Joseph Laforte is the team leader at Par Funding, a Miami based small business capital provider. Par Funding helps small and midsize business owners with some of the largest obstacles they might be facing, like cash flow, consolidating high-interest MCA loans and invoice factoring, in order to help them grow and expand efficiently. Joe Laforte and his team are known for not shying away from complex deals, meeting tight deadlines as well as a long record of closing loans that traditional banks and credit unions have turned down.
At Par Funding Joe Laforte has led a staff of extensively experienced finance professionals who offer creative finance solutions for small business throughout the US. He supervises day to day operations and takes a hands-on approach to help clients navigate the complex process of small business finance and cash flow, together with the team at Par Funding, Joseph Laforte helps clients grow and expand their businesses at times when capital is needed.
The contribution of small businesses and entrepreneurial ventures to America’s economy is seldom spoken about. Small business owners are, without any doubt, the unsung heroes of our great nation. They bring growth and innovation to their communities and provide numerous employment opportunities in their locality.
However, without the financial prowess of large corporations, these local businesses may find it hard to fund growth and expansion. With just the owner’s personal savings and limited investment from friends and family, there is only so much a business can expand. Unless it has been around for a very long time or has a lot of assets and income, a small business will find it hard to secure a bank loan.
Fortunately, there are several other routes that a small business owner can take in order to avail funding for expansion, growth and improved liquidity. Some of these are explained as follows.
Use Invoice Factoring
Many small businesses find it very helpful to go down the road of invoice factoring or selling future receivables. More often than not, this is the most effective solution for small operations and is also one of the most obtainable. It is a great way for a business to raise finances without accumulating new debt. Since debt is risky and too much of it can even force a company out of business, business owners prefer to raise money without borrowing more.
Invoice factoring is the most viable solution if a business is in a cash crunch and doesn’t have the luxury of time. With employees waiting to be compensated, supplies to be bought and rent to be paid, small business owners could make use of a financing option, such as invoice factoring, that is fast and provides funds quickly.
Get a Loan
While getting a bank loan is often the best option for small businesses, it is usually not the most achievable one. Having said that, some banks have funds designated for small business ventures called SBA loans. Business owners can inquire if their banks have SBA loans and if their business would be eligible to receive one.
In addition, businesses can make use of other financing programs with the help of their local network of business owners who can guide them in the right direction. Some of these may include finance program sponsored by the local state towns or even the local chamber of commerce.
Use a Credit Card
For many businesses, using credit card debt is often the only option available to them. Even though this may be an easy option, it is incredibly risky especially if the owner is planning to take on a significantly large loan. Since business credit cards report back on the owner’s personal credit score, a high debt-to-income ratio and default on payments can damage the chances of the owner borrowing money for personal use, such as an auto loan or a mortgage.
Cash out the 401k
Using their 401k is a viable option for business owners who have accumulated money for their retirement. However, the downside to this approach is that withdrawing money from your 401k account can lead to an early withdrawal penalty, not to mention that you’ll need to pay for a lawyer or a professional accountant to take money out of your 401k.
People that have available home equity can even use HELOC to raise money for their small business. A home equity loan is a one-time lump sum that usually has a fixed rate, fixed rate loan amount and a fixed payment schedule. Even though a HELOC interest rate is lower than that of a business loan, people still try to steer away from this type of debt because non-payment can lead them to lose their home.
Innovative businesses can benefit the most from crowd-funding, which requires business owners to make a string digital pitch to investors. There are two common types of crowdfunding for small businesses: rewards-based and equity-based. Each has its own set of pros and cons, which business owners should look closely into before opting for this type of financing.
Merchant Cash Advances (MCA)
Since small businesses are at a disadvantage when it comes to obtaining traditional bank loans, the MCA industry provides a great alternative that does not require minimum credit or putting up assets against the amount funded. An MCA provider offers a cash advance based on the business’s future credit card sales. The business pays back the advance and interest in installments from a percentage of its daily sales, which is typically between 9 and 20% and is agreed upon beforehand. While MCA is fast, efficient and convenient, it generally comes with a higher interest rate than traditional loans. This is because of the higher risk involved for the MCA provider. Despite that, merchant cash advances are gaining popularity among the underserviced small business owners.