Business Financing Options For US Businesses
Entrepreneurs and business owners are the financial life blood of communities, and wider economies in the provision of products and services. According to the Small Business Administration (SBA) small businesses in the USA represent 99.9% of employers and thus are the top employer for millions of people. This is similar to most advanced economies, such as Australia and the UK. Employees rely on businesses to offer employment, income, and benefits (health and group life insurances, retirement plan’s, etc.), and in turn the business owners depend upon skilled labor to help support the efficient, and productive operation of their businesses. These relationships are vital towards supporting the economic operation of economies with earned income and employees as consumers, will spend into the economy.
Entrepreneurial Risk Taking
Business owners and entrepreneurs are risk takers. They decide to passionately pursue their vision to solve a problem, better serve a need in an area they feel is underserved and inspired by their sense of purpose to better serve that need.
Business finance and financial risk is among the greatest risk small business owners take towards realizing their dream of operating a successful thriving business. As a result, most businesses will fail within their first year of operation. Of those surviving beyond their first year, 50% will fail to be in operation beyond 5 years. According to the SBA, the number one cause of business failure is their lack of access to business capital. Further, only 20% of US businesses qualify for funding from a bank or other lender, which is needed to operate their business. That means that 80% of US based businesses are left vulnerable due to a lack of access to readily available capital. What disqualifies this 80% of small business to adequate funding?
- A business owner having less than a 680 credit score, which is required by most banks. In many instances, the business owner may even have less than a 560 credit score, the minimum required to receive working capital from the SBA.
- Both the bank and SBA require collateral (real estate) be offered to secure much needed funding. Many business owners either don’t have or choose not to offer their real estate as collateral.
- Banks and the SBA require the completion of long, intensive applications, which oftentimes result in funding request approvals and disbursements that take either weeks, or even months to occur.
Identifying Business Financial Risk
What can a business owner to do to access capital to help their business survive and thrive? And how can a business identify that it may need access to additional operating or asset renewal capital?
A first check an be made with the Jazoodle platform. Assess your Cash Runway and business finance needs. This is the amount of funds within your business, based upon your average monthly expenditure and comparing this to the amount of currently available funds in your bank accounts. Most businesses should aim to have a cash runway of at least 3 months, ideally minimum of 6 months.
Your second check would be to assess both your invoice collection period and compare this to your supplier payment periods. Jazoodle assesses these periods for your business in seconds. You should aim for your client receivables period to be less than your supplier payables period. If so, you are probably generating cash efficiently. If not, you may be storing up problems within your business with cashflow issues likely to rear their head in the future
A third check would be to check how efficient your business assets are working for your business. Within Jazoodle, this is on the main dashboard, or efficiency area of the KPIs. Ensure that your asset turnover is at least 1. That means for every dollar invested in your business, it is generating at least a dollar in revenues. If less than 1, it may be time to assess replacing machinery, or other assets. You can create your own Jazoodle business performance and health dashboard here
Identifying Alternate Forms Of Finance
Now you’ve established your funding need, and the problems associated with the raising of capital, especially unsecured or lower credit score capital, you should consider non bank lenders such as David Allen Capital. It’s with this vastly underserved need facing many business owners that a company based out of Milford, Michigan, named David Allen Capital (DAC), founded by a business owner, David Rutz, was created. DAC believes that business owners are “the rock stars” of American Capitalism and deserve a channel of capital receptive to and customized to serve their funding needs. How does DAC accomplish this? In contrast to traditional funding sources being the bank or SBA, DAC serves business owners’ capital needs in the following ways:
- The minimum credit score for a business owner to qualify for business capital is a minimum score of 450.
- The business owner at a minimum must have been in business for at least 6 months.
- No collateral required, but instead a business’ most recent 3 months of sales revenue verifiable from their business banking checking account, at $5k and greater in consistent revenue also qualifies them to receive working capital.
- A 100% automated process where the business owner completes a brief on-line application, and submits it, will result in an immediate approval, and funding either the same or next business day. For working capital amounts approved for $25K up to $2M, $500K can be potentially funded in one week, and up to $2M funded within 2 weeks.
As a business services company, working capital for business owners is the primary way DAC uniquely help and serve the small business owner community. Additionally, DAC provides the following services: Business to consumer credit, health care plan coverage, merchant card processing, and recently, a revolving Line Of Credit from $5000 up to $100K, telecommunication services and equipment.
Small business owners need and deserve the funding support necessary for them to survive and thrive as the financial backbone of the US economy. The first step is to identify the capital need risks or opportunities within your business – Jazoodle can do this in seconds. Next, assess your own circumstances and credit score. Non bank lenders such as David Allen Capital have more business friendly criteria in which it assesses funding requests. For generations they have served and continue to serve its business and entrepreneurial clients. DAC’s mission is to enable American business owners with a source of funding that both understands their needs and to assess and provide those funds efficiently, and effectively.
Written by Orlando Darden Jr, who is a partner at David Allen Capital https://davidallencapital.com/