7 Myths about Financing for Small to Medium-Sized Businesses
It is not unusual for small to medium-sized businesses to need financing for a variety of reasons including to help them grow, expand, work thorough working capital fluctuations, seasonal variations, increased demand and many more. For those who are new to the process of acquiring business financing, we thought we would bust some common myths to help you navigate through.
MYTH: You and your business need to have perfect credit and established history to qualify for financing.
FALSE – Non-bank lenders, such as Franklin Capital, offer financing options, including Accounts Receivable Financing, that eliminate many of a bank’s criteria that are difficult to meet by basing approvals on the credit quality of a companies assets and customers. This allows us to provide financing even if your company is new, your credit history is weak, or your cash flow is inconsistent. By basing your financing on your assets and customers, we can work with businesses with challenging situations such as companies in turnaround mode, DIP, fast-growing business outstripping their cash resources, businesses that experience seasonal fluctuations, businesses in Chapter 11 and businesses reorganized through Assignments for the Benefit of Creditors.
MYTH: Obtaining business financing takes a long time and requires a lot of paperwork.
FALSE – That is often the case when you work with a bank; however, many non-bank lenders, such as Franklin Capital, can get you approved in a matter of days with minimal paperwork. For example, when you apply for Accounts Receivable financing from Franklin Capital, all you need to do is a complete a simple one-page application and submit copies of your current aging of accounts receivable.
MYTH: Most businesses are turned down for financing.
TRUE and FALSE – The truth is it depends on the financing source. Alternative lenders have loan approval rates around 57% according to the latest small business lending index from Biz2Credit. This is compared to reports of big banks rejecting about three quarters of loan applications and credit unions approving only about 40% of small business loans, according to the same Biz2Credit report.
MYTH: Banks are the only option for business financing.
FALSE – Banks might be the first thought for many business owners when they need business financing, but the truth is there are several business financing options available. Financing options for small to medium-sized businesses include Account Receivable Financing, Machinery and Equipment Financing, Purchase Order Financing, Merchant Cash Advances, and Leasing, to name a few.
MYTH: If your cash flow is inconsistent, you won’t qualify for business financing.
FALSE – This may be true if you are working with a traditional bank but alternative lenders, such as Franklin Capital, consider your assets and customers allowing us to approve financing for businesses in various situations including those that have inconsistent cash flow.
MYTH: If your business is in turnaround mode, Chapter 11 or reorganized through Assignments for the Benefit of Creditors, you won’t qualify for financing.
FALSE – This is another myth that may be true if you are working with a traditional bank but alternative lenders, such as Franklin Capital, work with businesses in various situations including turnaround mode, Chapter 11 or reorganized through Assignments for the Benefit of Creditors every day. We can do this by looking beyond your current and past financial situation and leveraging your assets and customers.
Have we busted any of your myths? Do you have any additional business financing myths we can bust? Franklin Capital has been helping small to medium-sized businesses meet their cash flow needs for over 25 years, and we would love to help you do the same. Give us a call today at (847) 579-4780. Our experienced team is always here to help you with your business financing needs.