The next day maybe you received a phone call or a curt email letting you know you had been declined. It’s frustrating, especially when you need working capital. Your cash flow has been depleted and it’s making it difficult for you to pay employees, get inventory, and keep the lights on.

When you don’t understand why your small business loan was declined, even though you have almost stellar credit, it can be even more frustrating. Here are a few simple reasons why this might have happened to you at this time.

1. You don’t have enough cash flow.

One of the reasons you needed a small business loan was because of limited cash flow, but it’s like a Catch-22; if you don’t have cash flow, some lenders don’t want to loan you more. If you have low revenue and are not making many deposits, these are often considered red flags for lenders.

2.You haven’t been in business long enough.

If you’re a relatively young business (even though you’re not young yourself), that’s not going to work in your favor when seeking funding through a small business loan. Maybe your business has been successful for the first six months of its operations, but that’s not enough for a financial institution to ‘take a chance.’

3. It could have something to do with industry restrictions.

There may be industry specific restrictions that limit your ability to get a small business loan. If your business operates within an industry that has specific restrictions on loans, you may need to seek alternative funding sources.

4. Your business plan was not clear or focused.

A business plan will tell a prospective lender exactly what’s been going on, what your goals are, mission, and plan to achieve those goals. If the business plan is not well written, is not concise, or does offer clarity, there would likely be numerous questions from the approval committee about how this loan would work in their favor.

The more you understand about why you might have been declined for a small business loan, the more effective you may be moving forward and getting the funding you need.

The post Top 4 reasons why your small business loan application was declined appeared first on Par Funding.

Unfortunately, not enough business owners are intimately familiar with their cash flow or even understand all the various components it entails.

Let’s talk about cash flow metrics.

Your cash flow is basically defined as your current assets minus your current liabilities. What are current assets? They are defined as the money you have on hand, in the bank, current Accounts Receivable, inventory, the building itself (if you happen to own it outright) and other equipment you use every day for operations.
Now, liabilities are Accounts Payable and other long-term liabilities you have on hand. This could include various business debts, including a direct business loan or line of credit.
When you divide your current assets by your current liabilities, you will be left with a ratio of assets to liabilities. This is your cash flow metric.

What should be the goal?

A healthy business should aim for at least twice as many assets as they have in liabilities. In other words, this would be a 2:1 ratio.

What about for small, relatively new businesses?

Most small, new businesses struggle to even come close to a 2:1 ratio. That’s because their liabilities often outpace assets and Accounts Receivable, at least in the beginning. However, by keeping a closer tab on these cash flow metrics, it can help a business owner or manager notice trends, whether their ratio is going up or down, or when they begin operating below 1:1 limits.

If a business is operating below 1:1, then they are operating at a loss.

Now, how can you address a cash flow problem?

The first thing to do is understand exactly where all of your expenses are. You need to be clear on where your money is spent.

Second, take a look at how other businesses are spending, especially within your industry. You may discover there are certain expenses you thought were necessary that other competitors are simply not focused on.

Third, become a micromanager, of your spending that is. The strongest and most successful leaders understand micromanaging is a poor idea, but when it comes to your spending when you want to increase cash flow, micromanaging is crucial.

The more you understand about cash flow, the more effective you can be at helping your business not just survive, but thrive.

The post How Much Do You Understand About Your Business’ Cash Flow? appeared first on Par Funding.

The main difference between loans and these other options.

Cash advances and factoring are not loans. Some companies, especially those more interested in tricking small business owners into making bad deals, will certainly pass some of these off as being ‘loans.’

So, what are loans?

Loans for small businesses will report to the major credit bureaus. They will report the amount of credit a small business received, as well as record payments, whether they are on time or not. A good FICO score is required to obtain a loan from a legitimate company.

With a loan, some or all company assets could potentially be used as collateral, depending on how much is required, the loan agreement, and other factors. Funding for the small business usually takes between 3 and 7 business days upon approval. A small business loan is a better option for companies that are on a solid and stable footing, but are looking for a long-term investment opportunity.

Keep in mind that with a small business loan, a missed payment will likely be reported and recorded on the business’s credit.

What about merchant cash advances?

There are plenty of reasons why a small business could benefit from cash advances. Seasonal businesses, like retail and those operating in a high-tourist destination, may need cash advances to not just to get set up for the new season, but to also make payroll, cover utility bills, purchase merchandise, and much more.

A merchant cash advance is a great solution for those companies that are relatively stable, at least to some degree, but if a business is on a downward trend, sliding toward potential bankruptcy, this is not going to help.

Factoring is more ideal for B2B operations.

Business to business companies may benefit from factoring. For example, if a manufacturing company provides a specific product and has numerous clients purchasing those products, but they only pay their invoices every 60 days, 90 days, or even at a longer length of time than that, it can make it extremely difficult for the manufacturing company to make payroll, pay their bills, and stay afloat.

Factoring is basically an advance on the invoices that are submitted to those other businesses, and the company relying on factoring will submit those invoices to the financial lender in exchange for the advance.

By understanding the differences between loans, cash advances, and factoring, it makes it easier for small business to determine the financial solution that will best suit their current needs and situation.

The post Understanding the Key Differences Between Loans, Cash Advances and Factoring appeared first on Par Funding.

Periodic review of finances
One of the most important aspects of ensuring that you succeed in your business endeavor is staying on top of your finances. It is natural for even the strongest and most successful businesses to go through periodic lulls, and keeping a track of your regular income and expenses will help you understand the market better. Most successful business owners regularly review their company finances to identify any potential pitfalls and fix them before they take up an ugly shape. They always keep an eye on their business cash flow.

Ensure a secure footing
Smart entrepreneurs are acutely aware of the fact that things are bound to go terribly downhill at some point in their careers. That being said, most successful business owners not only keep track of their regular cash flows but also ensure a secure backup plan in anticipation of financial emergencies that might come their way. Not only do they have a solid emergency fund to cover any unexpected losses but also are great at building strong relationships with their bankers who they might have to turn to in times of distress.

Push themselves out of their comfort zone
Some of the greatest entrepreneurs of all time have at least one characteristic in common- they are not afraid of pushing their limits and taking calculated financial risks in the anticipation of reaping gains along the way. Apart from ensuring adequate savings for a rainy day, successful business owners regularly invest in lucrative financial opportunities and also are bold enough to negotiate everything that they can get a profit on.

Willing to learn more
When Socrates remarked that “True knowledge exists in knowing that you know nothing”, he wouldn’t have known how relevant the statement would be thousands of years later as well! The fact is that most successful entrepreneurs possess the insatiable hunger to learn more about the intricacies of finances and incorporate their financial literacy to instill better money management practices and build the company’s wealth.

Setting their financial goals
If you do not know where you want to go, you will most probably end up deviating from your course. Successful entrepreneurs have the habit of setting realistic financial goals for their companies to ensure that suitable strategies are formulated and implemented in the right direction. Only when you have a proper action plan in place would you be able to work on it and succeed in your corporate endeavors.

Most importantly, successful entrepreneurs are willing to think differently from the others and question the conventions to ensure that their financial practices are aligned with the ever changing trends in the market.

The post 5 Financial Best Practices Of Successful Entrepreneurs appeared first on Par Funding.

1. Identify your market niche

   The most important yet often overlooked detail of a new business enterprise is the evaluation of the market and identifying your target audience. In order to be able to maximize your conversions and subsequent revenues, you must be well aware of who your target customers are and what they expect from you.

2. Understand consumer behavior 

   If you wish to sustain and cement your position in the market, you must be willing to do your research on consumer behavior and aligning your products and services to their needs and preferences. You can achieve this by analyzing your consumer database and conducting market surveys.

3. Hire the right employees for the job 

   More often than not, small start-ups experience phases of lull or entirely lose their perspective at the hands of inexperienced employees who are not suitable for their respective roles. You must make sure that you do your research while recruiting and hire individuals that are suitable for the job at hand.

4. Keep your staff motivated 

   Another aspect of your everyday operations that might eventually impede the growth of your business is a de-motivated workforce that is not really inclined to put their best foot forward. In order to ensure that your staff is functioning at their highest potential and not merely whiling away time in superfluous office gossip, you must hold regular meetings and provide adequate incentives and recognition whenever someone delivers on your expectations.

5. Tap the power of the Internet

   It is a no-brainer that in today’s world of digital technology, no business can survive without establishing its presence on the World Wide Web. Get a professional business website for your company and create your profiles on the social network to leverage the phenomenal exposure opportunities the Internet offers.

6. Engage with your customers 

   Establishing your presence on the social media is not enough. You need to constantly keep track of your customer activities and ensure to respond to their online queries and comments without any delay.

7. Enhance your customer support 

   Most consumers nowadays expect more than just a quality product or service from a company. They need to develop a connection with the brand and you can provide them the same by investing in great customer service and ensuring that your customers stay happy and satisfied.

8. Stay abreast with the latest trends 

   The world is changing at an accelerated rate and you need to stay ahead of the curve to ensure that your brand stays relevant to the present consumer market. Stay well informed about your industry and incorporate the latest technologies in your business model to ensure that you are not left behind in the competition.

9. Take a cue from the giants 

   Do comprehensive research of your competitors and the existing industry leaders in the market. Analyze how they operate and what puts them a class above the other players in the market, and you might just catch hold of something relevant that you can imbibe in your own business endeavor.

10. Stay in control of your finances

    You just cannot expect to grow your business without staying on top of your finances. Tracking your expenses and income will help you strategize better and enjoy greater profits in the long run. Always keep an eye on your business cash flow.

Taking your business to the next level is a challenging prospect for most. However, through judicious planning and the implementation of ideas and processes, you can make your dream of making it big in the corporate world come true!

The post Grow Your Small Business with 10 simple and effective tips appeared first on Par Funding.