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Working Capital Helps Small Businesses grow 15%-30% annually

Let’s face it, 20% of small businesses fail within their first year and a total of 65% fail within their first 5 years. The last person you should blame is yourself if your business fails excuse it should be thrown out the window when running a small business. There is a lot of adversity and stress you have to handle on a day to day basis but blaming your failure on a small business loan is not correct.

Number’s don’t lie so let’s put this in layman’s terms and make it short and sweet. It doesn’t matter what industry you are in or the product that you are selling either. To succeed just like the 75% who are deploying capital you must make back $.75-$1 back for every $.75-$1+ you borrow.

If you fail you to do that there is no excuse is. You took your shot and failed, re-evaluate, and came back next time but as mentioned in previous articles. The recipe for success is a lot of trial and error, a lot of adversity, and being able to push through that builds character and confidence that leads you to the next bridge you cross in life.

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Why should you use working capital to help grow your business?

There is a multitude of reasons why you should take on a working capital loan to grow your business but it all starts with cash flow as cash flow is king. It also begins with your risk tolerance and the speed in which you want to grow your business as well. If your business is in a trough, we will save that for later. So, let’s start with the first two reasons, cash flow, and risk tolerance. As a business owner you may be thinking my cash flow has been steady over the past few years but I want to increase my revenue and ultimately increase my net income, then there is a risk that comes to play if things don’t go right, you will have doubts of what if my product doesn’t sale quick enough or what if I can’t get enough customers to service. Well, you signed up as a business owner and an entrepreneur which was a big risk, to begin with, and any level of risk comes with a degree of failure or a degree of reward depending on the magnitude of the risk of reward.

My best advice in this is to follow your instinct and challenge yourself enough but not to the point where you can’t sleep at night unless you want that. Not everyone was meant to be Elon Musk or Jeff Bezos who operates with a large amount of risk and working capital. An injection of working capital will accelerate the growth of your business but everything needs to be calculated. For instance, if you are running an advertisement, you are going to need working capital for those ads but you will also need the employees to fulfill the needs whether it be product or service of the company.

In business, the fundamentals and concepts remain the same when it comes to achieving higher revenue and that is selling more of your product or service. Within those fundamentals and concepts in selling your product or service comes with more employees, more advertising, more management, more equipment, technology, etc. Although the reward will be higher the more you scale, the risk will be higher as well.

For example, your business has been doing $2,000,000 annually for the past 2 years. You want to increase this number to $4,000,000 annually, Whatever equipment, advertising, service, technology product, etc. that took you to get to $2,000,000 you will have to double down on that through calculating risks. We know as entrepreneurs there are risks but we push through that adversity because we want to achieve the reward. So, to wrap up the two segments of cash flow and risk, these are the two main reasons to use working capital to help grow your business.

Leading back to the third reason which was mentioned as your business being in a trough, where you are cash flow negative. You first need to strategically analyze your business on both the inflows and outflows of the capital. You don’t get many chances in businesses but an injection of capital to get you off a trough followed by a well-executed plan can help the start of the growth of your business.

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If the funding will work, take it.

Further understanding of Merchant Cash Advance, so before reading this is an informative blog for people who get surprised by the term rates, but crunch the numbers and most of you will still do fine and make a profit. If it helps accelerate your business’s growth with the injection of the capital take it.

The Merchant Cash Advance industry has built a reputation for being reserved for businesses who are desperate for cash but this nowhere near the case,

Merchant Cash Advance is placed into 2 categories A-B Paper18%-30% interest on average

These are businesses with strong cash flow and a 600-640 credit score. The term lengths are usually 6-24 months pre-COVID and the amount of cash given is usually 80%-120% of the merchant’s deposit volume. In a recent report, 80% of business owners were satisfied with the capital received and showed handsome quarterly. Cost is usually the number one issue that comes to mind before taking on a merchant cash advance but if you have an investment opportunity planned that takes no longer than 6-8 months in which you will turn a profit on why not take it? You can’t go broke making a profit. Further, there are advantages that a merchant cash advance has over banks. One is that you can receive the money a lot faster, secondly, it is a lot more flexible, thirdly it is renewable, and fourthly there is no prepayment penalty. Remember we are not backed by banks; we are backed by investors who count on the merchant to use the money responsibly to help their business grow and not bite off more than they can chew by stacking beyond 3 positions. You can gripe about the cost which is tax-deductible, but if it helps accelerate the growth of your business if you were not to take it then take it.

C-D Paper 40%-49% Interest on average:

This paper is reserved for merchants with a sub 550-590 credit score. Usually, these merchants hit a trough and need to get out, and can’t find funding anywhere else. This isn’t the end all be all for the merchant and in a recent report, 72% actually benefited from the capital. Remember this is small business investor capital with profit margins being a lot higher than mid-size companies. With that said under the correct allocation, the money deployed can benefit the businesses’ s growth.

Bank Term Loans:

It’s not all roses and daisies, from my half of a decade of experience with thousands of applications only 1% was approved for a 10-year SBA at 8% APR. Do the math and that is 80% over 10 years. The other 5% were approved with 3-5-year loan terms with 10%20% APR. Do the math and we are talking near 50% as well. Both with no prepayment penalty. Capital rarely cheap whether it be by the banks or by investors.

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How to get a Low Small Business Working Capital Loan Interest Rate

Ever since the COvID-19 Pandemic of March 2020 VIP Capital Funding has been hard at work helping small business owners obtain federal working capital loans at low interest rates. These products include the PPP (Paycheck Protection Program) and the EIDL (Economic Injury Disaster Loan). I Joshua Triplett being the Owner and Principal Managing Partner has experienced first had in the trenches of the struggle that small businesses have been facing. Several small businesses first don’t know where to start in applying, and secondly have no clue what to do during the funding process. Some $700 bullion was printed but there was no clear direction for small businesses to apply. VIP Capital Funding has been solving massive financial problems in the market place by representing small business owners by pointing them in the right direction for the Paycheck Protection Program (PPP) and hand holding the business owner throughout the EIDL process. You would be surprised as many business owners are in their 50s and lack the technological savviness to operate a PC. With that being said VIP Capital Funding has helped 100s of small business owners with low interest federal backed loans. We are extremely professional, confident, and personable at what we do; hence the great reviews we have been receiving.

Despite the low interest small business working capital we have been helping business owners get, they do have to fit the criteria in which I will outline both. Starting with the Paycheck Protection Program (PPP) one must have at least 1 employee and do $10,000 or more in revenue. Credit score is usually not an issue here. There is a 10-month deferment and it is forgivable as long as you are using it for payroll and mortgage/rental.

Next we have the EIDl where approvals range from $100,000-$150,000 on avergae. There has been a lot of fraudulent activity in this category so you will be asked a lot of times to confirm identity such as License, EIN Letter, Articles of Incorporation and Operating Agreement, along with the front and back of your driver’s license. This gives the loan officer proof that the money you will be receiving is going to a legitimate for your business. As mentioned in the reviews VIP Capital Funding has done an excellent job in the sales process by making sure all necessary documents are scheduled in and approaching the SBA representative relentlessly to get business owners funded. As per the terms of the EIDL, it is a very good loan despite it being unforgivable. It is a loan between $100,000-$150,00 on average with a 12-month deferment re-paid back in 30 which makes for a very cheap monthly repayment. Along with this to as per my knowledge early payment discount applies after 3 years. With it being a 30-year repayment, this gives business owners plenty of time to put the deployment of capital in great places to prosper.

With both loans combined this has been able to prop up the economy tremendously as business owners have capital to be put to work and slowly but surely employees will return to work as normal. If money ever grew on trees this is the first time in American history where money was stimulated into the economy at a magnitude where it was as if money did grow on trees. The next step for the economy is to get back to business as usual.

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You wouldn’t go to court with a cheap attorney or a public defender, then you shouldn’t go and try a get a business loan without a good broker/consultant.

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A good broker or financial consultant knows his or her industry to a T. The broker will do all the heavy lifting for you while you’re out helping to strengthen your business. A good broker you can trust will always present you with the best solution long term. The broker will know just off a glance of your bank statements and credit score on what you will be approved for which will result in minimal inquires on your credit history. A good broker is also a good listener and will prepare a report to present to the lender or investor to add as much strength to your file as possible, and depending on the reputation of the consulting firm they usually will have good relationships with the lender or investor to bypass nuance stipulations that would be requested if you were to go in alone. It’s your decision whether you want to go in alone but you would be walking into a lion’s den unequipped with knowledge and influence that a broker/consultant will prevent you from being taken advantage of.

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Why VIP Capital Funding is the Most Personable and Dedicated Financial Services Company

The success of VIP Capital Funding starts with its ability to focus on the customer. VIP Capital Funding is analogous to a Navy Seal Team who is, although smaller, their skill set and capabilities are far superior compared to a military group of 10,000 military personnel. Because VIP Capital Funding is a smaller group, they are a lot more nimble, personal and dedicated compared to bigger financial service companies. You get what you pay for with VIP Capital Funding, the difference between us and everyone else is that you are reaching out to us directly and we are your 24/7 financial consultants. We don’t care if you call, text, or email us at 3:00 AM; our job is to be there for you and your business. Unlike other companies where you call and get put through loops, somebody’s secretary or just a random employee that the larger company’s model; with VIP Capital Funding you have someone dedicated to your business needs.

Apart from this, with our talented team, we are shrewd negotiators and have great relationships in the small business loan industry. When it comes to getting an offer for our clients, we are both relentless and aggressive. We grab the bull by the horns and make offers happen fearlessly. We analyze our client’s financials and their industry and compile an executive summary to present to our lenders and investors who decide to approve or decline the merchant. VIP Capital Funding boasts a 95% success rate in getting their clients approved for funding. Joshua Triplett Owner and Managing Partner of VIP Capital Funding keeps a good handle on all of the client’s VIP Capital Funding’s representatives are working with to make sure business is up to standard. VIP Capital Funding uses all standard tools of communication such as phone, email, and SMS. VIP Capital Funding and its representatives also know which tools to use depending on the situation. For example, if it is just a quick question text/sms would be best. If it involves a thorough summary, reading email is best. If it involves details that are difficult to communicate over the phone that would last longer than 3 minutes than a phone call would be best. When you are working with VIP Capital Funding you are working with highly skilled consultants who are confident that they will get the job done for you at a very high success rate and make it as smooth, personable, and dedicated as possible along the way.

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When You Should Take A Small Business Loan

Small businesses have a unique structure and unique needs. As such, the financing they require during different times of their life cycle or at certain milestones means they need to look for adequate options.

But taking out a loan for your business isn’t a small decision – you don’t want to borrow more than you can repay, and you’ll have to pay interest either way. Depending on what you need the money for – you may be able to negotiate some more favorable terms. However, as a general rule of thumb – think twice before taking out a small business loan. Ask yourself – is this something you really need? Is there any way to finance out-of-pocket or even consider borrowing from friends and family as that eliminates the interest.

With small business loans – timing is equally important. Take it out too early and you’ll end up paying more interest than you need to, plus you may not be able to make full use of the cash. Too late and you risk getting jammed into a predatory loan and end up paying exorbitant interest and fees. So how do you decide when you should take a small business loan?

There are several milestones in the life cycle of a small business when a loan can propel your venture to the next step of its growth. Essentially, opportunities come in various forms. You may find your business is getting a contract from a big client or struggling to meet the demand for your products. Either way, these are good signals that your business is ready to expand. Here are a few of the most common scenarios when taking out a small business loan is the right move:

  • Balancing the sheet during difficult times to avoid bankruptcy
  • Renting a new location to open a new office as part of your expansion.
  • Hiring more staff to keep up with demand and focus on accelerating growth and working capital
  • Purchasing inventory to keep up with seasonal demand.
  • Investing in equipment could help improve the efficiency of your operations.

Each of these situations makes for a valid reason to take out a small business loan. Naturally, you should still carefully consider the pros and cons before going through with the decision.

It’s actually quite common for business owners to overestimate potential profits and underestimate the true costs of a small business loan. This mistake is why it’s important to have a quantitative assessment of the opportunity to guide your decision. A quantitative assessment could include using your historical financial records and creating a revenue forecast.  Then you can use the figures to see if the return on investment will be enough to justify the loan.

Evaluate your situation carefully before you decide to get a business loan. The benefits of the opportunity should always outweigh your cost to justify it. But don’t fall victim to online lenders who promise flexible terms, low interest rates and fast approval times. Getting stuck with a small business loan from a less-than-legitimate lender will end up costing you more in the long run. It can even run the business you spent so much time, efforts and money on into the ground.

VIP Capital Funding offers many small business financing solutions. If you find that you’re in a good position to get more funding and move your business forward, get a quote to see how much you’re eligible for.

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The Benefits of a Merchant Cash Advance

Over the years merchant cash advances have built a reputation of desperate business owners looking for money with high-interest rates. But this is far from the truth, as it all depends on your profit margins and your plans for utilizing the deployment of the working capital. The common misconception is the high-interest rate over 6-12 months which is the usual terms offered for Merchant Cash Advances, but if you were looking at an average business loan the offer you will find out it is worse Let me explain for instance a bank loan for 36 months, prepayment penalty, and 19% APR equates to 57% interest over 3 years and prepayment penalties ranging from 5%-15%. On the other hand, you have the merchant cash advance, a loan that is 8 months at 35% interest rate, no prepayment penalty, and renewals when the loan is 50% paid down. When you compare the two the merchant cash advance is better because business moves fast, and you shouldn’t need to utilize the capital for more than 6 months in most cases. Not to mention that the interest is tax-deductible. If you were to compare a bank loan, you’re stuck with it for 3 years, you already paid and invested in what you wanted but you’re left with no additional capital and a big prepayment discount. Another misconception is the daily or weekly payments of a merchant cash advance compared to a bank term loan is that a merchant cash advance’s daily/weekly schedule and a bank loan is at a monthly frequency. The census of default rates for a bank loan at a monthly payment frequency is actually 25% higher merchant cash advances whose schedule repayment is daily or weekly. Why is this the case? Because business moves fast when it comes to the inflow and outflow of capital. A daily or weekly schedule allows the business owner to keep better track of the repayment schedule so he or she can better strategize the inventory, material, or service that needs to be invested into helping the company grow. Merchant cash advances when used responsibly is highly beneficial because it is working capital to strengthen a business owners cash flow. This 30-year industry wouldn’t be here this long if it weren’t for the benefits that it provides for small business owners to handle in their day to day operations.

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How to grow your business with working Capital

To increase total capital of your business’s net worth, increase the working capital.  This is the amount of money available between assets and liabilities.  When there is a proven track record of successful revenue creating processes, many business owners find it useful to borrow money to fund expansion of their operations. 

Going to open a new location? 

Going to start a new product line?

Borrowed capital gives the business an immediate boost to expand in a rapid way and is ideal when the funds are tripled in the amount of time for the borrower.  Furthermore, when you borrow and use the funds in a strategic way the returns and rewards are well worth it.  This puts you in a better position to do what you do best. 

A shortened schedule for repayments means you will be paying less over time in comparison to a bank loan. This may be helpful to increase that inventory that is moving and grow your business in the way you have envisioned. 

Do you have a new product on the market?  Many businesses have expanded technical requirements to keep up with regulations and compliance for covid related changes. 

You can also use the Working Capital to start an advertising campaign to increase visibility and market appeal.

When you add working capital in your business you are increasing the flow of cash that goes through your accounts each month.  The more the money flows through, the better your accounts look for investors and the better you can make your appearance for customers.

A Working Capital Loan has a repayment period of 6-24 months. These are used by many businesses to keep or expand inventories, hire key employees and increase operations. 

This is good for businesses who are in trade, and have cash sales such as supermarkets who often turn their inventory.

When businesses increase their working capital they are using these funds to meet short term capital requirements.  This is perfect when a business has multiple account receivable collection invoices due within 30 days to show ability to fulfill payback of the loan. 

Enjoy a discount for early payment when paid in full, something which most banks do not offer. 

To recap, some of the benefits of increasing your working capital is that you can increase the inventory running through your business.  This is often used by manufacturing, retail and convenience stores and locations with high inventory and high cash turnover.

To make the repayment more productive there are weekly and daily (fact check) options.  Business loans can go through in as little as 3 days from application.  In addition, the interest paid on the loan is a tax write-off expense for your business.

Whether this is possible for you may be reviewed in the complimentary consultation with a financial professional. 

https://www.tutor2u.net/business/reference/working-capital-net-current-assets

https://www.investopedia.com/terms/w/workingcapital.asp

https://efinancemanagement.com/working-capital-financing/working-capital-cycle

 

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How Joshua Triplett Principal Managing Partner of VIP Capital Funding Helped Business Owners Obtain Over $100MM and Helped His Group Of Talented Consultants Thrive

Joshua Triplett has been in the financial industry for almost 7 years and has a plethora of knowledge in guiding small business owners toward the right solution. He first analyzes the business owners short term problems and creates a long term solution. The competitive advantage that he holds in the industry is by having a keen and empathetic understanding of a business’ needs and wants. This ranges from short term troughs that business owners must get by with because of the lack of capital at the time. In other cases, he will consult and tell a business owner to wait to improve areas of credit or cash flow if the offer presented by the lender is not attractive.

Joshua Triplett’s mindset based on identifying the problem and finding the best solution to the financial problem at hand, Through this approach he and his group have managed to help originate over $100 million in loans over the past 2 years. His reputation was built as being a trustworthy consultant that would aggressively get business owners offers that they deserve, and for the 5% who got declined he would help give advice for the business owner to follow so in the near future, the business owner would be approved. Joshua Triplett is a multi-millionaire and although money is rewarding, he is most fulfilled by being a great attribute to the economy by helping business owners seek working capital. He understands the sales process to a T, and through that, he has 6 trustful and highly skilled consultants who have duplicated his success. Because VIP Capital Funding is not as big as other financial companies they use their smaller size to their advantage by being more nimble. They are able to hire more talented people with higher salaries because they aren’t saturated with hundreds of mediocre employees. VIP Capital Funding is an elite group who is very effective at being personable and dedicated to their clients, and best of all they get the job done.

By having a deep grasp of understanding of the customer’s point of view Joshua Triplett and VIP Capital have been able to successfully originate hundreds of loans. Unlike banks who treat customers like a number or other merchant cash advance companies who read off scripts like robots; Joshua Triplett has been able to earn the customer’s trust through his performance and with that performance comes the confidence that business owners recognize and want to do business with. At the end of the day when a business owner comes to VIP Capital Funding for a small business loan, Joshua Triplett and VIP Capital Funding’s consultant delivers detailed consultations tailored to the business, and it’s industry nu solving financial problems. These problems could be a plethora of things such as capital for expansion, new hires, accounts receivables, strengthening the business’s cash flow. As a result, Joshua Triplett Owner of VIP Capital Funding and his consultants create great value in the economy of the 30.7 million small businesses in the United States.

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How Merchant Cash Business Loans Are More Beneficial for Small Businesses than Bank Loans.

bank

First, breaking down interest rates and repayment Merchant Cash Advance On average you will see factor rates on MCA’s between 1.25-1.499. For simplicity matter that is 25%-49.99% Interest rate. That may sound like a lot, and it is a lot for the personal consumer who is paid hourly or salary. But for a business owner who is using the capital to invest and reaping 100%-400% returns, then the cost of the capital makes sense as a profit is being made, not to mention the interest rate is a tax write off. Another benefit to this is that the interest is simple unlike a bank with hidden balloon interest who will have you running in place for years until you even begin to touch the principle. That comes out to he more expensive and disadvantageous for the business owner

Let’s take two product examples:

Bank Loan Amount: $200,000 Interest Rate with balloon: 15% APR

Repaument Type: Monthly

Term length: 60 months

Total Payment: $349,175

Interest Paid: 149,175

Prepayment penalty

Merchant Cash Advance amount: $200,000

Interest rate: 30%

Payment type: weekly or Daily

Term Length: 15 months

Total payment: $260,000

Interest Paid: $60,000

10% payment discount

From the two examples shown you will see that although a bank term is longer it is more expensive and less flexible as far as the repayment type is concerned a daily r weekly payment is a better for for small business for book keeping purposes. portunity cost of taking out a MCA loan every year with a preayment discount far outweighs the restrictions that a bank will put on your business not to mention your assets they want to hold at their fingers tips.

Now, look at the opportunity cost for taking out an MCA loan every year with a prepayment discount far outweighs the restrictions that a bank will put on your business not to mention your assets will be held at their fingers tips. Ideally speaking you want synergy with a bank loan with an MCA to cover both long and short-term expenses, and lastly do not overleverage your cash flow with MCAs that puts your account in quicksand. Use debt responsibility. At VIP Capital Funding, we will advise and put you in the best possible position to succeed. In summary: A Merchant Cash Advance gives you more capital overtime this growing your business faster, with no-prepayment discount, it can be cheaper in the long run compared to a bank loan, the funding process is a lot faster and there is no personal guaranty. The list could go further here but I will stop here.

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Banks vs MCA | Merchant Cash Advance

A cartoon of two people sitting at a table

“Now that you signed all your assets to the bank, †I am happy to lend you your bus fare home.â€

When you have a merchant who is trying to compare a bank loan to a cash advance us these sales tools to help the merchant understand they are comparing apples to oranges:
 
-A bank loan will allow interest to write off, whereas an advance allows a loss write off, why? We are advancing the merchant based on their future receivables at a discount, therefore taking a portion of their future profits, the tax writes off when comparing is night and day, the advance gives the merchant a substantially larger tax incentive to help minimize a tax burden at end of the year.
 
-The bank loan won’t allow you to take additional funding year over year, an advance will.
 
-A bank loan won’t allow you to pay off early with a prepayment discount, our advances will.
 
-A bank will want the collateral the majority of the time, an advance will not.
 
-When a merchant tries to compound the fees on the advance to a factor they always will say the interest rate is way too high, throw this back at them and see what they think. Convert the loan they think they are going to get into a factor and show them how much more expensive a bank loan is when compounding the interest over years.
 
For example:
 
A 250,000 advance over a 12-month term at a 1.30 factor will cost the merchant 75,000 in fees annually, not including if they payoff early and get the discount. The 75k in fees is tax-deductible. The merchant will also qualify for another 250k obviously if they have made their payments on time and their revenue is still in line. Over the course of just say 5 years, we will be able to give this merchant 1.25 million dollars and a 375,000 write-off.
 
Now take a commercial bank loan, let’s say it’s 250,000 amortized over 10 years at 8%. The merchant will make 120 monthly payments at $3,033, for a total of 363,960. A TOTAL OF 113,960 In fees. Now divide that number 363,960 by the amount they took 250,000, comes to a factor or 1.45!!! The interest writes off on this annually is minimal only 19,385 in the first year, compared to a 75k write-off from a cash advance. The bank isn’t going to give them another 250k each year either!
 
Now tell me if the merchant could potentially grow their business more in just a 5-year span, with a bank loan or cash advance? 250k with minimal benefits, or 1.25mill with a long list of positives.
 
It’s all about educating the merchant as most don’t understand how this financing really works.
 
Hope this helps!

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At VIP Capital Funding, our mission is to empower small businesses by providing them with smart and secure financing solutions. We are fully dedicated to delivering world-class service to our clients, ensuring their business growth objectives are met.

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