Traditional Financing Gone For Small Businesses

If you own a small business and have been in the bank lately there are only two letters that you've heard. They are N and O! This recent article in Newsweek highlights the challenges that small- and medium-sized business are have in obtaining financing.

The example is a 46-year old plastic bagmanufacturing company that had solid relationship with his bank. With a company this established and marketing a core product one would think that they are a sure in for bank financing. Now imagine being a successful business that has been around for a couple of years.

Their are other options out there depending on your industry and product or service you sell. For companies that sell B-to-B a good route might be traditional factoring of their account receivables or spot factoring of just a few invoices. A manufacturer may be able to do an equipment lease back or certain piece of equipment or vehicles. Of course many service, wholesaler and retailers may be able to take advantage of the merchant cash advance.

For each of the above there are different fees and costs. All provide a low documentation, convenient alternative to bank financing. Of course the rate charged for each is higher than what you used to be able to get at your bank. Expect to pay two to four times the yield rate that the bank offers. So while access to capital is going to cost your business more than the past, its still out there for when you need it.