
the different maturity periods is shown in the chart below.
Blue Ray Financial Blue Ray Financial is composed of a group of highly experienced and
P.O. Box 750534 seasoned, certified, financial professionals. With our knowledge and
Forest Hills, NY 11375 expertise, we can find the right solution for all your financing needs.
Phone: 718.554.3841 Unlike local lending institutions, which only lend to the most credit-
Fax: 718.732.2405
worthy businesses, we have programs available for all credit types and
email: info@brfinancia.co
company sizes. Perfect credit is not the only factor we use in qualifying
Connect with us: you for a loan, and If you business has good cash flow… You are
approved. If you business needs financing, we will guide you in choosing
the best option available. For more information, visit
www.brfinancial.co. You can also connect with Blue Ray Financial on
Facebook, Twitter and Google+.
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