Do you have clients in need of small business funding that you can’t provide? If you’re a bank loan officer, accountant, business consultant, financial advisor, lawyer or similar type of professional, you’ve probably found yourself in this situation. When searching for client funding solutions, you may want to consider forming a partnership with an alternative finance company.
Although the economy is on the rebound and the demand for small business funding on the rise, the financial crisis of 2008 has caused traditional funding options to be in short supply. The typical small business loan is around $500,000. Processing these smaller loans costs just as much to process and yield less profit than larger loans. For this reason, many traditional financial institutions have scaled back on the number of smaller loans they approve.
As a result, there has been an increase in alternative finance providers and the funding options they provide. Many also offer referral programs and partnerships. These enable professionals to connect clients with a provider that is much more likely to be able to approve their funding.
Partnering with an alternative finance provider is beneficial for everyone involved. Your client receives the necessary funding, the provider gains new business and you not only receive financial compensation but you create a stronger relationship with your client. Most alternative financing companies offer a variety of options that allow you to provide beneficial client funding solutions. Depending on your profession and the level of commitment you want to make, you can choose the option that works best for you.
Referrals are a great way to start working with an alternative finance company and involve the least amount of time and commitment on your part. If you have a client who has been struggling to get small business funding, you would simply refer them to the company you are working with and your work is done. If funding for your client is approved, you will receive a referral fee. Fee amounts and payment procedures vary from provider to provider.
Once they experience the benefits of being able to offer client funding solutions, some professionals choose to become an ISO (Independent Sales Organization). With an ISO program, you would actually help your client choose the appropriate funding options and guide them through the application process. Working in conjunction with the alternative finance company, you would complete the funding agreement and deliver it to your client. More work – yes, but with a bigger reward. As an ISO you would receive a commission that would be more than a referral fee.
The previously mentioned programs would work for most professionals. Platform partnerships are better suited for banks and other traditional financial institutions. The alternative finance company would work with the bank as a “white label” provider. Which is like being a silent partner. They would process the application using their digital software. but it would be done as a service of the bank.
The application is evaluated by both the bank and the finance company’s criteria. The bank will provide the loan if the application meets their criteria. If it fails to satisfy the bank’s criteria but meets the finance company’s requirements, they will provide the funding. The financing company receives the income generated by providing the funding while paying the bank an incremental fee. In addition to that fee, the bank retains the relationship with a client that they normally wouldn’t have been able to fund.
Alternative finance partnerships can help you gain more clients. Create long-term relationships, increased customer satisfaction, and a new ongoing residual stream. CapFlow Funding Group offers programs that range from simple referral relationships to fully integrated programs in which you choose your level of involvement. Contact us and let’s talk about working together to provide client funding solutions.
With the lack of access to smaller, short term business loans from traditional financial institutions, more business owners are exploring alternative funding options from merchant cash advance lenders. These options are not one size fits all. There are different funding options, each tailored to meet the needs of specific industries. For those in mercantile businesses that sell the majority of their products or services via debit or credit cards, the merchant cash advance (MCA) is becoming a more popular choice for small business funding.
According to an article from Creditcards.com, 54% of consumers make payments for goods and services using their debit cards, 26% chose to make these payments using their credit card and only 14% specified a preference for using cash. This, along with the reluctance of traditional banking institutions to provide short term business funding, has caused the use of MCA’s in the US to steadily increase in recent years. There are many mercantile businesses that could improve their cash flow and promote growth from this alternative funding option. Keeping in mind the frequency goods and services are paid for with a debit or credit card, there are some industries, in particular, that could greatly benefit from the services of merchant cash advance lenders.
Retail sales can be a constant roller coaster ride of highs and lows. Despite proper planning, a small business owner can sometimes experience a shortage of cash flow during an offseason. To prevent any interruption to daily operations, cover expenses and retain their core staff, business owners need a way to bridge these short-term financial gaps.
The hospitality industry also experiences seasonal highs and lows. Most hotel reservations are made in advance either online or over the phone and are typically paid for via debit or credit card. While the offseason can be the perfect time to make upgrades to their accommodations, the working capital they have on hand may not be sufficient to cover such projects.
The personal care industry is another business sector that receives much of its revenue via debit or credit cards. Salons and spas can see an uptick in appointments throughout the year, especially during prom, wedding and other holiday seasons. Coming off a slower season, it can be challenging to cover the expense of the supplies and payroll needed to meet the higher demand for services. As the salon or spa grows, it may be necessary to expand or move to a larger location. This can also require more working capital than the business owner can use without leaving the business vulnerable.
Whether customers are dining in the restaurant or ordering take out, they are often paying for their meals with a debit or credit card. The restaurant industry can be very unpredictable, impacted not only by the season but also by various trends in cuisine and fluctuations in the economy. In order to sustain the business through industry downturns or expand it to keep up with increasing business, a restaurant owner may need a quick influx of cash.
Vehicle repair is often a large and unexpected expense resulting in the use of a credit card to pay for it. This is due in part to the constantly evolving automotive technology. To keep up with that technology and stay one step ahead of the competition, repair shop owners are faced with the challenge of keeping their business outfitted with the most up-to-date equipment. The upfront cost of new equipment often requires more cash than they have available resulting in the need for additional working capital.
A merchant cash advance isn’t a loan. It is an advanced, lump-sum payment of future sales. In exchange for this advance, the business will pay the funding provider an agreed-upon percentage of future credit and/or debit card sales. Because payments are based on a percentage of actual sales, they flex with fluctuations in revenue. This allows business owners to avoid being faced with payments they can’t afford. Terms may vary depending on the provider and the specifics of each MCA application.
While these may be some of the most common businesses to benefit from the services of merchant cash advance lenders, they aren’t the only ones. If your business receives the bulk of its revenue from debit and/or credit card payments, an MCA could be the perfect funding solution to ride out a slow season or expand your business.
Although CapFlow Funding Group specializes in invoice factoring, in conjunction with our trusted partners we also offer merchant cash advances and other working capital solutions to provide the funding you need to grow your business. We strive to find the best funding solutions for businesses across various industries. Our team will work tirelessly to see you through to success. Contact us today!
