non paying customer

43% of companies don’t get paid on time. Here’s how to deal with non-paying customers

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Dealing with non-paying customers can be stressful. Use these strategies to manage late payments and maintain a consistent cash flow.

non-paying customers

If you operate in the B2B industry, receiving invoice payments on time is a major concern that can make or break your business. Even with great sales and quality products or services, many companies still experience delays when expecting payment. 

43% of companies polled by Atradius reported they often have to deal with clients that don’t pay on time. Dealing with those overdue payments means significant time is consumed by customer follow-ups and chasing down unpaid invoices. 

While there is occasionally some room to account for late payments, it can be detrimental to your business if invoices are consistently late. To avoid unwanted stress, you need to know how to deal with non-paying customers and have a plan in place to make sure there isn’t a lag in cash flow.

How to avoid non-paying customers

Below are four ways to take back control:

1. Research and reassess

Before you begin working with a new customer, look at their credit reports and make assessments based on customer credibility and trustworthiness. For existing clients who fail to follow your invoice terms, consider reassessing their creditworthiness and doing business with them.

You can involve us at Liquid Capital in this process. We can run credit checks for you and evaluate a customers’ risk factor. In addition, we can advise you whether a new customer is worth doing business with or not, and if they fall in the high-risk category (how likely are that customer would be to default their bill payments). An added benefit of getting us involved early is learning if you’ll be able to make use of invoice factoring to improve cash flow from your customer’s future invoices.

 

2. Have a contract in place

It doesn’t matter if your new customer is a family member or a business professional you’ve known for a while. You must have a contract in place before you begin working with a new client. 

A contract is a legally binding document that outlines the specifics of your working relationship with a customer. What product or service are you offering your customers? When and how will the customer pay you? What will happen if the customer fails to pay you on time?

The contract is your chance to protect yourself from non-paying customers. You can discuss all costs and fees associated with late payments before-hand. Ensure you include a payment schedule that identifies the terms of payments (such as deposits, milestone payments, payments before delivery, etc.). You can also make sure you’re implementing terms that will create a consistent cash flow for you (for example, using 30, 60, or 90-day terms depending on your need for cash every month). 

You can also include a “default interest” clause in the late payment policy within your contract to encourage timely payments. If the customer misses a payment, they’ll pay a higher interest rate. This term may influence your customers to prioritize when choosing who to pay at certain times. They are likely to give priority to paying partners who will charge more for late payments.

 

dealing with non-paying customers

 

3. Ask for a deposit

After running risk assessments and background checks, if you’re still unsure about a customer’s credibility, you can ask for a deposit. This way, you can absorb some of the loss in the event of non-payment since you already charged a portion of the payment upfront.

It would help if you decided on the deposit structure based on the industry type and the product or service you’re offering to your customers. It’s also important to consider how much deposit your customer can make. If your payment is contingent on them getting paid by their customers, you should consider that and adjust the deposit term or schedule based on their cash flow. After all, you’re trying to build relationships with your customers, so it’s probably best to find a balance and discuss mutually beneficial terms.

 

4. Send invoices ASAP

If you think a client might disregard your payment terms and delay payment, it’s best to send an invoice as soon as you’ve completed the work. This can encourage on-time payment since the work is still top of mind, especially if they’re happy with the result. This also allows their A/P team to manage their payment process on time.

 

 

Implement these tips and speed up your invoice payment time to boost a steady stream of cash flow. If your cash flow needs are immediate and cannot be resolved with these strategies, you can use invoice factoring to inject some capital into your business.

 

Featured image by Adobe Stock, secondary image by Pixabay

working capital

3 factors that keep working capital flowing into your business

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Improving cash flow and optimizing working capital is possible with these three strategies.

Keep working capital flowing into your business

Working capital, aka cash flow, is vital for a successful business. After all, without sufficient working capital, businesses can end up missing opportunities, wasting money and ultimately fading away.

But many companies struggling with cash flow may wrongly assume that the only way to remedy the situation is through borrowing via traditional loans and lines of credit. Although this can be a good solution, there are many other ways to optimize working capital before going further into debt.

Factors that affect working capital

There are key factors that have a direct impact on cash flow. As a business owner, these will be top of mind every day.

  • Accounts receivable: Money coming into the business increases working capital, so you’ll want to speed up this process as much as possible.
  • Accounts payable: Conversely, delaying outbound payments will keep cash in your business for longer.
  • Inventory management: Businesses that sell physical goods must be careful to balance their inventory with cash flow. Having capital assets sitting in a warehouse limits cash to use elsewhere.


Three strategies that help optimize working capital

So, what can you do in each of these areas to increase working capital and cash flow?

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Accounts receivable

It makes sense that the quicker you get paid, the more cash you will have on the books.

Begin by negotiating favorable payment terms with your clients, reducing the time they have to pay an invoice. As an SMB, you may find yourself lacking the leverage to achieve this when doing business with larger companies. 

One option is to invoice customers upon shipping or receipt of goods, or as soon as a service has been performed, rather than waiting until month end.

You can get around this by adopting a real-time payment tool for your goods or services, which gives clients an easy way to pay as soon as you send the invoice. It can be as simple as adopting a system that uses payment links sent via email.

Also, look at the efficiency of your invoicing cycle. How many days does it take for an invoice to land with the client after it has been approved? If you can shorten this time you’ll receive payments sooner.

Related: Read the Cash Cycle Guide

If you’re in a position where you regularly have large amounts owing to you, you could look at invoice factoring. This gives you access to working capital for a small percentage of your accounts receivable based on the amount due on an invoice. Also known as ”accounts receivable financing,” you could be more easily approved for this solution than traditional business financing.

Working capital for SMB

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Accounts payable

On the A/P side, businesses should look at increasing Days Payable Outstanding (DPO). This financial ratio shows how long it takes your company to pay invoices from suppliers, usually measured annually or quarterly. The higher your DPO, the better your cash flow since the amount you owe stays in your hands for longer.

Here’s how you can calculate DPO with a simple formula:

Days Payable Outstanding =

(Average Accounts Payable / Cost of Goods Sold)

x Number of Days in Accounting Period

One way to increase your DPO is to negotiate better payment terms, perhaps increasing from 30 to 60 days. But as mentioned above, it can be difficult for smaller enterprises to achieve this when dealing with larger corporations. Everybody wants the most favorable terms for themselves, and more often than not, the big guys win.

You may have better luck striking a deal with vendors or suppliers you have had a long-standing relationship with and who may agree to extend your payment terms. Depending on the supplier, you may also ask for longer payment terms if you purchase larger quantities. However, this will vary from supplier to supplier.

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Inventory management

We can’t stress the importance of finding the right mix of inventory if you’re selling physical goods. 

Buy too much stock up-front, and your assets will be tied up until it is sold. But buy too little, and you may lose out on sales or disappoint customers with longer than expected delivery times. 

It may be worth investing in inventory management software, which lets you find that balance based on lead times, stock value and other factors.


There’s always a way to improve working capital

The strategies mentioned above don’t require you to compromise how your business operates — you just need to make slight adjustments to optimize for working capital and increase cash flow. By evaluating the current way you send and receive payments, including the systems you use to manage your inventory and accounting, you’ll improve your working capital and enable your business to grow the smart way.

 

business funding

Is business funding missing genuine human partnerships?

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Learn how Liquid Capital Principals provide more than just business funding for SMBs.

business funding

Looking for the right funding partner is like looking for a needle in a haystack. Although they might feel hard to find, when you find a great partner, it can be quite rewarding. 

Liquid Capital Principals are the needle you have been looking for. Here is how we’re different and why you should consider working with us at the Liquid Capital team. 

We understand small businesses because we’re business owners, too

Liquid Capital Principals are very much in-tune with the needs of SMBs. That’s because we, too, are business owners who understand what it takes to run our own operation. We are passionate about helping other entrepreneurs reach their dreams and ambitions.

We also recognize the pressure that comes with finding capital and funding growth. But more so, we can recognize that unsettling feeling of loan rejections from traditional lending channels such as banks. 

We listen and acknowledge your needs 

Liquid Capital Principals have roots in small and medium-sized businesses, so we are trained to listen and understand the specific needs and challenges of SMBs. 

While conventional lenders try to categorize both small and medium-size businesses together and offer a «one size fits all» loan, our Principals take the time to talk to clients, understand your business, and offer you customized solutions that are designed specifically for your business volume and scope.

We’re not afraid to be honest with you 

business funding

Businesses may feel like they have no choice but to approach their bank for a traditional loan. 

When you work with Liquid Capital, our goal is not to sell you on pervasive funding. We propose solutions that will offer benefits in both the short and long-term. 

Whether it’s asset-based lending, PO financing, invoice factoring, purchase financing program, equipment financing and leasing, working capital advance or top-up financing — you should know the pros and cons of each option.

Often, we have clients that come to us with a certain solution in mind, but after discussions and strategic advice from our Principals, they get a better understanding of the alternatives that end up costing them less while receiving more capital. 

Related: AV company booms by adding invoice factoring


We give you more control over how you’re funded 

Traditional lending has a “take it or leave it” approach because there’s only a couple of main solutions: loans or lines of credit. Borrowers don’t have a lot of say or control on the terms and conditions, and have to pass strict underwriting standards to get approval. These traditional solutions can leave you in debt and having to manage payment schedules that make you feel burdened, not relieved.

In comparison, Liquid Capital offers a wide range of alternative funding solutions, and our expert team walks you through the solutions so you have a say in how your business is financed. One key example is our invoice factoring option that allows companies to access capital without adding more debt to their books. 

Not only do our Principals present alternative options that would best fit your business model and operational needs, but we also offer strategic advice based on industry trends and financial best-practices — so you always make an informed decision. 

Our success is tied to how your business thrives, so you always have more control over your business finances when you work with us. 

 

Liquid Capital provides a wide range of funding solutions for businesses of all shapes and sizes. Our Principals understand the challenges SMBs are faced with today and can help them smartly borrow money. Contact us today to get the financing your business needs from the people who understand your business.

 

Images by Adobe Stock and Pexels.

finance your business

Business booming? Here are 4 ways to finance your business for growth

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Do you have plans for expansion? Make sure you have funding lined up. But with so many options available, it can be difficult to pinpoint an option that makes sense for you. We share four ways to finance your business for growth. 

finance your business

 

When you’re planning for new hires, searching for a bigger office space, increasing your inventory or expanding your business in other ways, cash flow can be a significant  concern. Fortunately, there are many  financing options available for these types of situations. 

We’ve talked about other ways to finance a business, but in this post we’ll cover some more alternative funding methods:

1. SBA loans

SBA loans are small business loans partially guaranteed by the U.S. government, making them less of a risk for the lender you’re working with. Similarly, The Canada Small Business Financing Program offers loans to SMBs that are backed by the government. 

These loans come in a variety of amounts with APRs as low as 6.5%. They’re relatively harder to qualify for and you’ll need to meet the following requirements:

  • At least two years of business experience.
  • A credit score of 640 or higher. 
  • At least $100,000 in annual revenue.

However, government funding may slow the application process down so you should only apply for these loans if you can wait at least three weeks to receive the funding.

2. Business lines of credit

Sometimes, it’s hard to know how much money your small business needs to cover expenses, which is why some companies opt for a business line of credit. 

A business line of credit (LOC) is a revolving loan that gives SMBs access to a fixed amount of capital to meet short-term working capital requirements. Common examples of LOC uses include: 

  • Repairing business-critical equipment
  • Purchasing inventory
  • Bridging a periodic cash flow gap 

That way, you can borrow what you need without spending the entire line of credit.

3. Equipment finance and leasing 

finance your business - warehouse

Equipment finance and leasing is a loan designed specifically for companies wanting to purchase new equipment but don’t have the capital to make the investment. The lender lets you use the earnings generated from your new equipment to make monthly payments, cover additional overhead costs and contribute to your profits.

4. Purchase financing

If you have a good credit score, you can use purchase financing to fund a one-time business purchase. 

Purchase financing is a short-term funding solution that companies use when there’s an opportunity for immediate growth. They may also apply for purchase financing if they need to take advantage of a bulk-sale offered by a supplier or purchase inventory at reduced rates. 

Bottom line

Small business expansion is exciting. Once you see signs that indicate it’s time to grow your business, it’s important you prepare yourself for growing pains. 

One of the biggest challenges is how to facilitate growth and avoid unexpected problems that emerge when your business is expanding too fast. 

Another setback is the lack of funding to back-up your expansion plans. That’s why it’s crucial to explore different ways to finance your business — such as SBAs, LOCs, purchase financing or equipment financing — and select a funding option that will take your business to the next level. 

 

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Click here to learn more about our alternative funding solutions, such as invoice factoring.

Images by Adobe Stock and Pexels

ways to finance a business

5 ways to finance a business in a slow economy

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The business funding landscape is continually evolving, in part due to economic shifts and business demands. Here are some innovative ways to finance a business or your next strategic plan. 

ways to finance a business

 

Gone are the days when commercial banks were the only safe lending choice and even then so many rules and regulations made it hard for SMBs to obtain a loan. According to Dun & Bradstreet, bank loan success rates stood at 32% (initially 41%) for small businesses and 89% (down from 95%) for mid-size companies. 

Thankfully, there are many alternative sources of funding out there besides traditional loans that SMBs can use to raise capital. Many have been around for some time, but others are relatively new and emerged over the past several years.

Keep an eye on the terms of any funding deal, as some will be more favorable than others. Here’s a quick overview to help you understand the different types of funding and lending:

Five ways to finance a business in 2021

ways to finance a business


1. Invoice factoring

Invoice factoring is one of the most common ways to finance a business. You get quick access to cash by selling your accounts receivable to a financial institution or factoring company (also known as a factor). Businesses often use a factoring company to help inject cash flow and manage slow-paying customers. 

As part of the process, the factor pays a portion of the accounts receivable — typically 75% to 80% of an invoice — and keeps the remaining amount as a reserve. Once the final invoice is collected, you’ll receive the reserve funding back (minus a small fee), keeping the cash flow…well, flowing. The higher the invoice capital or the more credit-worthy the customer, the more you’ll be able to borrow. 

The main upside to invoice factoring with Liquid Capital is that you receive a partner who is willing to take the time to understand your business. This is important when there are a multitude of considerations and implications, with various choices and options that you might not be aware of yet.

Related fact: While invoice factoring is in wide use in today’s business world, it’s one of the oldest funding methods, dating back to ancient Rome!


2. Peer-to-peer lending 

You may have heard about this lately, and we recently explained it in another article. Peer-to-peer lending, also known as social lending, connects investors and borrowers together on a digital platform. The platform acts as a middleman and doesn’t actually give out any loans. Instead, it facilitates the lending and brings together a community of like-minded individuals that share an entrepreneurial zest.  

A growing number of P2P business lending platforms offer a diversity of loans and act as a pitching service to connect businesses with investors. This type of funding is geared towards more established companies looking to grow and typically requires a thorough pitch deck to showcase. Not all businesses will be at the right stage to focus on this, nor have the time and capacity to fulfill all requirements. 


3. SBA microloans 

If you’re based in the U.S. you can apply for a microloan program that awards up to $50,000 loans to help grow your business. North of the border, there are also many microloan options for Canadian businesses. 

These loans are made available through nonprofit community-based organizations and help you increase working capital and buy inventory, supplies or machinery. They also have relatively low-interest rates, generally between 8% and 13%. 

The upside to this type of funding is that lenders may also provide some degree of consultation services, so you’re able to get direction and industry knowledge to move your business forward. However, the one catch is that some applicants may need to go through training before their loan request is even considered, to make sure they are exemplary candidates and deserving of the funding. If you’re in need of fast funding, consider the timing.


4. Fintech lenders

ways to finance a business 3

Many online lenders have emerged due to a rise in fintech capabilities. These lenders provide smaller loans, credit options and quick loans through their online storefront.  

Many SMBs see them as a useful substitute for an immediate cash-flow problem, but doing business with these lenders has its own set of benefits and limitations. The trick is to do your research and understand what kind of lender you’re dealing with. 

Look into their online reputation, and most certainly take the time to review customer feedback. When researching an online lender, you should also look into their contract terms, interest rates, along with any additional fees and charges. And always find out if an online lender will register security against your business. Some may even do this for a basic application — even if you don’t borrow money from them — which can put you in a worse position. Also consider whether expert consultation would be helpful in your circumstance – someone who will take the time to understand the bigger picture and goals for your business. Fintechs are generally transactional, which can work in some situations if you know exactly what you need.


5. Merchant cash advance

If you accept card payments, you can apply for a merchant cash advance loan (MCAs). When you borrow through this method, a lender gives your business cash upfront in exchange for a commission or a part of future credit card sales. You pay back the loan from the percentage of the business’s daily transactions. 

The biggest downside to MCAs is that they can get quite expensive. In fact, based on this estimate, they can have annual percentage rates (APRs) as high as 350%. Business owners in a tight spot that go for this lending option are pursuing one of the costliest forms of financing.. 

While MACs can offer a quick fix for cash flow problems, they are in no way a long-term solution. How do you expect your business to thrive when someone’s eating into your profits every single day?

While there are a few options for SMBs to consider in solving cash flow needs, it’s recommended to slow down and look a little deeper at the options – and the funding providers – before deciding. 

Always work with a partner who is willing to take the time to understand your business and your needs. A good partner will have your back and keep you protected. 

 

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

 

Images by Adobe Stock and Pixabay: Featured, body 1 and body 2

resiliency during COVID

Moving Forward – The power of resiliency in the era of COVID-19

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Here are three ways you can win big with resiliency during the COVID-19 pandemic.

resiliency during COVID

 

“Resilience” is defined by Harvard Business Review as “The ability to recover from setbacks, adapt well to change, and keep going in the face of adversity

To say that we’re experiencing substantial economic and social changes would be an understatement. At the center of this maelstrom is a viral enemy that has affected the globe in a profound and deadly way. 

It has dramatically challenged our healthcare capabilities and our ability to support the supply chain. It has crippled numerous industries, with resultant massive unemployment, while overtaxing industries that have been charged, willingly or unwillingly, with providing crucial goods and services. It has forced a social society to be distant and rightfully fearful. It has exposed our vulnerabilities on many different levels.  

Having to deal with so many unknowns, both current and going forward, challenges our emotions and ability to cope. No one knows for sure what the “new normal” will look like and what will be required to adapt to it. 

To be sure, America and the world are being severely tested. Resiliency will help us battle through and persevere.     

Human connection: The key to overcoming the pandemic 

While the above scenario is troubling, to say the least, there is a massive effort to contend with it and somehow prevail. 

Heroic actions by healthcare professionals and first responders, as well as governmental efforts to shore up the economy and assist its citizens in their time of need, give rise to the fundamental mantra that provides needed solace at this time.

Together, we will get through this crisis.   

To be sure, there’s no lack of commentary by the news channels, medical experts, economists, money managers, government agencies and the like that hypothesize and even predict what the U.S. and the world will look like going forward. 

The overall impact will not be known fully for some time. Some businesses will fail altogether, some will have reduced capabilities, and others will change their industry focus and operations.

From the supply chain, all the way through to the end customer, every business will be affected in some way. 

That impact isn’t necessarily all in the red though. While we’ve already witnessed the effect this crisis has left on many prominent industries, there are a select few — such as eCommerce, augmented reality, robotics and e-Learning — that have been positively impacted.  

There’s a need to pivot strategically 

Not surprisingly, the psychological and emotional impact on business owners has been profound. Being able to deal with the ongoing challenges posed by the pandemic while trying to maintain some semblance of a positive attitude can be daunting.  

Making the situation feel worse is the unknown. How long will this go on?

To survive and surmount this scenario, business owners need to steel themselves with a can-do mindset combined with a keen focus on situational analysis, flexibility and innovation. Decisions need to be made about potential changes in the business model, processes, markets, customer profiles and requisite resources.

For business owners and leaders, some changes will require minor adjustments while others may  require significant realignment of teams and priorities. The key is for the business owner to act decisively.   

Recent research by IBM reasserts that COVID-19 has forever changed how companies around the world operate. Executives are shifting their top priorities as they plan for the future, with 55% reporting the pandemic has permanently changed their organizational strategy. Another 60% indicate they’ve adjusted their approach to change management and even accelerated process automation. 

One way or another, 2021 will be different from last year

resiliency during COVID-19

Throughout this most difficult period, and likely continuing for some time, business owners will need to continue to reaffirm their resolve to move forward.

This can be challenging, given the range of issues affecting their businesses. In the face of adversity, resiliency is the common thread with those who will find success. Being able to visualize opportunities where none appear to exist, will also improve the likelihood of success.  

And as the old saying goes: When life gives you lemons, make lemonade. 

This speaks to the spirit of an entrepreneur imbued with the will to win. History is replete with many examples of individuals and businesses facing dire circumstances—only to come out stronger and even more determined to succeed.  

As we get to the other side of this crisis, the process will ultimately make many business owners more durable and wiser. Experience, although sometimes painful, provides a frame of reference for the future. Hopefully, we won’t have to endure a similar situation going forward, but the experience should better prepare business owners to address their challenges and seize opportunities in a more informed way.

 

When working with us at Liquid Capital, clients not only receive funding but also gain access to a strategic business partner who works alongside them to make sure their business is thriving. Our Liquid Capital Principals work closely with our clients and referral partners to help them address concerns regarding business operations outside of funding.

If you’re interested in learning more about invoice factoring, or would like to connect with a Principal near you click here. 

alternative business funding

What kind of alternative business funding is right for you? Get your facts!

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What are some alternative business funding options you can explore?

alternative business funding

Have you noticed that business funding has changed drastically over the years? 

Banks used to be the default lending choice in funding and borrowing by most businesses. But thanks to factors including access to technology, a shift in a business mindset and the need for immediate cash flow, alternative business funding companies are taking up a share of the funding sector. 

Many entrepreneurs have this question on their mind:

How do I know what kind of alternative business funding is right for my business? 

In this quick guide, we help you understand different alternative funding options so you can choose one that fits your business needs. 

The $5 trillion funding gap!  

When a borrower obtains a loan from a lender that is not a bank, it’s considered a form of alternative funding. 

Non-bank or non-traditional lenders offer many different types of loans that give borrowers access to capital when they need it the most. Often, small businesses and medium-sized companies apply for funding through alternative lenders when they are short on cash and need to inject capital into their business immediately. 

A recent study by Oracle shows that alternative forms of funding are only expected to increase in popularity, as 40% of consumers feel that non-banks can offer more than a traditional bank. Small to medium businesses, in particular, are encountering a funding gap — $5 trillion to be exact — that is driving them to explore alternative borrowing options.

Another survey discovered that banks have an approval rate of approximately 58% from small business applications. In contrast, alternative lenders have a 71% approval rate for small businesses, which is making substitute funding options so viable and popular. 

Popular alternative business funding options in 2021

alternative business lenders

Alternative loans come in many different forms, so you can usually find one suitable for your current needs. Here are three popular alternative funding options to add to your toolkit: 

Asset-based lending (ABL)

ABL works by utilizing the assets your business already has, such as accounts receivable, inventory, machinery or equipment as collateral for a loan.

In terms of benefits, ABL loans can have lower interest rates and less stringent borrowing conditions as compared to other funding options. 

Read more here

Invoice factoring

Invoice factoring is when a business sells its outstanding accounts receivable to a third party at a slight discount. 

A major advantage of invoice factoring is that businesses are not adding any more debt to their books. They’re simply getting access to their own cash flow before the invoice due date. 

Read more here 

Peer-to-peer lending (P2P)

P2P is another alt lending solution that’s becoming more mainstream. Under this form of funding a borrower, an investor, and a partner bank are brought together through an online platform.

The main benefit of P2P is that borrowers enjoy a relatively lower interest rate. Because P2P platforms don’t actually give out a loan and act as a middleman, they are able to keep costs low. 

Nevertheless, P2P lending does come with its own set of challenges. The main downside is there are no laws protecting borrowers or lenders. The platforms are generally not guided by any regulatory bodies, so there are a lot of inconsistent behaviors that may pose problems. 

However, when you have a trusted go-to lending partner and have developed a long-term relationship with them, you’ll be able to openly discuss all funding options available — regardless whether they offer those options or not. This is our approach at Liquid Capital, and we’ll give you expert advice on a variety of funding options to help grow your business. 

In light of uncertainty: Why alternative funding makes sense

Many small businesses have been locked out of government-assisted loan programs through their banks—and with temporary holds on new loans, businesses have no choice but to turn elsewhere for funding. As businesses struggle to come up with ways to fund their operations, alternative lenders seem like the obvious choice for many. 

To put the need into context, Statistica predicts that 1,778 thousand small and medium businesses will receive loans this year from alternative lenders—amounting to $30,413M, which will set off an upward growth trend of 10.2% YoY. 

Yet, perhaps many companies are also shifting towards non-traditional funding because they need to build partnerships with new lenders. Business owners recognize they aren’t experts in everything and no longer want to go at it alone. Instead, they are leveraging help from professionals who have the right experience, knowledge and resources to get things done.

 

Related: Baby’s on Broadway — How partnering with the right lender helped this retail store grow into a community cornerstone. 

 

Ultimately, you have to choose a funding option that fits your business needs and timing. Alternative lenders offer the flexibility of repayment and a creative solution to unique business challenges. They may also offer faster access to capital, so if you’re short on time you may want to speak with a non-traditional lender. Whatever your decision may be, choose an alternative lending option that makes sense for your unique business challenge.

 

When working with Liquid Capital, clients not only receive funding but also gain access to a strategic business partner who works alongside them to make sure their business is thriving. Liquid Capital Principals work closely with clients and help them address concerns regarding business operations outside of funding.

If you’re interested in learning more about us or connect with a Principal near you to chat about your business funding needs, click here. 

Images by Adobe Stock and Pixabay: Featured and Secondary

cash flow budget

Best of 2020: The top funding advice you loved reading!

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We love producing articles that are informative and engaging for our readers — whether you’re a client, business partner or fellow commercial finance professional. This year, the top blog content included funding advice and other topics on cash flow budgeting, reducing expenses, growing better business partnerships and more.

Here are the top 10 articles from our blog this year:

7 steps to create your cash flow budget

Funding advice — cash flow budget

Cash flow is extremely important for a business — it’s literally the bread and butter. So how do you ensure you have enough money to pay yourself and keep your business operational? Start by creating a cash flow budget that shows you how much money is coming in and going out of the business.

 

3 biggest financial challenges facing small business owners

Financial Challenges Facing Small Business Owners

Business owners are faced with a number of financial challenges. In this post, we don’t just present the top three finance-related problems, but also offer solutions to help you overcome and flourish in business.

 

4 core business principles you might be overlooking

Group of playing cards

In this post, we explain how you can use people, strategy, execution and cash to propel your business to the next level.

 

How to determine your company’s «cash conversion cycle»

Cash conversion cycle

What is a cash conversion cycle and how can you use it to your company’s advantage? We cover the basics and show you the importance of being on top of your working capital.

 

5 tips to grow an outstanding referral partnership

5 tips to grow an outstanding referral partnership

Referral networks can bring you a lot of value— and business. We share five tips to help you find the perfect referral partner.

 

12 hidden costs of running your small business

Holing an invoice

From employee perks to phone and Internet bills — we share common hidden costs associated with doing business, so you’re not in for a surprise!

 

5 ways factoring can help you clear cash flow hurdles

5 ways factoring can help you clear cash flow hurdles

82% of new businesses will fail because of cash flow. But invoice factoring can help you overcome this big hurdle. Learn more here.

 

Thanks for your readership this year, and we look forward to sharing more funding articles and advice with you in 2021!

Invoice factoring vs. bank loans

Invoice factoring vs. bank loans: Which lending option is better for your business?

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When looking at the various funding options, you may review invoice factoring vs. bank loans. Here is a quick and handy comparison.

Invoice factoring vs. bank loans

If your business needs working capital, you will likely research both invoice factoring and bank loans as possible funding options. 

But how do you know which one is the better option?

Every business scenario is unique. And while there may be multiple factors that may impact your decision, there are two important elements to consider — how quickly you need the funds and the borrowing costs associated with your choice. 

Invoice factoring and bank loans have little in common, other than both providing cash to businesses. We’ve put together a simple breakdown of the two borrowing options to help you decide which one works best for your business:

First, what is invoice factoring? 

Invoice factoring is a funding method that gives your business access to immediate cash by selling your invoices to a third party at a slight discount — with considerable advantages. (More on that in a bit.) 

Let’s say you’re expecting a customer to pay a $10,000 invoice next month. If you need that money today, you can sell that invoice to a factoring partner and receive slightly less than the totalling amount on the bill — right away.

So invoice factoring isn’t the same as borrowing money. Instead, you’re selling an asset (your accounts receivables). You don’t owe the lender any money so there’s no debt added to your business.  

When bank loans make sense

When you borrow money from a bank, it’s usually in the form of a traditional loan or line of credit. With this type of borrowing, you pay the principal plus interest until the loan is repaid in full. It’s the same as a personal loan, and is relatively straightforward.

While these conventional loans are pretty cut and dry, they add more debt to your business. For that reason, they can cost more in the long run — and you may not be able to close the cash flow gap when you really need it. Approval may also take long, and you’ll also be adding another liability to your business.

Here’s a quick breakdown of invoice factoring vs. bank loans:

 

Invoice Factoring Bank Loans
Approved in a few days. Approval process is lengthy.
No collateral is required. Need some collateral.
Interest rate is lower. Interest rates vary depending on bank and type of borrowing. 
Only your clients’ credit history is assessed. (Good for companies who do not have as strong a credit rating, or limited credit history.) Business needs an established credit history.
No debt incurred with advances on invoices. Line of credit is added as debt to the business.
Financial flexibility and immediate access to cash flow. Upfront payment is required on uncertain future earnings.
Additional services can often be offered at no cost. No additional services offered.

What’s the best financing option for your business?

It’s clear there are many advantages with invoice factoring.

With factoring, you’re selling a valuable asset to gain more funding, not incurring any debt. You also get to choose which invoices you want to factor depending on how often you need to inject cash flow into your business. Unlike a bank loan, you’re not tied into a long-term contract and you can make the most of your invoice terms, taking advantage of the flexibility that factoring offers. 

When you compare factoring with traditional funding, you may realize that bank loans are sometimes less advantageous in the long term. You could end up paying more for the access to that capital than you would with factoring, and will be adding on liability on your company’s balance sheet. 

 

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Holiday Gift Guide 2020

Holiday gift guide 2020: Thoughtful presents for colleagues & clients

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We’ve compiled a holiday gift guide with ideas from creative businesses, so you can feel good while surprising your employees and clients! 

holiday gift guide 2020

This year, a lot of things changed for us — how we work, shop, travel and socialize with others. So it’s no surprise that we’ll be celebrating the holidays differently, too. 

Although there likely won’t be a traditional holiday party at work, you can still spread some cheer by sending gifts to your employees, coworkers and clients to show your support and appreciation. (And don’t forget the possibility of a Zoom party!)

In this holiday gift guide, we highlight some products and services you can customize with a company logo and brand colors. You can also use this guide as a starting point to find more personal gifts for the recipients – as long as it’s fun and shows that you’re thinking of them!

Useful tech for the WFH team 

GIF work from home

Let’s face it, working from home can get a little mundane. (We thought these fun gifs could paint a fun picture!) So who wouldn’t love some cool gadgets to brighten the day?

There are many accessories that you can make a home office setup more enjoyable and productive. If you also have any parents on your team, consider giving tech that can make it easier to juggle kids and work (and help them keep some of their sanity!).

While Amazon has some very affordable and quick delivery options, you can also choose something more unique from this Wired list. 

Featured gift ideas:


Experiences 

GIF kardashian new hobby

Yes, Netflix and guilty-pleasure TV has been a major hobby for many this year. But for most of 2020, we’ve all been stuck indoors without the usual entertainment. So this year, why not give a fun experience to your colleagues or clients? 

With this idea, you’re actually giving them two gifts in one: the experience is unique as it is, but they also get to make memories — so that’s something exciting they’ll never forget. Either way, they’ll have you to thank for the quality time they spent honing in on a particular skill, exploring new hobbies or spending time with their loved ones. 

Here’s a catalog that showcases some great finds. 

Featured gift ideas:


A wine subscription

GIF wine pouring in glass

Do you miss grabbing an adult beverage after work with your colleagues? Or the happy hour your company hosted that gave everyone a chance to relax and have fun?

Wrapping up a busy workday with a glass of wine may be the way some coworkers like to unwind.  And next year, the equivalent of the after-work outing can take the form of virtual meetups where you can supply the wine through a gift subscription to colleagues. There are also subscriptions available with non-alcoholic options so those who don’t drink can still join in. Plus there’s the bonus of team bonding!

This article rounds up some great and affordable wine subscription services that you can choose from.

Featured gift ideas:


Match a donation 

GIF donate sign

The holidays are all about generosity and community. And there are so many people and organizations that can benefit from charity this year. Why not initiate a match for a donation request? For example, you can ask recipients to choose a local charity and you can match their gift. 

You can also encourage them to give to front line workers, food banks or contribute to your companies charitable organization (if you have one!). 


Have fun while spreading some holiday cheer

Just like you, everyone in your company will have a very different experience this holiday season. And with remote work, it can be hard to feel connected to your employees, coworkers and clients. Make this season a bit more memorable by sending gifts that add a bit of fun and excitement! 

 

Up Next: When is a good time to expand your small business?