Challenging Myths about the Funding Of Small Businesses

If owner of a small business is constantly searching for new methods for growing his company then working capital loan is something after which he won’t look further. A highly efficient way for growing his business and generating capital is by securing working capital with a line of credit or a loan. Growing your working capital will secure your small business during the sluggish months, making sure that you can cover up your everyday operational costs such as payables, payroll, and receivables. Also, it will help in mitigating your cash reserves for unavoidable circumstances you might face while doing expenditure on your business.

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The available financing needed for covering short-term or immediate business requirement is referred as working capital. In order to determine how much working capital is available sum up your bank cash along with the money that customers owe you and your inventory value, after that subtract what you owe to employees and suppliers. Small business owners always make sure that they have sufficient cash for not just starting a business but also keep it going. Lastly, you can also cover your business requirement with the help of personal funds by potentially harming your wallet. Often, working capital is quite difficult to find so it’s better to know the options that are easily available.

It’s essential to understand certain characteristics because management of working capital might be a difficult thing so you can take benefit of in order to ensure that your business venture is fully efficient in improving working capital. A lot of myths are there related to funding and working of small business. But the prime need of any business is working capital and if involve into myths, your venture will surely suffer. Following are few myths about safe as well as unsafe business loans:

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Banks Are My Only Option

Banks loans are the traditional assumption as they don’t offer loan for small businesses. But the fact is that there are plenty of funding options and even if one has well-developed business as well as strong credit, still applying for bank loan is very hard as you require collateral and a personal guarantee. The bank loan process is worse as it is so slow, if one is seeing a long- term financing because you need money quickly.

Not Getting a Business Loan Because the business is Too Small

It has been observed that the amount matters a lot while applying of loan whether too small or too big. Because size matters a lot in small business loans but on the other hand alternative lenders don’t see the size of business rather they look at your repaying ability. You must borrow the required amount for  the right purpose what you have.

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Doomed Because Of Bad Credit

This is true for bank loans, but automatically not for those small business loan types. The right thing about the right business loans might help in rebuilding bad credit.

No Having a Fancy Business Plan

Unless you are not taking a bank loan, you don’t require a fancy business plan but yeah you need goals along with a plan in order to achieve them. The fact is that smart borrowing may turn either into boom-or-bust for steady and smooth growth of a business.

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Moreover, now you are aware of common myths about small business loans and it solutions which can help in getting the working capital you require at time of your business need. In this way you can opt for right funding option to make your business successful and profitable in the future. ALCORMNA is there as an alternative for funding your business to traditional financing methods. Our flexible, fast as well as easy capital options proffer the fund you need. And we make it sure that our short-term repayment means that you will grow sooner and faster. The funds can be used for any kind of business you want to do and it doesn’t require any proposal or business plan. Moreover, if you require extra cash in order to help in growing your small business, ALCORMNA is here to help.

So is your business suffering from Funding problems? ALCOR MNA is experienced in finding the best Investors for companies and small businesses. We provide a broad spectrum of comprehensive fundraising solutions to cater the capital requirements of different companies across industries.

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For additional information on how we can help you finance your Company, Complete the Enquiry form. One of our representatives will contact you within one business day.

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Working Capital Loans for Small Businesses

Working Capital

In terms of accounting, working capital = current assets – current liabilities. Current assets have short term which can quickly converted into cash, mainly accounts inventory and receivable. On the other hand, current liabilities have certain obligations that may due within a year, mainly accounts payable as well as short term debt. In its current assets, working capital can be observed as equity of business. This presumes short term loans are used for short term needs while long term loans are used mainly for fixed assets financing. Often, working capital is incorrectly used in case of business financing needs, particularly for startup business. 

Need of Working Capital Financing

When a business is at its initial stage or an existing business that is increasing its customer base and revenues, the need for true working capital occurs. While starting a business venture, one needs fund for covering inventory as well as accounts receivable balances until they start the receivable collection. The first fund source is accounts payable, which signifies credit terms that have negotiated for purchases with the trade vendors.  Additional funds for covering working capital will come from outer sources. For a new startup business, this might be in startup equity form getting funds from family, friends or other investors. If there are modifications on how quick its inventory as well as accounts receivables turn into cash. For example, inventory and accounts receivables during a slow season turn cash at slower rate than the cash needed for doing payment to vendors.  These are actually the needs of working capital due to timing.

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How Much Working Capital Is Needed For Starting A Business?

To get the answer of this question, one need to know how funds will flow through their business – or rather one need to know working capital cycle. The flow consists of two processes: how quick cash is used for paying current liabilities and how quick current assets turned into cash. The working capital cycle is termed as turnover rates for inventory, accounts receivables, and accounts payable.

How to Fund Working Capital Needs

In general, it is quite difficult for startups to get working capital financing from traditional source of banking. Although few small business owners might cover the needed funds from the equity raised by them but others might be lured to turn it through non-bank lending sources such as merchant cash advance, factoring, and online lenders.  These working capital financing sources charge annual percentage rates of 50 percent or more. For small businesses that are in operation and also generating profits, one will definitely reinvest for getting some more profits from the business. Also the business owners start reinvesting profits into inventory, using the profits for carrying out increased levels of receivables as well as using profits for paying trade suppliers.  Moreover, the maintenance of these profits enhances the working capital that might grow continuously.

Conclusion

While starting a small business, one needs working capital financing for investing in inventory and accounts receivable. Using a formula of assumptions, one can get to know how much money is needed for working capital can be estimated on “Turnover Rates” for accounts receivable, inventory, and accounts payable. So, if one is small business owner and is in need of working capital financing, then he must avoid high price related with financing products such as merchant cash advance, factoring and peer-to-peer online lending, and lower cost financing opportunity available through your local Community Development Financial Institution (CDFI).  

Working Capital at AlcorMNA

ALCOR MNA leverages its relationships with more than 100-major banks and financial institutions to arrange working capital facilities, both fund based as well as non-fund based, for its clients. The facilities are created either through multiple banking routes or the consortium(syndicate) route, depending on the size of the facility. We arrange the same at very competitive rates in the Industry. Select solutions offered by us under Working Capital includes the following:

• Fund Based: Actual funds are disbursed or made available to the borrowers
• Cash credit
• FCNR
• Overdraft
• Factoring
• Export Financing
• Buyers’ / Suppliers’ Credit
• Bills Discounting

• Non-Fund Based: Actual funds are not deployed with borrowers, but these help the obligations to obtain credit facilities from third parties
• Letters of Credit
• Guarantees
• Co-acceptance of Bills/deferred payment guarantees

Are you looking for a Financing Options?

For additional information on how we can help you finance your Company, Complete the Enquiry form. One of our representatives will contact you within one business day.

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