Essential Steps to Become a Successful Small Business

Managing a small business is challenging. One of the common challenges for business owners is financing. Your company might not have a lengthy credit history or collateral to apply for a bank loan. Whether you want to grow your business or cover unforeseen expenses, you have come across other financing options. Merchant cash advance and cheques factoring are some of the available options for small businesses.

What Is Merchant Cash Advance?

A merchant cash advance is an alternative financing option for small businesses. You can take the funds upfront and pay them off with a percentage of future sales. The MCA is an ideal solution for businesses that need fast funding and might not be eligible to take a bank loan. The availability of funds is another excellent advantage. If your business needs the funds fast to proceed with the operations, the cash advance will be approved within a day or two.

PROS

Fast access to funds

When timing is crucial and you can't go through the lengthy bank approval process, the MCA is your solution. Small businesses can get funds within a day or two from submission. Unlike the traditional bank process, the financial institutions that issue MCAs don't do rigorous checks. They will check the business's past sales to determine whether they qualify for a cash advance.

Ideal for businesses that work with cash and credit cards

Retail and restaurant businesses rely on a high volume of credit card sales, making them ideal for obtaining MCA. If your business depends on cash or credit cards, a cash advance is the ideal financing method. This opportunity is perfect for the ones that don't rely on invoices. Instead, they take a percentage of the credit card sales to repay the loan.

CONS

High-interest rates

Merchant cash advance comes with higher interest rates than traditional bank loans. The convenience of having the funds fast will cost more. However, the price is worth paying when you need urgent funds to proceed with the business operations.

What Is Cheques Factoring?

A post-dated cheque is a cheque that can be cashed on the indicated date on the document's face. It is a form of advance payment and can be cashed on a specific date. According to Canadian laws, a cheque can't be cleared before this date. If you still need cash to keep your business's liquidity, you can sell the cheque to a factoring company.

PROS

Fast approval

Depending on the date indicated on the check face, you might have to wait long to receive the payment. If you need to meet your business needs urgently, factoring your cheques will provide you with funds quickly. They will pay off a particular value of the face value while keeping a specific percentage as a fee.

No credit score checks

When applying for a traditional bank loan, they will do a rigorous check on your financial history. When your small business is relatively new and doesn't have a credit history, you might be restricted from obtaining such loans. Your ability for cheque factoring isn't assessed with credit history, and you aren't required to disclose collateral. This is very important, as you don't need to put your property or equipment at risk. The factoring company will check the check for authenticity.

Not deal with cheques

Having to deal with cheques is a tedious job. Passing this responsibility to a third party means less time spent sorting out cheques so that you can focus on the more important aspects of your business.

CONS

Higher cost

The factoring company will charge fees to provide you with the cash in advance. They will usually pay 80% of the amount indicated on the face. However, the high cost might pay off if you need money urgently.  

Requirements

Cheques factoring companies might have specific requirements for cashing out your document. For example, the check drawer should be a reputable entity. Also, the factoring company might have particular requirements on the cheque's active time.

Merchant Cash Advance vs. Cheques Factoring

For cheques factoring, you will pay a fee to the factoring company expressed as a percentage of the total amount. On the other hand, you will pay off your MCA as a percentage of your future sales. When choosing the suitable financing method for your company, select the one that is a better fit for your needs. We at 2M7 are dedicated to providing the needed funds to enhance your business's liquidity without restrictions on how to use them. Get in touch with us, and we will answer your specific needs!

The great majority of small businesses go under because of cash flow issues. You know the importance of cash flow for that reason. That doesn’t mean you don’t face seasonal cash crunches.Seasonal cash flow struggles are quite common, even among established businesses. You can take the strain off by employing these five effective methods of solving cash flow challenges.

Know Your Problem Seasons

The first step in combating cash flow challenges is know your problem seasons. For seasonal businesses, this may be obvious. If you run a golf course, you might find cash flow tightens up during the winter. If, by contrast, you have a ski club, then winter could be boom season for you.Knowing when you’re most likely to run into trouble can help you plan for those dry spells more effectively.

Shift the Timing of Financial Commitments

Once you know when your cash crunches are most likely to happen, you can work on scheduling around them. Try to shift any major financial commitments to other times of the year.This might include adjusting when you order stock or how you organize your tax year. A golf course may not want to make a major tax payment at the end of April, because funds are already tight.You may not be able to move every financial commitment, and that’s fine. By shifting some earlier or later in the year, though, you can make all your obligations easier to manage.

Offer Incentives for Customers to Pay Early

Another tip for meeting seasonal cash flow challenges is to entice customers to pay early. If you invoice your customers, you could offer them a discount if they pay before the indicated due date.You may encourage prepayment or even down payments. For example, if you run a mattress shop, then you could ask people to put a down payment on their purchase.You can make this a seasonal offer and encourage customers to “buy ahead.” With more money flowing in, you’ll have an easier time managing your cash flow.

Get a Merchant Cash Advance

Sometimes, the answer to cash flow challenges is credit. That’s particularly true of seasonal cash crunches since they’re usually temporary in nature.A merchant cash advance is one of the better choices you have to manage seasonal cash flow. With one, you get the cash you need against expected future sales. As sales take place, you’ll pay back the advance.

Diversify Your Business

One of the best ways to solve seasonal cash flow issues is to diversify the business. If you run a golf course, you might also operate a banquet hall. Acting as a wedding venue can keep cash flowing, even during the winter season.If you face seasonal challenges, think about the ways in which you can diversify and offer more to your clients all year long.

Get a Helping Hand with an MCA

If you’re feeling pinched, it might be time to get a merchant cash advance. Get in touch with the experts and discover what the right financing option can do for your business.

If you are looking to grow your business, then you may find it challenging if you have poor credit. However, there are a number of options that can help your business get the financing with poor credit. Here’s a look at the steps you can take to secure fencing for your business with poor credit.

1) Check your credit score

The first thing that you should do is know your credit score. If your credit score is below 700, then your credit will be considered subprime. Also, this can prevent you from the top business financing options. You can credit your credit score for free on Credit Karma. You can also request one credit report, per year, from the two major credit reporting agencies.

• Experian to include a different link https://www.transunion.ca/
• Equifax - to include a different link https://www.consumer.equifax.ca/

2) Know your options

Once you know your credit score, then you can explore your options. In fact, if you have a low credit score, then you will want to consider the following types of financing options:

• Business credit cards - There are a number of business credit cards that allow customers with subprime credit scores. While these credit cards may have higher interest rates, they will allow your business to get the quick funding that you need.
• Merchant cash advance - A merchant cash advance is an advance based on the credit card sales deposited into your business’s bank accounts. In short, a merchant cash advance can help you get access to your money faster for a small fee. Many businesses used merchant cash advance to gain faster cash flow.
• Short-term line of credit - A short-term line of credit allows you to draw from a pool of funds. When you pay back the loan with interest, then you can draw from the line of credit again.

3) Create a business plan

If you are looking to secure a short-term business loan, it is a good idea to have a business plan. After all, the bank will want to know what type of business that you are in and how you intend to generate revenue. A well-organized business plan will increase your chances of being approved for a short-term business loan.

4) Have collateral

If you have any form of collateral, then you can secure a loan much more easily. Here are some types of collateral that can allow you to get the funds that your business needs:

• Vehicle
• Property
• Inventory
• Unpaid invoices
• Cash

5) Find a co-singer

Finally, you can find a co-signer that can help you secure a loan or financing with poor credit. A co-signer can be anyone from a member of the family to a business partner. The co-signer should be aware that they are liable for the loan if you don’t pay back the principal or the interest.

Getting your business up and running

Bad credit doesn’t have to stop you from funding your business. At 2M7 Financial Solutions, we do not require a credit score to issue a merchant cash advance. Apply now to get a merchant cash advance today.