Understanding the benefits and cost of our Financial Products
Understanding the benefits and cost of our Business Loans
Where does working capital come from?
Working capital is calculated by subtracting current liabilities from current assets. It is essentially the lifeblood of any business, without it businesses will sink.
What are the benefits of a working capital loan?
Cash flow is king in business and due to insufficient funds, about 35% of businesses are unable to grow their business or expand operations, 14% are unable to finance increased sales, 13% cut employment, and 9% are unable to increase inventory to meet demand. With small business funding, your business is better prepared to handle any challenges or opportunities that arise. Even a business that has billions of dollars in fixed assets will quickly find itself in bankruptcy if it can’t pay monthly bills. Under the best of circumstances, poor working capital leads to financial pressure on a company, increased borrowing and late payments to creditors – all of which result in a lower credit rating. A lower credit rating means lenders charge a higher interest rate on money borrowed. Applying for and using a small business working capital loan when you need it most can keep you in business when shortages in resources occur. A small business loan is one of the easiest ways to harness the potential of your business. Proper application of working capital will enhance a company’s’ profitability in the long run by managing day to day expenses in avoiding any operational failures. Working capital increases the chances that collection from trade receivables are paid on time as receivables is a key part of working capital which would also make for a lower case of default in paying the trade payable on due date because of proper management and allocation of cash. Lastly, it can also be a great solution for businesses that are small, just starting out, don’t have traditional collateral or are simply in a period of low cash flow.
You can maintain ownership of your business.
If you were to receive funding from an equity investor, you would likely have to give up a generous percentage of your company in return. In turn, you are giving up a portion of your decision-making power. If you borrow funds from the bank or another financial institution, you are obligated to make the agreed-upon payments on time – but that’s where your obligations end. You can run your business without outside interference. In the words of Mark Cuban, “These investors know what you don’t, they are not telling you; the minute you ask for money, you are playing in their game, they aren’t playing in yours. You are at a huge disadvantage and it is only going to get worse if you take their money. The minute you take money, the leverage completely flips to the investor; they control the destiny of your plan; not you. Investors don’t care about your plans and goals. They love that you have them, but investors care how they are going to get their money back, and then some.”
6-24 months revolving working capital terms are ideal for quarterly and bi-quarterly needs.
Small business working capital loans are designed to infuse money into your business for 6-24 months as revolving capital to meet your needs. You won’t have to plan for years of monthly payments to pay back what you borrowed.
Use the money however you see fit.
Banks and other lenders have few – if any – restrictions on how you use the money. Whether you need to maintain your operations or make an investment, how you use the funds is your decision.
The application process is straightforward.
Applying for a typical business or personal loan can take up a lot of your valuable time and may not end in an approval. It often includes extensive paperwork, a lengthy approval process, putting up collateral, making fixed monthly payments and having restrictions on how you use the money. A small business working capital loan online is a great way to access funds without the long-waiting period hassles associated with a traditional bank loan. Qualification is generally determined within a few hours, if not sooner, of applying resulting in a faster turnaround when compared to traditional lenders. This makes online small business funding more appealing for those who need quicker access to capital.
It’s your call, when you are ready we will package together the funding package neatly for the underwriting department on a silver platter and get you the funding you need fast within 24 hours
Understanding the cost
Before managing the risk of taking on funding, you must be able to predict the amount of time that the capital deployed takes to make a return on your investment. Whether that intention being a short term fix from a business hiccup or an offensive purchase of inventory, whatever the case maybe; case in point is that the capital should be used to help generate more revenue, which results in more profit. Next is understanding the cost, as cost is determined by both time the funds are borrowed and risk to the lender based off the merchant’s profile. A Traditional Bank Loan at 8% APR over 5 years is equivalent to our 6-24 month Revolving Working Capital Loan at 40% without prepayment penalties, collateral, extensive paperwork, not revolving, etc. Reason being, the Bank Loan is 40% over 5 years, and our Working Capital Loan is 30-40% over 6-18 months. The key difference here is the term length. Don’t let a Traditional Bank fool you with single digit interest rates as that is interest rate paid annually and certainly adds up over the year. Take your house for instance over a 15-30 year mortgage and multiply the percentage; it’s a lot! We give you the cost with simplicity and total transparency. As mentioned if your business is predicted to make a return every 6-12 months it wouldn’t make sense to take on a Traditional Bank Loan at the same cost and a lower amount offered if you’re predicted profits are substantially less than that. For example, a merchant gets approved from a bank for $100k for 5 years after a 90 day process and we are able to approve a merchant for $200k for 12 months (We are able to lend 100%-500% more than Traditional Banks) after a 24-48 hour process. For example we are able to offer $200k every year with prepayment discounts, that is $1M over 5 years because we are able to offer you $200k every year compared to $100k over 5 years from a bank with prepayment penalties. As your business grows, this amount is subject to substantially more. In the given example, that is 1000% more capital put to work for your business at the same cost, just shorter repayment periods. In fact the 6-24 month repayment lengths are statistically better for small businesses as there is a lower default ratio and higher growth in annual revenue.
Our small business funding is designed to keep your business sailing in deep water and infused with the lifeblood of business working capital; every 3-6 months. Not to mention we are able to get you more capital after your term is 40%-50% paid down. Our capital is ideal and designed for businesses nationwide as the funding is given in large enough amounts and given frequently to put to work at approximately the same cost. Traditional Banks are not only lending less, but also can take a lot of time to close up to 90 days. Timing is crucial in this fast paced business world we live in today. Our capital is also tax deductible and there are prepayment discounts not prepayment penalties. Unlike banks which is backed by the government, our funds are from Private Investors and Venture Capitalists who not only believe your business will be able to repay the termed loan, but be able to grow from it as well.
VIP Capital Funding strives to build long term relationships across all of their clients and graduate their clientele to better terms and rates along the way.
The primary focus is you. Let’s move forward and get the funding you want. Give us a call, fill out the funding application or fill out the form above for a brief consultation and we will be in touch with you shortly. We are available 24-7, and there are multiple ways to contact us.