We are a Full-Service Business Financing Firm that specializes in providing clients
with access to Business Financing options.
What is Business Financing?
Business Financing is capital that is either borrowed from a lender to raised from an investor for the purposes of funding a startup business, cover the expenses of an existing business, or to fund the expansion of a growing business.
What are the 3 main types of Business Financing options?
Debt Financing which comes from a bank or non-bank lender. This is capital that is borrowed for the business and sometimes personally guaranteed by the owners operators of the business. Debt Financing products typically come with a set rate and term for prepayment. With payments usually in monthly, bi-monthly and weekly installments. Most Debt Financing payments include principal and interest and when the final payment is made the Debt Financing relationship typically ends.
Equity Financing comes from investors, often called Venture Capitalists which are usually firms or Angel Investors which are usually individuals. Equity Financing works by financing the business as a partner for a percentage stake in the company vs debt financing from a lender on a set term.
Mezzanine Capital is often a combination of equity and debt financing. Although each Mezzanine Capital round of financing may vary from the other, typically it is either Debt with an added Equity component or Convertible Debt. Which is debt capital that offers the lender the right to convert the loan to an equity interest in the company under certain circumstances.
In the Capitalist Economy that the vast majority of us operate under Financing of some sort is fueling everything everywhere. Whether it’s the U.S Government’s National Debt, Local Government Bond offerings, to Mega Corps like Apple and GE, eventually almost everyone may need access to capital through some form of financing. It makes perfect sense for small to mid-sized businesses to also access the capital markets responsibility to fund or expand their company’s.
As all business owners know, opening and running a business isn’t cheap.
When the current cash flow isn’t enough, owners of companies can turn to business financing options to get the funds that they need
Even when things are going great and business is really picking up or maybe even starting to boom.The company might want capital to fund things like consolidation competitors, location expansions, opening up new markets, new equipment purchases and seasonal inventory management.
Before a company seeks out Business Financing, it’s wise to know the goal of the funding. Is the goal the most common one which is long-term financing? Does the company need cash within days? Is the funding for refinancing debt or buying real estate? Please note just as not all Business Financing options operate the same. Please also note that each type of Business Financing option not only has its own range of turnaround times from application to payout, but some may also have rules on how the funding is spent.
Figuring out how much capital the business needs, how long of a repayment term is needed, and how the company is going to generate the revenue to back up the capital funded are the most crucial steps before seeking out Business Financing.
All lenders and investors will ask for a detailed list of reasons why the company needs the funding, how it will be used, and how the company plans to pay it back. Owners and operators seeking Business Financing should take their time to make certain their list is specific. For example: Is the company seeking the funds for expansion? Will there be hiring of employees? Then document the projected cost to hire and how much each employee will be paid.
Is the company purchasing equipment? Research what equipment is needed and an average cost to acquire that equipment including soft cost. Are the funds to refinance a loan? Then detail the cost to refinance the current debt and the cost savings of the new financing against the older debt. Is the company purchasing inventory and products in anticipation of a busy season? Then create a detailed list of the items that will be purchased and the estimated cost.
The first thought is to panic at the idea of creating all of these possible projections and it seems easier to just ask for as much money as possible. The companies that thrive by using Business Financing do so by only asking for the amount of capital the company will need. Once a company has taken the time to lock down it’s financial projections and estimated how much they will need and how the company will be able to pay it back. Then the Business Financing process will be easier time after time.
Navigating the different Business Financing options can be confusing. There are over 30+ different types including the 3 main types we just covered! Finding the right Business Financing option is extremely important. If a company were to take funding from the wrong source and it may lose part of the business or get locked into repayment terms that stunt the company’s growth. We here at Troy Business Group have seasoned Consultants that are ready and able to help companies to find the right Business Financing options for them. Here is a list of the Debt Financing Business Financing options we provide access to for our clients.
Using Debt Financing to fund a business once the loan or line of credit is paid back. Then the company’s relationship with the lender ends as they are not an equity partner. This is especially important as the business becomes more valuable and the owners may want to maintain full ownership.
The bank or non-bank lending institution has no control over how the owners operate their company, and as mentioned before it has no ownership. The only form of control that some Debt Financing Business Financing comes in the form covenants on how the funds may be allocated.
With Debt Financing to finance a Business the monthly payments, as well as the principal and interest breakdown of the payments, becomes an expense that can be accurately included in the company’s financial forecasting models.
Debt Financing products can be used to purchase assets, goods, raw materials, expand into new markets, and for the other flow of economic activities.
With Debt Financing products typically the interest that the Business pays is tax deductible as a business expense.
Now that we have gone over the Business Financing products that we provide access to for our clients. Each lender will have their own set of specifics, but the big four requirements that seem to matter most include. Having these stipulations in order will help companies increase their chances of being approved for Business Financing.
- Time in business. Depending on the business financing product and the lender the time in business requirements may vary. For example Banks and non-bank lenders only offer Business Term Loans to companies with a minimum of two years in an existing business. Depending on which product a company is seeking out they need to confirm what the Time in Business requirements are.
- Profitable Cash flow. Along with time in business, lenders like to see how much money the company has on hand to repay the debt. Healthy cash flow can be demonstrated with cash flow reports, financial statements, and even tax returns. Lenders will want to see sales figures, the payments coming into your business, and what you are spending – or the expense going out of your businesses.
- Personal and Business Credit Credit scores. Both the company’s owners personal credit scores and the businesses credit score matter. However a newer business may not have much of a business credit history. Most lenders will expect to see a personal credit score of above 650 for most Business Financing products. For the best products lenders typically want to see personal credit scores over 700 + and business credit scores closest to 100 points as possible.
- Lenders will not just take a company’s word for it they will need to see actual information about your business. Additional paperwork needed may include:
- 1 to 2 Years Most Recent Personal tax returns
- 1 to 2 Years Most Recent Business tax returns
- Min of the Last six months of business bank statements
- A Comprehensive Business plan
- 1 to 2 Years of Most Recent Financial Statements as well as Financial Forecast Statements
- Debt Schedule detailing the companies current outstanding debt
- Articles of incorporation, relevant licenses, and application certifications
What are the Debt Financing Business Financing products do we focus on?
Standard Interest Rates or Cost
Rates Starting at Prime + or Libor +
Typical Underwriting TimeLine
3-10 Business days
Available Capital Limit
Up to $100mm Depending on the Product.
Average Term Limits
12 to 60 Months
In closing, The Private Business Community is the main driving force behind our U.S Economy with Business Financing being the major reason why these companies are able to operate and thrive. According to Forbes Magazine total US corporate debt is $15.5 trillion, 74% of US GDP. With this much capital at stake companies need the right team of Business Consultants to be their port in the storm. We are here to be our clients number one partner when it comes to securing all of their Business Financing needs. Troy Business Group has a team of seasoned Consultants that specialize in providing clients with access to Business Financing options. Please apply online, email us for an appointment, or call us today. Our team is committed to helping your business grow with Business Financing and will guide you through the loan process each step of the way.