What You Need to Know about Auto Business Loans
So you saved up $300,000 of your own money, and you brought in investors to pony up another $500,000 in investor money so that you could start you r own auto repair business. Loans were the last thing on your mind, because you thought you had enough money, from your own savings and with your investors. But then refurbishing and equipping your facility cost more than you thought, and a lot of the cash that you were going to put toward operations was taken up just getting ready to open the doors. You had an aggressive marketing campaign in place, and you had business from Day One, but not as much as you had planned. So now that you’re a nearly 12 months into running your shop, you still face tight days when it comes to cash on hand. Your business is increasing to the point where you really want to consider buying the vacant lot next door and adding capacity, but there’s no way you can do that right now.
Or is there? A lot of banks won’t help out new entrepreneurs with auto repair business loans. A lot of our customers complain that the banks won’t lend money except to people who don’t really need the money, and in a real sense this is true. Even people who are applying for auto dealer business loans are also finding that traditional lending sources have tightened up their requirements and are not helping entrepreneurs find the capital that they need to start and expand their small businesses. This approach to providing working capital is shortsighted. Sure, there are some businesses which are poorly conceived and shoddily planned, and those are bad investments for any lender. However, there are also many entrepreneurs who have done the research to find the perfect location for their job, have saved up to open their doors, but don’t have the lending profile that banks will appreciate. Still others have room in their budgets to pay back the money they receive to help them grow their businesses, but they don’t have the liquidity to take on a fixed monthly payment. If either of these scenarios sounds familiar, take a look at this article about the merchant cash advances that our lending network offers, and see if this sounds like it will help you. Many entrepreneurs throughout Canada & the United States have taken out this type of cash advance and found it gave them the boost they needed to elevate their businesses.
You might wonder why you should take out a cash advance when you already have investors who have helped to fund your business. However, if you go back and ask investors for more money before they have seen a return, you can get a much different response than what you got the first time. Even if you get approval for a loan, that process can take a month or two, even if your first application is approved. A cash advance gives you the money you need when you need it, instead of making the bank’s timeline the priority.
So here’s how it works. When you contact BBC (or any broker or provider of merchant cash advances), a record of sales records over a term specified term will be required. How much money has been coming in the door? How much do you make from credit or debit card sales? (We’ll go over that in more detail down below). Your personal and business credit scores do play a role in the decision, but your business revenue (cash flow) is more important in the decision to approve your advance – and how much the advance will be, and what your factor rate is going to be.
The factor rate tells you how much you’ll have to pay back. If you receive an approval for a $200,000 merchant cash advance for your auto repair business, and your factor rate is 1.2, then you pay $200,000 x 1.2 back – so a total of $240,000.
How do lenders figure out how much to advance you, and what the factor rate will be? Factor rates generally vary from 1.15 to 1.45. Credit scores come into play, as well as your daily sales. The amount of time that your business has been open plays a role as well. The other important number is the repayment percentage (aka retrieval rate).
Every day that you are open and do business, a set percentage of your credit and debit card sales will go to your merchant cash advance provider. The good thing is that on days when your sales are down, your payment is less. On big days, the payment is greater, but the flexibility tailors the repayment plan to your business cycles.
When you negotiate the advance with your provider, try and get the lowest percentage rate possible when it comes to payments. You don’t save any money by paying the advance back sooner – for the $200,000 advance above, you would have to pay back $240,000 whether you had a huge boom and made it in two months or took a year and a half to pay it back. So having a lower percentage rate gives you more flexibility.
Now, if you run the numbers and start thinking about the APR involved, this is more expensive than taking out a bank loan. But if you don’t have the credit or business profile to get approval for a bank loan, and if you need the flexibility that percentage-based payments would provide, then this arrangement will help your business much more than a new installment payment would.
In addition to the flexible payments and the fast approval rate (you will get funded in a week or less in the vast majority of cases), there is the added bonus that no collateral security is required. Its repayment is tied to your credit and debit card sales for your business, so if those dry up, then that’s that. The risk of this is a part of the calculation of your factor rate and approval amount.
So if you have opened an auto repair business, and things are tight at the beginning despite the fact that you have robust sales, a merchant cash advance can make all the difference. You can refill your savings coffers and put money toward marketing and expansion. You’re paying yourself back every day with a percentage of your revenue, but you would be doing this with any sort of financing. Why not choose a vehicle that offers as much flexibility as possible? Many entrepreneurs all over Canada have benefited from this type of credit, using the infusion of cash to make that expansion or higher those extra employees, and the resulting increase in revenue has made the advance more than worth it.
Want to more? Get in touch with BBC today. We have a network that will work with just about every industry and credit profile. Call or email today!
FAQ: Oil and Gas Business Loans
For the consumer whose only interaction with oil and gas exploration, loans seem like the last thing that these companies would need. After all, there is a steady stream of customers who need gasoline on a regular basis, so every day you see people driving up to the pump, hopping out and pouring money into the service station’s coffers in exchange for a tank of gasoline.
However, for those who are in oil and gas production, loans are a part of everyday conversation. Prices for oil are at relatively low levels, at least in comparison to the 2000s, thanks in large part to a decision by the OPEC nations to increase their production supply. This might seem counterintuitive until you realize their motive – to get the United States and other North American nations out of the production business. Thanks to the innovation known as fracking, exploration companies have gained access to new pockets of gas and oil, which threatens the monopoly that the OPEC nations traditionally held on fossil fuels. Fracking is more expensive than the methods that the OPEC nations use, though, so with prices kept lower, there aren’t as many profits to go around. Companies end up having to close or at least put a hold on their operations, which (as many Albertans have learned) means a freeze on jobs and a freeze on revenues for the businesses that serve the oil and gas industry.
Even with higher pricing, though, oil and gas loans are still a common topic for business owners in the industry. Rig counts can go up or down by as much as 30 or 35 percent per year, which means that if you are an oil and gas entrepreneur, you’ll have times when you have wheelbarrows full of cash, but you’ll also have times when you don’t have two loonies to rub together as you wait for your next infusion to roll in.
That’s where the topic of oil and gas bridge loans comes up. Even when companies are riding the swell of a boom, they don’t often have the liquidity to keep up with the expansion. Whether you own an oil and gas exploration company, a parts manufacturer that serves the industry, or even a restaurant in a town that depends on the oil and gas industry because the majority of jobs serve that field, your financial fortunes ebb and flow with those of that black gold lying beneath the ground.
How do bridge loans for oil and gas work? Well, traditional lenders will provide credit and financing for oil and gas exploration companies as well as those companies who provide what the companies need. You get the money now, but then you have to take on a new monthly payment in your budget to satisfy the principal and interest. And if your business and personal credit scores aren’t so hot, and if your business is too new, and if your revenue streams aren’t where the bank wants them to be, then you won’t get the loan – and you don’t get the time back that you spent answering all of those queries that the loan officer kept sending your way.
At BBC we have decided to join a growing trend in business financing – merchant cash advances for customers who have the business coming in the door to handle payments for additional liquidity but don’t fit the cookie cutter profile that the banks have apparently decided is the only suitable one for loan approval.
Here’s how your merchant cash advance would work. Let’s say that you have had your company up and running for six months, and your revenues have steadily climbed, but you need money in order to purchase some new equipment if you are going to take advantage of some more exploration opportunities that you have learned about. However, you don’t have the liquidity on hand to make the purchase, and you haven’t been in business long enough for the banks to lend you the money – and you don’t have the steady income stream that would handle fixed monthly payments.
You’re far from alone if you’re in this situation – and BBC stands ready to help. We represent a network of cash advance lenders that work with a wide variety of industries in Canada – and a wide variety of borrowing profiles. Our advance providers will want to know your personal and business credit scores, but that information is less important to them than it is to the banks. What they want to know is how much money your business is bringing in.
Once they have this information, they will determine how much of a cash advance you can qualify for. They try to get their money back within nine to twelve months, so even though there is not a fixed payment schedule, they use that formula to determine how much to advance to you and what your daily payment percentage would be. The particulars of your credit profile, the length of time your business has been open and the amount of money that you bring in will all combine to determine your factor rate.
Here’s how it works. Let’s say you gain approval for $600,000 to put toward some additional equipment acquisition or leasing. Your factor rate is 1.3 (they usually fall between 1.1 and 1.4). This means that you will pay back $600,000 x 1.3, or $780,000, on a daily (or sometimes weekly) basis. A percentage of your daily or weekly income will go directly to your cash advance provider.
On days when you have a lot of business, you’ll make a bigger payment. But on days when things are going slowly, then you don’t pay as much. In an industry that is as cyclical as oil and gas, you may have days where you don’t even bring in a single dime. That’s all right as far as the advance goes, because if you make nothing on a particular day, you pay nothing.
Obviously, the advance provider is banking on you having a lot more big days than small days, because the purpose of the advance is to help you boost your business and find new ways to elevate your revenue streams. The flexibility of the payment terms is one of the most attractive features of this loan for many of our customers.
However, an underrated factor with these advances is the speed of approval. On a traditional bank loan, even if the first bank approves your financing, it can take a month or more to get your money. With a merchant cash advance, you have your money within a week, with only rare exceptions.
Also – in the rare case when the absolute worst happens – if your business goes under, you walk away from the advance obligations. The provider can’t attach liens to your personal assets, such as your house, because the only collateral is your business receipts. Obviously, this happens to only a very small percentage of the entrepreneurs who take out these advances, but having that in the back of your mind can be comforting.
So what’s the next step? If you think that this might be a good idea to help your business to get to the next level, then BBC stands ready to connect you with the advance providers in our network. We take your information one time and send it to the lenders who best match your profile, and we have a response to you within a matter of days – or even hours. Get in touch with us today!
The Skinny on Business Loans for Dentists
When you first headed off to dental school, you likely envisioned a day when you would hang out your own shingle in a practice, either by yourself or with a partner or two. All of those long hours in dental school would pay for themselves when you would be able to leave the practice for the day at noon on Wednesdays and Fridays, heading to the golf course, the tennis courts or wherever you like to spend your afternoons.
Of course, the first years in independent practice are not always that easy. You may have started off in a larger group and brought some of those patients to your own private practice, but even if you have already put together a robust slate of patients, there could be times when you wanted to expand your business – moving into a larger suite of offices or into a better part of town, investing in new equipment, or relocating your practice because you decided to move to a different part of Canada – but you don’t have the liquidity that you need do pull it off. You’ve heard about dental small business loans, so you decided to go to the bank and see about getting the financing that you needed.
Unfortunately, because your practice has only been open for about nine months, the bank is a little skittish about extending you the money. It doesn’t help that you went through a divorce a few years back and your wife let some of your bills lapse without you knowing it, and one of your cars was almost repossessed. You redeemed it, but that’s a stain on your credit for a couple more years. She ran up a ton of money on some joint credit cards that you didn’t know about until the bank ran your credit report for your loan application. Business loans for dental professionals are often difficult to come by – ironically, even more so for the dentists who actually need them.
So if you’ve headed to one or more banks in search for business loans for dental practice expansion and haven’t gotten the answer that you wanted, then you’re far from alone. One reason for BBC was to connect small and mid-size business owners like you with the funding they need to expand their operations and take their dreams to the next level. Far too many dentists (and entrepreneurs in a variety of fields) have felt the same frustration that you have – you’ve put together a business that’s succeeding enough to merit expansion, but you don’t have the liquidity on hand right now to make that happen. You know that there is no such thing as standing still as a business; if you’re not growing, you’re getting ready to shrink, because the competition is out there working to grow as fast as they can.
So let’s talk about how a working capital cash advance might work for your practice. You and your college roommate went to undergrad and dental school together, knowing that one day you would want to open your own practice. So you scraped your way through dental school. You spent a couple years working in a larger group to save up the money that you would need to open your own practice together.
Then, you finally did it. You pooled the money you and your partner had been saving up and opened your own practice in offices in a blue-collar part of town. Some of your patients came with you, but a lot were leery of driving across town just to keep you as their dentist. You’ve just found out that some offices are opening up in the same part of town as the practice where you worked before opening your door, and even though the rent will be three times what you’re paying now, you feel confident that you can cover it. The problem is that you will need to pay for your moving expenses, and you need to upgrade your furniture. You haven’t been open that long, but you started out with secondhand equipment and see this as the right time to upgrade, along with your upgraded clientele.
You’ve been to the banks, though, and you haven’t gotten the answer that you wanted. At BBC we have a number of lenders waiting to help you with a working capital cash advance to get you the liquidity that you need. You come in and go through the application process: we run your personal and business credit scores (they play a role in the final decision, but not as strong a role as they do with a bank loan), as well as three to six months’ worth of bank statements for your business, as well as records of income from credit and debit card sales. Within a business day or two, you should have at least one offer from the BBC lending network. You fill out just one application, but the information goes to multiple lenders in our network.
Let’s say that you get approved for $400,000 at a factor rate of 1.15. The factor rate tells you how much you have to pay back when you take the advance, and it generally varies between 1.15 and 1.45, with such factors as your credit scores, the length of time your practice has been up and running, and the regularity and volume of your credit and debit card income over that time. You multiply the advance amount by the factor rate to learn that you will have to pay the provider back $460,000.
What’s the term? However long it takes you to pay it back. If that sounds too good to be true, it is worth pointing out that you will have to pay that total back whether you can settle it in six months or two years – there is no bonus for early prepayment. The factor rate reflects your cost.
So how do you make payments? They come out of your debit and credit card payments each business day or week. You and the advance provider come to terms on a repayment percentage, and that’s how much you send to the provider each business day (or week, in some cases). So if your repayment percentage is 12% and you bring in $10,000 in credit card and debit cards on a particular business day, $1,200 of that would go to the provider.
But what if no one pays with a card on a given day? Or what if you only take in one $50 payment via card, and the rest come from cash, cheques and ACH transactions from dental insurance payments? Then you only would pay $6 on your advance that day (12% of $50). Your payments vary as your income from the agreed sources does.
The advantages of an advance like this include a swift approval process and flexible payment terms. You can also qualify for more this way than through a traditional loan, because the advance providers use cash flow records to make the decision about how much to send you up front, instead of the assets that you already have on hand.
Curious to know more? Get in touch with BBC today. We’ll go over where your dental practice is now and make recommendations about the best path forward.
Securing Loans for Your Restaurant Start Up (2400) –
Opening a restaurant is one of the most exciting small business startups that an entrepreneur can engage. If you’re taking this journey, you have come up with a concept that is fresh and innovative in your community, both in terms of cuisine as well as the overall ambiance. This represents a significant risk, as many of the new restaurants that open each year end up closing within 12 months. However, if you can get your business together and attract a clientele, this is a terrific way to make a lot of money while giving your community a unique gustatory experience.
Starting a small restaurant business involves a significant level of cost, as you might imagine. Before we move into a discussion of some creative ways to gain restaurant startup financing, let’s take a look at some of the costs you will face as you put your business plan together.
One of the most basic cost areas includes rent and utilities. Depending on where your restaurant is located, you can expect to pay between $10,000 and $15,000 for your first month’s rent, and the same amount again as your security deposit. There are also the utilities from the first month to consider, which can go as high as $3,000 or $4,000 – including telephone and Internet service. If you are going to buy a lot and build, or buy an existing building, that will bring about a significant cost all its own – and you still need to have the money of those utilities in mind.
The above costs do not include the price of improving the space so that it meets your needs. If you’re going to have to add a customized buildout for your kitchen, plan to spend as much as $400,000. Furniture for your restaurant, including tables and chairs, could easily cost $40,000 or $50,000. Then there’s all the bar equipment, as well as the tableware, dishes and kitchen utensils. Block out $75,000-$100,000 for that. You’ll need to lay in your first round of beverages and ingredients, which could easily cost you $10,000 to $12,000. Even if you’ve already thought of all this, you can easily see why so many people are curious about loans for restaurant business operations.
Then you have some of the other expenses that come with opening a restaurant – or any number of other types of businesses. You need insurance, licenses and permits, and technology such as your POS system. Plan on spending up to $40,000 total on all of those items. Unless you’re a bookkeeper as well as a chef, you’ll likely have to outsource the accounting for your restaurant, which will add costs as well.
Finally, you need to get the word about your new establishment. You’ll need signage ($15,000 – $20,000), menus ($1,000 – $2,000), some fliers to spread around the community ($5,000), local ads and social media campaigns ($10,000 – $15,000). When you add in business cards and an event to celebrate the opening of your restaurant (plan $15,000 – $20,000 for this shindig), then you can see that you could easily spend as much as $600,000 just to get your restaurant open.
There are some ways that you can save on some of these expenses, keeping your restaurant startup capital requirements lower.
Start out with secondhand equipment.
None of the customers who come into your restaurant to eat will ask to see your ovens, stoves and utensils. They’re not going to ask to see if they are shiny and new, and they aren’t going to fuss over brands. They will come to try your food, so as long as you have equipment that is clean and effective, then you are good to go. If another restaurant has gone under, you can often buy their equipment for pennies on the dollar. You do want to have quality equipment – but don’t overpay for new. Obviously, you can start out by financing your equipment through a separate loan, as many equipment retailers also offer credit for purchases, but then you’re adding another monthly obligation. So look online, peruse the secondhand market, and only buy the things that you absolutely need.
Only buy the technology that you need.
Yes, you need a bookkeeping system. Yes, you need a point-of-sale setup. No, your waiters don’t need iPads to take orders, unless your business model makes it an absolute must. However, even in the fanciest restaurants in downtown Vancouver and Toronto, there are still waiters who take orders using pen and paper. Your staff can probably do it too.
Don’t forget to negotiate the wi-fi costs for your restaurant too. If you live in an rea that offers multiple providers, shop your business around – and let the representatives know that you’re taking multiple bids. You’re more likely to get the best deal from sales reps that know that they have to win your business.
Be smart with your marketing money.
Don’t run out and hire an expensive ad agency to promote your restaurant. Just don’t. You might think that you need to spend big in this area to get people in the door, but there are some smart ways for you to do this, either by outsourcing individual tasks or dealing with some of these yourself. The Internet is beyond powerful nowadays when people are looking for restaurants. You don’t need to launch radio or television ads; nowadays, if people watch television, they’re watching a DVR program and just scroll right through the ads, and more and more people are plugging their smartphones into their car stereos anyway, listening to Spotify or Pandora instead of the FM or AM stations.
So make the Internet your friend. Make sure that your restaurant has attractive presences on the major social media platforms. Put ads on Twitter and Facebook, as well as some other social media sites. Start a blog and get the conversation going that way. Post links to your blogs social media. Get out to local businesses and hand out your flyers. Talk to other small business owners in your neighborhood to get a network of referrals up and running.
Renovate smarter, not costlier.
You might think that you need to move a wall to open up some space, but there are other ways to add some openness to a layout without making that costly move. Are those $3,000 chandeliers really necessary? Use paint colors and finishes, along with some impactful lighting and inexpensive landscaping, rather than expensive decorative items. Think about making a statement without spending too much money. Pinterest isn’t just a site for crafters – it has a ton of ideas for decorating big without spending big. Remember that you will need a contingency fund when you are improving an existing building. There are always last-minute cracks and leaks that you have to fix in a hurry, so you want to save at least $25,000 for those last-minute things.
Make wise menu choices.
If you’re skewing toward the higher end, don’t sign a contract with an expensive vendor. Start out with co-ops and local farmers, and build relationships with them to lock in prices. Take a look at your menu. If you have to turn the page more than two times, are you operating your restaurant in a smart way? It’s better to start simple, with fewer offerings, and then gradually add other items in once you have things going in the right direction. When it comes to fresh ingredients, don’t buy more than you will use before it spoils – this is particularly important when looking at produce. If the majority of guests aren’t finishing their meals, consider reducing your portion sizes – another way to cut costs.
So let’s say you’ve opened the restaurant and had things going quite well for the first nine months or so. Your clientele is still growing, but you’ve gotten some feedback about some changes that you really need to make to the restaurant. Or you’ve gotten wind of a restaurant going out of business on the other side of town that has the right layout to make a stellar second location for your existing concept.
Just because you’re opening a second edition of your restaurant, though, doesn’t mean that you can plan to skimp on the opening costs with the later edition. There will be some cost savings because you’ll be a little wiser about what it takes to open your restaurant concept, but don’t expect a major cost reduction with opening the second unit.
When you go to the bank to ask for information about small business restaurant loans, you can expect to get questions about your personal and business credit scores. You’ll be asked for personal and business tax returns, as well as statements for your personal and business checking and savings accounts and other assets. The bank will run personal and business credit scores for you (and any other co-owners). After they take in all this information, they’ll take at least a week to decide if you qualify for one of their restaurant startup loans. When it comes to small business loans, restaurants are one of the most common types of borrowers, but because restaurants go under so frequently – and because banks are still notoriously tight with their lending in the wake of the 2008 financial collapse – you may go through rejections from several banks in a process that takes several weeks – and leaves you without that money that you needed to open the second location.
Small restaurant loans can be tough to come by – and they can be hard to get in any industry where the entrepreneur comes to the table with fewer than 12 months in business. Banks want to see steady income over time, and if your restaurant hasn’t been open long enough for your liking, then it doesn’t matter how rosy your numbers are, and how much research you’ve done supporting the viability of that second location. The banks just won’t go for it, a lot of the time.
This is where a restaurant cash advance can make the difference for your company. We started BBC for the express purpose of helping this type of borrowing client – the entrepreneur who has his or her business up and running and has solid prospects for expansion, but who cannot get funding from the banks. We have built a network of entities who are willing to provide businesses like your restaurant with a cash advance based a lot more on your income than on your credit score.
How does a restaurant merchant cash advance work? Well, there is one thing in common between applying for an advance and a bank loan, and that is that you will have to provide some documentation. You’ll still have to provide tax returns, bank statements and income record for your business, including (in many cases) reports for your credit and debit card transactions. However, when you apply through BBC, you just have to go through the process once for the whole network of lenders, because we distribute the information to every entity that matches your borrowing profile.
But that is where the similarities end. With a bank loan, you often have to wait a week just to hear whether you need to provide more documentation, let alone whether your application has been approved. With BBC’s network of cash advance providers, you can often hear an approval the same business day, but almost all of our borrowing customers hear within a business day or two. Instead of having to wait a month, or even longer, to receive your money, as you might with a bank, with our network of advance providers, you often receive your money within a week of applying.
How about payments? With a bank loan, you receive a check for the amount of the loan (less fees), and then you have to start making fixed payments for principal and interest the next month, and each month thereafter. With a restaurant merchant cash advance, you also get a lump sum up front (less fees), but you don’t make monthly payments. Instead, you pay each business day (or each week, in some cases). Instead of a fixed amount, you pay a percentage of your receipts for that day or week.
Here’s how it works. Let’s say that, on the basis of your receipts, you gain approval for an $800,000 cash advance. You’ll be assigned a factor rate of somewhere between 1.15 and 1.45. The lower your credit scores and the less consistent your income stream, the higher this number will go. For the purpose of this example, let’s say that you receive a factor rate of 1.2. You will pay back your advance amount times the factor rate, so in this case $800,000 x 1.2, or $960,000. The third number that you need to know is your repayment percentage. This is the percent of each day’s receipts that will go to the advance provider directly, to begin paying down that amount owed. So if your repayment rate is 15%, that means that for every $100 you bring in on a particular business day, the provider gets $15 up front, and you get the remaining $85.
In many cases, particularly when a restaurant is involved, the repayments come from credit and debit card receipts, which means that you don’t have to pay back any of the cash revenue that you bring in.
At first blush, you might think that paying $960,000 to take out $800,000 sounds like a lot of money. Even if it takes you a year to pay all the money back, that’s a 20% interest rate. If it takes 24 months, than its equivalent to a 10% rate, and the reason the retrieval percentage is so important.
But think of the advantages. You applied for and received your money in the amount of time that it normally takes a bank to reply to your initial application, let alone put the money together. You dealt with an advance provider who rewarded you for your performance at your first restaurant, rather than a bank looking for holes in your application.
Instead of having to make monthly payments on a new loan, you pay on the basis of what you make. If a professional sports team decides to have a team dinner at your restaurant and run up a five-figure tab, then you’ll probably make an unusually large payment to the provider for that day. However, if you have a lot of crickets chirping at empty tables the day after Christmas, then you won’t be paying much at all to the provider for that day. Because of the way the payments are made, you will never have a late fee. When you’re done paying the balance off, your revenues will jump up to 100% of what you made.
Questions? Give BBC a call or an email. Tell us all about your new restaurant, and we’ll give you recommendations about the best way to get the liquidity you need.
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How a Retail Merchant Cash Advance Loan Works
If you look at the ways that the Canadian government (and, to be fair, most of the other major governments in the West) responded to the financial collapse of 2008, there seems to be a paradox at work. The prime lending rates remain at or near historical lows because the governments want to stimulate economic activity. When people want to start a business, or expand one, they often need money that they don’t have. Theoretically, they would then go to a bank and apply for a business loan at a low rate thanks to the activity of central national banks, and then they start that business, or make the expansion, and then the economy grows because people are spending more at the expanded businesses, bringing more money to everyone in the industries associated with that business. The government gets more money too, because more purchases mean more sales tax.
The same logic applies to keeping those rates low for the mortgage industry. The idea behind these rock-bottom rates means that, theoretically, more people will take out home loans because they can afford it and prefer ownership to renting. Once again, home sales mean tax revenues, and as property values go up over time, the wealth that people have will expand.
However, the other side of this – and you’ve likely run into this if you’ve ever headed into a bank asking about small retail business loans – is that the lending requirements that banks have for borrowers keep many entrepreneurs from getting the funding that they need – and that they have the means to pay back with interest.
Why does this happen? Well, the financial collapse of 2008 saw a ton of banks get caught with loans that went into default. So the underwriting requirements became stricter – credit scores became a lot more important, and banks took a closer look at income streams and the verification of income history. This might seem logical at first blush, because many banks (particularly in the mortgage sector) had not done any due diligence on their loans, simply rubber-stamping them to bring in volume and get revenue coming in the door. The problems came when people couldn’t afford to pay their loans back and the banks were left holding empty paper.
While a credit score is important, it doesn’t tell you everything about a potential borrower’s viability. When you talk about retail capital business loans, you’re usually talking about an entrepreneur who has already had some success over the past few months (or even more than a year) in building up his business. Things haven’t been perfect by any means, but the vast majority of businesses start with a rough month – or even a rough quarter of two. Even those that turn into smashing successes go through growth pains, often more than one time. Even a giant like Starbucks went through a period when it had to cut back on its number of locations and make some adjustments to its business model before expanding its operations once again.
We founded BBC because we knew there were so many small business owners in Canada & the United States looking for retail business working capital who simply could not get the money that they needed – and deserved, on the basis of the way their business had performed so far. We have built a network of lenders who approach this sort of financing in a different way, by providing cash advances to retail merchants. The approval process is a lot faster than what you will get from a traditional installment loan with a bank. You’ll almost always get approved for more money, and the flexibility of a merchant cash advance is significantly higher than what you would get from a bank loan.
How does the application process work? Well, if you approach BBC, we will ask for your information one time and then distribute it to all of the lenders in our network that we feel would make a good match with your profile. So you don’t have to send PDFs of your bank statements and credit card receipt statements more than once – and we only have to pull your personal and business credit scores once.
If your credit scores caused the banks to turn you down, don’t worry just yet. Yes, our lenders also look at your credit scores as part of the application process, but remember that while the score numbers play a role, they play much less of a role than they do with the banks. The lenders that BBC work with look at your income stream, particularly what you bring in from credit and debit cards, because that is how they will get their money back in the end.
Let’s say that you opened a flower shop about eight months ago. You’ve built your business steadily since then, and a new location a couple blocks up from you has become available. The square footage is about 10 percent bigger, which isn’t a huge difference, but the location is incredible. It’s next door to one of those fabled Starbucks locations, and on the other side there is a trendy Vietnamese restaurant. You know that if you can get in there you will be able to drive your revenues up through the roof.
However, you don’t have enough money on hand to cover some of the new furnishings and fixtures that you would want in a location like that one. You also want to add a couple of staffers because you anticipate the foot traffic here being significant and you don’t want to lose any business.
Complete an application package with BBC and send us the required documents. Usually within 24-48 hours, one of our lenders offers you a $200,000 advance with a factor rate of 1.2, and a repayment rate of 16%. The lender calculated that, based on the trends in your credit and debit card revenue, if you pay them 16% of those receipts each business day, then you will pay the total due back in about ten months.
But wait – how much are you paying back? That’s where the factor rate comes in. You took out a $200,000 advance, and you multiply that by the factor rate to get $240,000. The factor rate is set on the basis of your credit scores, the amount of time your store has been open, and the reliability of your credit and debit card income streams.
If 16% seems high, the lender may provide a modified 13% repayment rate. This means that, every business day, you’ll pay 13% of your credit and debit card receipts directly to the advance provider. So if you sell $1,000 in flowers on a particular day to clients using credit and debit cards, the provider will get $130. If you only bring in $100 of credit and debit card receipts, then you would only pay $13. That percentage remains set each business day until your total balance is paid off. The balance does not change, no matter how long you take to pay it back – which is another reason to take out this sort of advance. There are no penalties for late payment, and you never pay more than that set percentage each day.
Want to know more? Call us at BBC today. We’ll talk about your flower shop (or other small to mid-size businesses) and go over a plan that will get you to the next level.
Taking out Business Loans for a Trucking Company
Getting started in the trucking business can be challenging financially, but once you are up and running it is one of the most accessible ways to become your own boss and make sure that you take in all the profit from your hard work, instead of having to see percentages of it go toward managers, supervisors and the people who own the truck that you drive. When you take over more and more of your own trucking equity, though, you also take on more and more of the risk associated with driving huge vehicles all over the country, including maintaining your truck and acquiring new vehicles as you have the opportunity.
When you started out as an OTR driver, you likely brought in a certain amount of money per mile. You knew early on that you wanted to get more and more of that pie, so you saved aggressively until you had the money to buy your own setup. Now you’re reaching out to clients and hauling their freight, making more money, even after you factor in for maintenance and depreciation on your truck.
However, you’re ready to start expanding your business beyond the truck that you drive around the country. You even envision a time when you don’t have to be the one braving the vast expanses of Canada in a truck, far from home and family, just to bring in money. You want to add a second truck to your business and find someone who is now where you started out – holding a license to drive the big trucks and looking for ways to start building an income.
Then you realize that you need a little more money that you have set aside to get that second truck – or you think to yourself that getting two trucks at once gives you a chance to build your profits even faster. So you do some research on start up business loans for trucking, and you head down to your local bank to see what they can offer you. You’ve been driving your own truck for almost a year, building business and piling up the savings.
But when you go in and talk to the same bank that has had your checking and savings accounts – both personal and business – you find that small business loans for trucking companies take a lot of paperwork. They want to know your credit score, and they want independent verification of your income receipts from the driving you’ve been doing. You turn all of this in, as well as your bank statements (both personal and business), and they hum and haw around, and a week or so later they say that you’re not quite where you need to be to qualify for that loan.
You figure that since this is “your” bank, you’re not going to get any better answers from anyone else, so you decide to stick it out for another year or two with your single truck and save enough to buy that second truck in cash, and you hope that you can do the same thing to get that third (and maybe fourth) truck down the road.
Before you give up on your dreams of expansion (or push them down the road a year or more), consider the advantages that a merchant cash advance could bring you. While your credit score does play a part in the decision about your advance as well (particularly the amount and the factor rate), what the provider looks at even more are your credit and debit card receipts and your sales trends over time. The reason for this is that it is your sales that will be your collateral – and your repayments will come right out of your receipts.
How does it work? At BBC, we work with a network of funders & lenders that are all looking to provide cash advances to small business owners – we help restaurant owners, florists, dentists, auto repair business owners and people from just about every sector, including the trucking industry. Once we take your information, we review your information to find the best fit, and then we come back to you with proposals to consider.
Then the next step is up to you. You review the offers and decide which approval amount, factor rate and repayment rate work best for you. The factor rate dictates how much you have to pay back, and the repayment rate indicates how much of your daily (or weekly, in some cases) receipts will go to your advance provider directly and work on paying down your total balance.
Here’s an example. Let’s say that you get approval from for a $150,000 advance at a factor rate of 1.3, with a repayment percentage of 20%. So when you sign the paperwork, you’ll get that $150,000 and then owe the provider $195,000 ($150,000 x 1.3). Every day, 20% of your eligible receipts will go directly to the provider, until that $195,000 is paid in full.
An alternative option of funding for $160,000 is provided, with a factor rate of 1.15 (most providers use a factor rate between 1.15 and 1.45). You would pay back $184,000, and the repayment percentage rate would be 15%. This is by far the better deal – you get more money up front, you have to pay back less over time, and you pay less out of your pocket every business day. So the second offer is definitely the one that you would take.
How do the providers set the repayment percentage and the approval amount? They take a look at what you bring in each month and use that to determine how much you would be able to pay back out of your receipts. Then they figure out how much you would have to pay in order to settle the debt within nine to twelve months. If you ask for a lower repayment percentage, then you may find that the approval amount drops a little bit in compensation. Remember, they use a formula that ideally brings them all of their money back in a little less than a year.
So if you’ve been looking for a way to expand your trucking business but haven’t gotten the answer you wanted from your bank, a cash advance could be the difference maker for you. You don’t face a new set of fixed installment payments, and you don’t face an approval process that can take as long as a month even if things go according to plan. If the worst happens and you have to close your trucking business, you don’t find that advance following you. It is tied to your business receipts, and if those go away, you have no other liability for the loan.
Curious to learn more about how a cash advance could help your trucking business? Get in touch with for a merchant cash advance with BBC today. This sector was entered to help entrepreneurs turn their dreams into reality, and we look forward to helping you. Give us a call or email, and let’s start turning visions into reality, so that you can replace those long miles behind the wheel with big revenues coming from your expanded business operations. Your family will definitely appreciate seeing more of you.
Liquor Store Business Loans: What You Should Know
While the big chains have taken over many of the types of stores that we go to every week, one exception to this is the liquor store. You can find “Mom & Pop” liquor stores sprinkled on corners all across the wide expanses of Canada and the United States, so if you’ve decided to go into business for yourself selling spirits, you’re joining a tradition that goes back to the days when the country was a wild frontier and woodsmen stamped into a tavern to buy the liquor that would help keep them warm and bring a twinkle to the end of a long day of work.
So if you’ve done the market research about where to open a new liquor store, or if you’re in discussions about buying a liquor store from someone who is ready to get out of the business, then you’re at an exciting point. Or if you’ve already opened your store, and you are more enterprising in your marketing than the competition, you may see that business is steadily climbing. In instances like that, you have an exciting chance to expand your operations – maybe by opening a second location or by moving your store to a more accessible point in a nearby retail center. You also may be at a point where you can upgrade the fixtures in your store, because while some people are simply on a mission to find that case of Labatt’s Blue or they want to pick up some Lot No. 40 or some Pike Creek for a chill night with some whiskey, a lot of shoppers are also looking for some class in their ambiance, and when you have the funds, making some upgrades can help your business significantly.
So let’s say you’ve been open for about a year now, and your business is on the upswing, and you’ve heard about a corner spot at the retail strip center about a mile down the road that’s opening up in two months. The rent is about three times what you’re paying now, but there’s a lot more visibility center, and that retail center is only about a year old, while the one where your store is now looks shoddy at best with no curb appeal. You’ve used one bank your whole adult life – checking, savings for yourself, and even your investments, and then checking for your liquor store. You go in and ask about what a loan for a liquor store would entail.
Instead of grinning and asking you how much you need, though, that same bank investment advisor who signed you up for that investments and says hello every time you come with another business deposit gives you a small frown and asks to run your credit. You wince a little bit, because your husband had thyroid cancer about a year ago. He had to miss work for about nine months because of complications from the surgery and the combination of radiation and chemotherapy, and you guys fell way behind on your bills. You almost lost your truck, and you had a couple of credit cards get maxed out and go 120 days past due. Everything is paid off now, thanks to him going back to work, but your personal credit score has some big holes in it. Your business credit score is still pristine, but the fact that your personal credit has taken some big hits this past year is an area of concern. Also, your store has done really well, but it’s not quite been a full calendar year since you opened, so you don’t have THAT much income history – and what happens if your husband gets sick again? More than a little frustrated, you stamp out the doors of that bank that has so much of your money but won’t lend you a dime to expand your business.
So now you start searching terms like “business loans for liquor store” and “small business loans liquor store.” You find other banks that say that they will help small businesses out, but that experience with your own bank really made you sore. You think that the only way that you can solve the problem is to chug away another year or two at your current location and save up the money that you need, hoping that a similar spot is available when you have the money on hand to make the move – and make it the classy way.
Before you commit yourself to another year in that old building, though, take a look at what’s available through BBC. BBC is here to work with entrepreneurs like you in mind. Business owners are seeking alternative loan options for liquor store expansions – as well as loans for anything from a bistro or a florist to a medical office or a construction company. There are a lot of entrepreneurs out there in the same boat that you are – they have put together a solid business plan and have seen several months – or even more than a year – of successful operation, but they simply can’t find the funding that they deserve to get to the next level.
This is where working capital cash advances come in. BBC has a network of funders that want to help entrepreneurs pay for the expansion of their businesses without having to go through the hassle of dealing with loan officers at banks. If you had heavy six figures in the bank to invest, you wouldn’t need the money, but why should you have to wait for several years to make the expansion that you could manage successfully now?
Here’s how the process works. You fill out one application and provide necessary documents. The appropriate lender will run your personal and business credit scores, because they are important – but they’re not the primary factor in our lenders’ approval process. The primary factor is your revenue at your business, often your credit and debit card receipts, because many lenders will take their payments out of those revenue streams.
Once you’ve applied, the priority lender that approves your advance will send BBC a conditional term summary with an advance amount, a factor rate, and a rate of repayment. The advance amount is the number on the check that you will receive (less any fees). The factor rate shows how much you will have to pay back, and the rate of repayment tells you how much of each day’s or week’s receipts will go directly to the advance provider.
Let’s say you get approval for a $300,000 advance, with a factor rate of 1.2 (you’ll usually see factor rates between 1.15 and 1.45). The higher the factor rate, the more you pay back; you can get a lower factor rate with more income coming in each month – or with a smaller advance request. Your credit scores may also play a role in the setting of the factor rate, depending on the lender.
So you would pay back $300,000 x 1.2, or $360,000. Let’s say that the repayment rate is set at 15%. That means that each day (or each week, depending on your lender), 15% of your receipts will go to the advance provider. Some providers take this from your credit and debit card receipts only, while others set up different repayment arrangements, but one element in common is that you pay a percentage of your receipts.
The upside: flexible payments – when you have slow days, you pay less, and there are no late payment fees – and quick approval – often a few business days. You have the money that you need, and as your business increases, you’ll pay back the advance quicker than you think.
Want more information? Call or email BBC today!
Creative Small Business Loans for Chiropractors
One side effect of the increasingly sedentary lifestyle that so many Canadians lead – long work days spent at computer workstations, followed by evenings sitting looking at a smartphone while the television is blaring in the background – is that people are reporting ongoing back issues. Some of this has to do with the extra weight that some Canadians are carrying around, while it also has to do with the poor posture habits that develop during such a day – slumping over a monitor, sitting with your head down looking at a small smartphone screen, and the like. What does this mean? If you’ve completed your training as a chiropractor, you should have plenty of business opportunities waiting for you.
The training that chiropractors receive is costly and lengthy, and once you have finished it, you will likely be ready to take on the challenge of working for a practice. After a while, though, you may be ready to go out on your own. You will likely have worked for a couple of years now and perhaps have built up enough of a regular clientele that trusts you to move to your own practice and bring at least some of them along. However, this is a step that requires more money than simply joining an existing practice, as now you’ll have your own overhead to cover, your own staff to pay.
But if you have already made it through that point, saving up to open your own office, you may find that the money you invested has brought you to one of a couple different places. Your first nine months of existence as a private practice may have been gangbusters, and you have to turn patients away. You’re thinking about expanding into the adjacent office space, as the law firm that was there has decided to relocate. To do that, though, you’d need to bring in new furnishings and prepare for a higher rent. You’d also probably need to bring on more staff to occupy the existing space.
Or you might find that the savings you put together to open your chiropractic practice were enough to get things up and running, but you’re always behind the 8-ball when it comes to liquidity. If you ever hit a funk, you’d be in trouble; for now, there are plenty of clients to pay the bills and then a little some, but if you hit a chance to expand, you’d have to say no – and you find yourself getting pretty low in your account every payroll cycle. Every month is a little better, but you still would feel better with a bit of a cushion.
Banks that offer chiropractic business loans often make their borrowers fill out a ton of paperwork – tax returns, bank statements (personal and business), credit reports and inventories of other assets. Then they make them wait for a week, or even longer, to find out if they even have preliminary approval. If the loan finally goes through, funding can take as long as a month from the initial application, and that’s when things go smoothly.
One factor that comes up with a lot of chiropractor business loans – as well as for loans in other industries – is that banks will only lend to businesses who have so much cash in hand that it doesn’t seem like they really need the money. If you have any blemishes in your personal or business credit profile, and if you don’t have proof of a steady stream of income, then you won’t get approval for your loan. Of course, if you’ve been open for less than a few years, you may not have built up much in the way of business credit, and you may not have an income stream that is long enough to make the bank happy.
So what are you supposed to do? You could keep plugging away with that small cushion, or you could keep your business running in that smaller space, saving until you have enough to fund the whole expansion by yourself, but by then another business could have moved in next door, which means that if you want to expand, you have to find a whole new building – which will make your move more expensive.
It’s dilemmas like this that motivates BBC. There are so many small business owners throughout Canada & the United that don’t have access to the capital that they could really use, because the banks just don’t want to relax their lending rules, that we saw an opportunity to connect customers who need working capital with a niche funders – those who want to provide the sort of financing that entrepreneurs need, with the flexibility that recognizes the demands of a small business.
You’ve probably heard of merchant cash advances before, but we have taken the whole process and streamlined it to make it easy for customers to find the funding that they need. We take one application from each customer along with key verification documents such as ID, business license, merchant statement history, bank statements, and copy of business lease if applicable. For loans over $75-$100K; financials will be required. Personal and Business Credit is also reviewed…. it is a factor, but the banks look a lot harder at your score than our lenders do. Our lenders focus on the amount of money that you have coming in, because that’s where your repayments will come from.
Once you’ve sent in your application, you’ll likely get an offer back from one of our advance providers that makes you forget all about chiropractor business loans. Your offer will have three important numbers: your advance approval amount, the factor rate and the repayment rate. The advance amount (obviously) is the dollar amount of the check that you will receive (less any fees). Then comes the factor rate (usually between 1.15 and 1.45, and the better your credit score and the stronger your income stream the lower this will be), and the repayment rate (the percentage of your daily or weekly receipts that will go directly to the advance provider to start settling your amount owed).
Consider this example. You get approval for a $250,000 advance, with a factor rate of 1.2, and a repayment rate of 20%. If you agree to those terms, then you’ll get a check for $250,000 (less fees), and you’ll pay back $300,000 ($250,000 x 1.2). Instead of a term, such as two years or four years like a standard loan… you get a repayment rate. The number 20% means that, each day or week, depending on the terms of your provider, 20% of your receipts will go directly to your provider. In some cases, this comes only from your credit and debit card receipts, while other providers have different ways of taking the percentage.
The upside is that you get an approval decision quickly (often with a couple of business days, with funding in a week in most cases). You also have flexible repayment terms – if you have a big day or week, you’ll pay more, but if you have a slow period, you pay less. That keeps you from facing a rigid payment to make every month. While there’s no benefit to paying the amount early – there are also no added fees if it takes you longer than you thought to pay the due amount back.
Want to learn more? Get in touch with BBC today. Consider BBC an alternative to when a traditional business loan is not an option.