Bad Credit Asset-Based Lending (ABL)

Bad Credit Asset-Based Lending

Getting a small business loan is a real challenge no matter what kind of credit you have. It gets gruesome for companies with a bad credit score. Or perhaps you are a start-up or newer business looking for business financing.

Many small businesses with these challenges are looking into different types of asset-based loans (ABL) when bad credit or being non-bankable is an issue.

We are here to help you navigate through the process of landing fast, affordable funding for your non-bankable small business. First, let’s look at the variables involved in your unique situation with a checklist:

Start-up Business Questions

  • Are you starting a retail or B2B/B2G business?
  • How much money do you need?
  • Do you have any money to put down?
  • How is your personal credit?
  • Do you have any direct industry experience?
  • How soon do you project to be cash flow positive?
  • Will your business be an importer or exporter?

What Type of Small Business are You Starting?

The funding options greatly depend on the type of business you have or plan to start.  If you are buying and reselling goods, Invoice Factoring or PO-Purchase Order Funding is available for start-ups.  Also, if you are starting a service business supplying temp staffing, guard service, trucking or IT services, for example, an Invoice Factoring Company can provide pre-client credit approval and be ready to fund the minute you generate an invoice.

If Invoice Factoring and PO funding are terms you have heard for the first time, it is crucial to understand the difference between both concepts.

Invoice Factoring, also referred to as AR financing, is a financial agreement between your business and a factoring company, allowing you to get funds via accounts receivables against cash. It is available to any B2B or B2G company that bills creditworthy clients within terms.

Purchase order (PO) financing is also referred to as Supplier Financing, Accounts Payable Financing or Trade Financing. This is a short-term commercial funding option aiming to accommodate your business’ financial needs by providing your suppliers with an advance payment for verified PO.

As a result, PO financing enables your business to fund it’s manufacturing costs. PO financing will give you the ability to have goods available for your clients from your suppliers before an invoice is generated.

What if You are Starting a Retail or Restaurant Business?

There are SBA-backed programs available including the 7a, Micro Loan Program, and Express Program. Also, there are business loans based on your credit cards receipts available after you have been in business at least six months. This is referred to as the Merchant Cash Advance. There are also programs to get you $5000-$25,000 in financing for equipment or other needed hard assets to get you started.

Are you already stacked in multiple merchant cash advances? Our merchant cash advance consolidation program can help. If you have numerous short-term advances, consolidating all of them into one single loan will lower your payments by a considerable margin.

This will help you prevent defaulting as this program not only lower your payments to a significant extent, but you would not be in the obligation of paying several interest rates.  Moreover, you can be offered an extended period to pay back the due amounts of your existing consolidated loan. Please call us for more information.

How Much Money Does Your Small Business Need?

Different Lenders and Funding sources have different “sweet spots.” For instance, we have programs for Invoice Factoring of $30,000-$10,000,000 per month. More massive secured business financing programs are available. Our Merchant Cash Advance program can help businesses needing $5,000-$500,000.

Start-up loan, capital loan, microloan, business funding, business financing; we have our programs and reciprocal relationships with the alternative lender community to meet almost any small business credit need.

How Much Money Does Your Business have to Put Down?

This question is more critical if you are going the traditional bank route or SBA-backed loan. Banks typically don’t make zero down business loans.

However, an Invoice Factoring Company cares more about the creditworthiness of your clients. Also, we advance you up to 92% of your invoiced amount. A factoring business would focus on turning your outstanding account receivables to substantial capital by looking into the credit score of your business customers and therefore shift the credit risk from the business owner to his clients.

As a matter of fact, your factor will provide your business with an upfront payment based on the due amounts from your verified creditworthy invoices. After 30, 60 or 90 days, the factoring company receives the debt from your end customers and returns the remaining balance to your business after applying the agreed service fees.

Do You have Direct Industry Experience?

This question is ultra-critical to traditional banks and to SBA-backed lenders (unless you are buying a solid franchise). It is not necessary to an Invoice Factor. However, it is somewhat essential to a Purchase Order Financing or Inventory Financing Company.

This is because they can cover up to 100% of your supplier payments. Doing so enables you to deliver the goods and close the sale. Also, they need to know you have the expertise to help liquidate the goods funded if required.

Under SBA rules, we are considered a Lender Service Provider. This is a much more extensive role than a “Packager,” whose job is to take an already structured and an approved loan and prepare the paperwork for submission to the government. While SBA packagers perform a valuable function in the process, they do not provide the comprehensive range of services that we do. 

How Soon does Your Business Plan on Being Cash Flow Positive?

Again, this question is quite critical to traditional banks and to SBA-backed lenders. They both will require a business plan with cash flow projections. However, this is not as important to an Invoice Factoring Company. But an analysis of your profit for each deal is still essential to an Inventory Finance Company or PO Funder. For the, to fund you a deal it is crucial you have sufficient profits.

Will Your Business be an Importer or Exporter?

The SBA has some exciting programs for export companies. If you are an Exporter, you can still use the factoring services via the International Factoring funding option that is dedicated to financing international accounts receivable, when the Seller and the Buyer are located in different countries.

At Paragon Financial, we have the experience and can help you with the issues with exchange rates on the money, credit on overseas companies, shipping, billing, tariffs and much more. If you are an Importer, we have deep Factoring and PO Funding experience in almost every consumer good imaginable.

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