Business Advice for Arizona

Are you looking for ideas to finance your small business.  After you have maxed out your family and friends, where do you turn?  Traditional ways include the various SBA (Small Business Administration) programs and traditional bank loans.  But if you are a new company, or had a hiccup in your earnings, banks won’t finance you even in the best of times.  And the SBA programs are pretty restricted when it comes to working capital: only $50,000 and the bank has to take half of the risk.  These sources of financing working capital are available when times are normal.

But now is not normal.  Tightened lending standards are making it harder for small businesses to borrow money. So more are turning to plastic to make ends meet.
A recent survey by the National Small Business Association in Washington, D.C., finds that 44% of small businesses used a credit card to finance capital needs over the past 12 months and 55% had trouble securing credit. Credit cards were the only source of small-business financing that didn’t decrease between 2007 and 2008. And more than half the respondents say their credit-card terms have worsened in the past year.

 
Unsurprisingly, some credit-card issuers are positioning their cards as a way cash-strapped small businesses can get some relief.

 
American Express’s new Plum card, for instance, lets businesses wait two months to pay off their full balance without incurring interest and finance charges, as long as they pay 10% of the bill by the due date. Amex’s SimplyCash card doles out 1% to 5% cash back each month on purchases.

 
Discover Card and Capital One also offer cash-back rewards cards for businesses.

 
One of the hazards, however, is if they carry a balance they can be at the mercy of the bank.  An annual percentage rate can be raised or a credit limit chopped at a moment’s notice.

Some small business owners are taking advantage of some other newer, alternative funding sources.  Peer-to-peer lending sites are an outgrowth of the micro loans industry started for poor borrowers in developing countries.  Business owners with good credit can find money on these sites:  prosper.com and myrichuncle.com.

These are two new sources of alternative financing for small business.  Other kinds of financing include factoring (using your accounts receivable to finance your cash flow), equipment leasing (for both new and used equipment), and purchase order financing.  What kind of financing are you using to get through the credit crunch?

Posted by prector under small business funding |