| Is VC Funding Right For Your Business by Cole Sadkin LLC

Posted in Business Financing, Finance, Start-up Ventures at 9:00 AM by Loftis Consulting

Cole Sadkin LLC makes some great points to consider when deciding if venture capital funding is right for you and your business.  Check it out “Is Venture Capital Funding Right for You?

| How to Start a Business with Customer Cash

Posted in Business Financing, Start-up Ventures at 9:00 AM by Loftis Consulting

The Wall Street Journal had a great article on “How to Start a Business With Very Little Money”.  The article highlights ways a start-up can garner cash flow by getting customers to pay upfront as one recommendation instead of depending on loans or investments from others.  In reality, many great businesses were started with a little money from the business founders.  The types of businesses that can be bootstrapped tend to not be capital intensive.  Some examples of customer upfront models not mentioned in the article are:

  1. Gift certificates if your business is consumer focused
  2. Prepaid service bundles (i.e. discount on service bundle only if prepaid)

To read more ideas and examples, check out the article.

| JOBS Act Update: 2 Years Later, Where Are We Now

Posted in Business Financing, Start-up Ventures at 9:00 AM by Loftis Consulting

Rules under the JOBS act are still not finalized. The Washington Post article, “Companies, Congress grow anxious as the wait for crowdfunding continues“, updates us on the status of the JOBS act.

| Why Raising Capital Continues to Be a Struggle

Posted in Business Financing, Finance, Start-up Ventures at 9:00 AM by Loftis Consulting

This article published by CFO.com, “Demand for Venture Capital Outstripping the Supply” is a must read for companies seeking capital.  The article focuses on why raising capital remains challenging for many companies.  After you read the article, I would love to hear your stories regarding raising capital – – both the good and the bad.


| JOBS Act Investor Solicitation Rules Goes Into Effect Today

Posted in Business Financing, Start-up Ventures at 9:00 AM by Loftis Consulting

Finally, the day has arrived.  Today companies can advertise private placements to the general public using general advertising methods including social media; however, the private placements can only be sold to accredited investors.  Notice that I said accredited investors not just plain ordinary investors and this is a different funding source than through crowd funding which has a different set of rules.  Accredited investors are believed to be more investment savvy and thus have less rules but it is up to you, the seller, to verify that your buyer of the private placement meets this definition.  According to the SEC here are your options to do just that:

  • On the basis of net income by reviewing tax returns or through a statement from the investor that he or she expect to hit the SEC income requirements
  • On the basis of net worth by reviewing the investors personal financial statements showing assets and liabilities
  • Third-party written confirmations such as a registered broker-dealer, SEC-registered financial advisor, licensed attorney or CPA

Good luck.

| WSJ: Small Business Banking by Amazon.com

Posted in Business Financing at 9:00 AM by Loftis Consulting

In a recent Wall Street Journal article, the writer highlighted the fact that Amazon.com is now offering small businesses that sell their products on Amazon.com a financing option.  As with any credit situation, you should always make sure that the financing package makes since for your business.  To read the full article go click the link and let me know what you think.



| Why Your Small Business Loan Was Turned Down and How to Fix It

Posted in Business Financing at 9:00 AM by Loftis Consulting

In the current economic environment it is difficult to get a business loan but not impossible.  The first step after being rejected by a bank for a loan is to dust yourself off and ask the bank for feedback on why your loan application was rejected.  Usually they will be forthcoming for the reasons why they turned it down and you can use that information to improve your chances the second time around.

Many possible reasons exist for why a loan application is turned down but the mains ones are:

  • For a start-up business the business idea was not credible and as a result too risky an investment for the lender because their ultimate goal is to not only get their money back from you but to also earn some interest income.
  • For an established business applying to expand its existing business there are usually concerns that you will not be able to handle the extra strain on your business debts even if you are turning a profit. This means that you did not do a good job of laying out how you were going to afford to pay back the loan if your expansion opportunity did not work out and that your new opportunity is viable.
  • Not enough collateral if things go bad.  Most small businesses will need to provide a personal guarantee for business debts until they are more established.  From the bank’s perspective, if you have bad personal credit then it is likely that you will end up with bad business credit.
  • Lack of personal commitment by you.  One way to show your commitment is by investing your own money into the business.  I cannot count how many hopeful entrepreneurs who only want to provide sweat equity when trying to get others to invest in their idea. Good luck with that one.
  • Lack of a credible business plan and financial projections. Again, how can you approach someone to invest in your business through a loan and you haven’t taken the time to prove to them that your business is credible by having a detailed business plan on what makes your business credible.
  • Not understanding a “good” loan purpose.  The purpose of the loan should be very specific and not general in nature. For example, a loan to cover payroll will not be approved since the additional funds will not help the business earn additional income to pay the loan back.  However, a loan purpose to put in new machinery that will increase profits 20% is something that is concrete but will enable the business owner to grow the business and pay back the loan.
  • Not being able to talk the talk. You as a business owner must be confident in why you are asking for the loan and your ability to pay it back.  A bank will not invest in someone who is unsure of themselves.  Also, you are asking someone for their money, make sure you understand your needs and why and what the expectations the banker will have when doing business with you.

Use these tips and you should be well on your way to getting that first bank loan.  Loftis Consulting can help your business gain access to funds by working with you to build credibility in your financials and business.  If you need assistance beyond our tips, please give Loftis Consulting a call to schedule your free no commitment business review at (312) 772-6105.

| Business News: Fed Commits to Keep Interest Rates Near 0% Until Mid-2013

Posted in Business Financing at 9:00 AM by Loftis Consulting

Last week, the Federal Reserve announced it would keep interest rates near 0% until mid-2013.  What does this mean to businesses?  A lot.  By keeping interest rates low, the Federal Reserve is ensuring low rates until mid-2013.  As a result, as a business owner you can make financing plans and investment decisions based on this. For example, now that I know that interest rates will likely not be raised until mid-2013, I can refinance some of my higher debt to lower debt and lock in today’s low pricing for the long-term. I can also maybe invest in some new equipment at today’s low rates.

For your business, you should begin looking at your debt, cash accounts and investments to determine how to lower your interest expense costs and raise the return on your investments. This is normally something a CFO would do.  By maintaining the proper debt and investment levels with the right timing and returns your business profitability and cash can be maximized.

| Business News: Treasury Releases Small Business Lending Funds

Posted in Business Financing at 9:00 AM by Loftis Consulting

The US Treasury Department set up a Small Business Lending Fund for $30 billion to spur bank lending during the recent financial crisis. $123 million has been released to six community banks with more to be released in the coming months.

| Small Business Financing Options: 3 – Invoice Factoring

Posted in Business Financing at 9:00 AM by Loftis Consulting

Invoice factoring is a form of business financing that has been gaining a lot of notoriety in recent years. It is a specialized form of business financing that is designed to help companies that offer net 30 to net 60 terms to their customers, but can’t afford to wait that long to get paid. Factoring invoices solves this problem by advancing funds to companies based on their slow paying invoices. This improves their cash flow and helps them stabilize operations, allowing them to grow.

Most factoring transactions are structured as the purchase of an invoice by a factoring company. The purchase is done in two installments. The first installment is called the advance, and is provided as soon as you sell the invoice to the factoring company. The percentage that is advanced is based on your industry, your track record, the payment record of your customer and market risk conditions. Most advances average 80% of the invoice. However, transportation companies using freight factoring can get advances as high as 90%. Likewise, staffing companies can get factoring advances that go as high as 90%.

The second installment, called the factoring rebate, is paid to you once the customer pays the invoice in full. The rebate will include the remaining amount that was not advanced, less any fees. For example, if the advance was 80%, the rebate will be 20%, less any factoring fees.

When a factoring company purchases an invoice from your company, it can do so with recourse or without recourse. In a recourse factoring transaction , the factoring company has the right to sell back to you any invoices that have not been paid within 90 days, regardless of the reason for nonpayment. A non recourse transaction is a little bit different. The factoring company will absorb the loss of a non paid invoice if (and only if) your customer does not pay the invoice due to a declared insolvency (such as a bankruptcy) during the purchase period. Each factoring company engineers transactions in their own way, so you should familiarize yourself with the terms of your contract.

One very important aspect of a factoring transaction is the notice of assignment. Before you start factoring invoices for a particular customer, the factoring company will need to setup the customer. This is usually a fairly quick process where the factoring company checks your customers commercial credit, and then notifies them that their invoices will be factored. The notification letter, commonly referred to as a notice of assignment, informs your customer that you are working with a factoring company, who is helping you with your receivables. It also contains a new payment address. Many times the payment can continue to be made in your company’s name, provided it goes to the new address. The notice of assignment is fairly standard in the factoring industry but each factoring company has its own version of it.

Although factoring transactions appear to have many moving parts, they are fairly simple to implement and can be easily integrated into most companies. One of its most important benefits is that factoring is flexible. The line is dynamic and tied directly to your sales. You can easily grow your financing – as necessary – provided you sell good products or services to a diverse number of credit worthy customers.

About the Author

Commercial Capital LLC
Looking for invoice factoring? Commercial Capital LLC is a leading factoring company and can provide you with a competitive invoice factoring quote. For information, please visit their website or call (877) 300 3258.

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