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Alternative Options for Financing Your Business
Understand the choices when it’s time to borrow BY JEFF MITELMAN
I
n the world of boxing, there’s a say- ing that “Everybody has a plan to get punched in the face.” As a fit- ness business owner, staying on top
of your day-to-day finances can help you roll with the punches in today’s competitive marketplace. But what happens when you want
to deliver a knockout and take your business to the next level? Perhaps you need quick and easy access to addition- al cash for financing renovations, up- grading equipment or hiring more staff to expand your services. There are more than a dozen dif-
ferent types of business loans, but those offered by traditional lenders in Canada typically fall under three dis- tinct categories: lines of credit; short- term loans; and, long-term loans. For these loans, you will need a good credit score and/or many years in business. If you’ve struggled with finances in
the past, alternative financing could be your best line of offense. Alternative financing refers to financial channels and instruments that are outside the traditional finance system. There are several options, each with its own ben- efits and drawbacks.
Alternative loans are an option
when you have average to bad credit. These lenders look at your credit score, but they also consider the overall suc- cess of your business and your busi- ness plan. If you have been in business for several years and if you generate enough revenue, you could qualify for a term loan. The interest rates associat- ed with these types of loans are higher than a loan from a traditional lender, but they are quite competitive com- pared to many business credit cards.
46 Fitness Business Canada May/June 2017 Working capital loans help finance
a business’s immediate everyday needs, for example, accounts payable, squaring up wages and even pulling a seasonal business through a lull. To determine your ability to repay, of- tentimes lenders look at your time in business, your average annual and/or monthly sales and even your imme- diate business forecast. You will need to complete an application and sign a contract to be approved.
Merchant cash advances are an op-
tion if your clients pay with credit or debit cards. You can get funding in as little as one to five business days, and your credit is often not even a consid- eration. Lenders look at things like the age of your business and your monthly revenues. While some merchant cash advances come with high annual per- centage rates, others have one-time fees built into the total amount of the loan. Instead of monthly payments over a fixed term, you repay this type of loan with a percentage of your daily sales.
When evaluating your options for
alternative financing, be sure the lend- er delivers a product that is tailored to your business needs. For example, flexible payment solutions can align with the cash flow of your business and help you plan financing based on your terms. Also ensure that the lender provides fast turnaround of approvals and can deliver the capital when you need it. And finally, remember that the fi-
nancing you receive is to be used for business purposes. But be sure the lender has not restricted the use of your financing, so you are able to spend the money however you see best for your business. FBC
Jeff Mitelman is the CEO of Thinking Capital. Jeff and his team are focused on redefining how small businesses borrow. Driven by a vision that lending should be smarter not harder, he con- tinues to drive new products and has cultivated many of Thinking Capital’s partnerships, includ- ing CIBC, Staples and Moneris. Learn more at
www.thinkingcapital.ca.
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