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As we welcome 201 4 many resolutions will be made and forgotten. Something about a brand new year on the earth makes us desire to do a little better, or to be better individuals. A company, as a team and an organization, is no different. However, just like individuals companies can also forget a resolution. After all it takes determination and persistence to make a change, and most of all it takes time. However, when you are a company a resolution can be more than simply doing something better. It can be a reflection of what you value, what matters to you the most about your customer, and how you define success. Success for us this year and every year means finding new ways of helping businesses grow. About business plans coming to fruition and brokering smart deals that help for a better global business community. 201 4 for us is a year about informing as well as brokering, teaching as well as negotiating. It is about building a community of those who value striving to be the best, because what matters us to the most about our customers is their success. After all we define our success as the success of our clients.


Harsh Brar

Design + Copy

Khandakar Shadid


What is Working Capital By: Khandakar Shadid

Working capital is typically considered the difference between current assets and current liabilities. Current assets are liquid assets that can be quickly converted to cash. Current liabilities on the other hand are obligations due within a year. Then the difference between the two accounts for money available for operations. It is literally the cash you use to run your day to day business. You can use a working capital loan for funding payroll or taxes, advertising and marketing, expansion, and even purchasing new inventory. Due to the flexibility of the purpose of the loan, it is a very common type of loan. For this reason we receive a lot of clients seeking this particular type of loan. Typically they are in one of several situations.

Transitioning from Startup to Adolescent Business- These businesses fall into two

categories. The first made it through the arduous first two years successfully and are ready to expand. For the second, the first two years have been successful but difficult because of unexpected events and shifts in demand. The first managed to keep up with all its payments and protect its credit score. With the additional advantage of being collateral enough that they can secure their loans for a great rate.

The second business, however, was not so fortunate. Despite best efforts, this business has experienced setbacks that have impacted their credit score. So for this business, collateralizing real estate or equipment becomes the most viable options for securing a loan. An objective business owner may always prefer to be the former business; the truth is again and again we have seen the latter business secure financing and be successful. Want to know their secret? The answer is coming up.

Startups that Need Working Capital to Start-

Many lenders specifically require that a business has at least two years of business experience. Though it may sound a bit like having to have experience in order to gain it, there is a good reason for it. Being in business for alteast two years of tax returns allows lenders to determine how much debt that you can realistically handle. After all lending to someone who is not in a financial position to manage their payments only assures that—both the lender and the borrower lose. No matter what type of business you’re in, or why you need working capital. There are three types of working capital loans that are popular in the US: Merchant Cash Advance, Line of Credit, and Accounts Receivable Financing.



Get your Documents in Order It is important to remember that lenders above all else prefer to lend to businesses that are already profitable. This is because though banks may be crucial to communities for financing, they remain operational by making smart investments. Just as you the business owner wants a strong return in investment—so do they. This is why having your documentation in order before applying is highly recommended. When you have your tax returns, financials and bank statements all in order you stand to save both time and energy for the bank as well as yourself.

For the Bank

1 . They can evaluate your request faster, and respond accordingly.

2. It creates good will because you are essentially making the processor’s lives easier.

3. It generates good will which can be transformed into a strong working relationship.

For You

1 . If you have your documentations already then you will receive faster responses from lenders—saving you a lot of time.

2. With a little bit of research you can figure out

your financing options by comparing their criteria with your business’s current financial standing.

3. Good relationship with a lender. Businesses

rarely need financing just once, which is why it’s always smart to keep a good relationship with your banker.



Have a Story Not a Loan Purpose As mentioned above, lenders are interested in a return on investment. This means that the purpose of your loan should be tied to that purpose as clearly as possible. Some questions you might want to ask yourself are: how is this loan making my company more profitable, and why should the bank invest in your company? Consider the following before making a pitch.

Don’t just emphasize past victories

A commercial loan is the most common way for businesses to grow or start. What makes you the better investment between you and another comparable business? Remember that the lenders experience an opportunity cost by lending to you, so prove yourself to be the better opportunity!

You have competition Yes, banks like to lend to already profitable businesses. Return on investment is however all about the future. When discussing your loan have a check list of feasible steps you plan on taking to make your company even more profitable. To strengthen your pitch, point out how past successes and failures have taught you to build an even more prosperous company.

Show and Don’t Tell To make an effective pitch you have to show that you are a smart invest and not tell it. This is why I want to emphasize how important it is that your documents are in order. The easiest way for lenders to be moved by your successes is to see it clearly in your financials, while you explain the story behind how this success came about. The same can be said about any setbacks that your financials may reveal. So be sure to tell the story of your cash flow from its availability to its growth/decline and where it’s headed.



Be Persistent, Be Determined Every business is different in their need for financing. Ultimately it is typically a need that forces that drive to the bank. It’s a tense drive as you wonder what you will say, and how much you will ask for. Not to mention there is the fear of being rejected. Though securing a loan, especially if you have bad credit, can seem like an arduous journey—there is a key element that overwhelmingly determines whether someone is approved. Persistence and Determination is that key. Securing a loan is a rarely a very fast process. Consider a Merchant Cash Advance. Even though the actual processing is rapid, between clients getting their documents together, discussing the ideal terms with their broker, and actually negotiating with lenders—it can be lengthy process. Though this is typically not the case for Merchant Cash Advances, these types of delays do arise for loans that require a lot of documentation and have a low rate approval. That does not however mean you should not pursue these types of loan. It means you should simply be prepared for it to be an extensive process. The big takeaway is that persistence and determination are two things and are often biggest determinants of whether a loan is actually approved.


Types of Working Capital

Accounts Receivable Merchant Cash Line of Credit--A line of Financing --There are two Advance -- A Merchant Cash credit can be achieved in two types of Line of Credit. One that comes from a bank and the other, from the Small Business Administration. The requirements to qualify include the following. The applicant must have a minimum of 2 years of experience. Their Debt Service Ratio has to be at least 1 .25 and it requires full doc. This means that you must provide: proof of earnings, any additional income, asset verification, debt information, and information regarding the purchase. They also must pass the 5 C's of credit: character, capacity, capital, and conditions. Typically the rates range between 5-6% and the terms are usually for 3-5 years. These loans tend to offer smaller payment options and a high chance of renewal.

Advance is a lump sum small business loan based mostly on the cash flow of the business. It requires very little paper work, and there isn't a need for collateral. Another important factor for some businesses is that it doesn't require good credit. Some are skeptical of merchant cash advance due to the relatively high interest rates, but there are also seldom discussed benefits. The first, a merchant cash advance can actually help you build your credit. The Second, it has a very high renewal rate. Finally, you can get your merchant cash advance in up to five days.

ways. One way is the banking institution you bank with and the other is another banking institution that you don't bank with and guaranteed by Small Business Administration (SBA). The requirements to qualify include the following. The applicant must have a minimum of 2 years of experience. Their Debt Service Coverage Ratio (DSCR) has to be at least 1 .1 5 and it requires full documentation. This means that borrowers must provide: proof of earnings, any additional income, asset verification, debt information, and information regarding the needs for additional working capital. They also must pass the 5 C's of credit: character, capacity, capital, collateral and conditions. Typically the interest rates to usually are on the lower end of the spectrum and the terms can be usually for 3-5 years. These loans tend to offer smaller payment options and a high chance of renewal.

Accounts Merchant Receivable Cash Financing Advance Doc Requirements Approval Time Difficulty of Approval Avg. Interest Rates Terms

Line of Credit


Full Doc

2 - 4 Weeks

3 - 5 Days

3 - 6 Weeks

Very Difficult



1 .5 - 3.5%

5 - 7% 3 - 5 Years

Chance of Renewal Aging Report


Inventory List


Future Invoices


Bank Statements Voided Check



3 - 6 Months

2 Months


Debt Schedule


Business Experience Bad Credit + No Collateral

+2 Years

+2 Years Yes

* Situations may vary depending on your financial standing.


+2 Years

Working With Workingcapital  

A look at the options available to small businesses interested acquiring a working capital loan.