Is The Money Expensive?
New Idea Business Loans was created to make working capital available to businesses that need cash faster than a bank can move, don’t want to pledge collateral to a bank, or have credit challenges that limit their borrowing power.
The company was also created to help business owners avoid the risk and complexity attached to other capital raising options — like taking on equity partners or borrowing from friends and family.
As a non-bank, or non-traditional lender, New Idea Business Loans has streamlined processes and a flexibility that can’t be easily matched by established banks. In many cases our non-traditional business loans can make perfect sense as an option for raising working capital — that short term capital infusion necessary to get a business to the next level.
Non-Traditional Business Loans
Non-Traditional business loans can seem more expensive if the borrowing criteria is based solely on interest rates. But the 1000’s of business owners that take advantage of non-traditional business loans know there is more to the cost of money than interest rate alone.
Smart business owners make borrowing decisions based on efficiency and Return On Investment (ROI) … “does the end result have higher value than the capital investment?” They know that waiting on a bank, taking on a partner, or borrowing money from friends and family, has risks — and costs.
Waiting On The Bank
Seeking working capital from a bank has it’s own set of risks and costs. In a business cash emergency (like the failure of a business critical piece of equipment), a bank is a poor risk for a working capital 911 call. Business revenue may be damaged by the time funds arrive — if funds arrive at all.
In addition, having to provide a loan officer with resumes, business plans, projected financial statements, tax returns, collateral documentation, etc. and waiting (often for months with no approval guarantee) has a cost — time, frustration, and lost opportunities.
The Small Business Administration’s business loan checklist found here provides some insight into the hoops that must be jumped through with an SBA business loan application. Traditional banks are now following this model for non-SBA loans also, because government “stress tests” require this kind of paperwork (risk avoidance) in order to keep their FDIC insurance.
Funding From An Equity Partner
The cost of raising cash by taking on an equity partner can, also, be high. This is especially true if the relationship becomes strained.
The new partner may want an active role in the decision making process, but isn’t as emotionally vested in your business — and will always have an eye toward an exit strategy. In addition, the new partner shares in every increase in the value of the business, whether they work hard or not.
Borrowing From Friends And Family
The risk of taking on friends or family as “partners” needs no explanation. Except on rare occasions, borrowing from friends or family can lead to strained relationships and hurt feelings — a heavy emotional cost that can steal focus and drain business energy.
Non-Traditional Loan Costs
As mentioned earlier in this report, non-traditional business loans do carry higher funding costs than traditional bank loans.
Because providing immediate, unsecured business capital with limited owner background information (resumes, financial statements, tax returns, etc.) carries much higher risk for lenders.
Non-traditional lenders, however, can’t charge anything they want. There is a free market cost of immediate, unsecured working capital.
That cost perfectly balances the risk/reward of the lenders and reflects everything happening in the capital markets around the world. In raising capital, the business owner will do their own risk/reward analysis to determine what makes sense for their situation.
The New Idea
The above is not an exhaustive list of every option for raising business capital, but clearly, every conceivable option has risks and rewards — costs and benefits.
At New Idea Business Loans we focus on reducing the risks and increasing the rewards:
- Capital is immediately available – funds can be wired directly into your business account within days. A business can quickly take care of that unplanned emergency expense or cash flow crisis.
- Personal credit scores for the business owner(s) carries much less weight than with a traditional bank — as long as the business checking account has a positive average daily balance over the last four months (with no NSF’s), we fund business with credit scores down to 525.
- Simple application process – our formal application is two pages, along with a few documents for identification, and bank statements that show the cash flow trajectory of the business – no resumes, financial statements, or tax returns.
- Our loans are not secured with collateral – personal property or business assets
- Loan payback is made through equal daily micro-payments debited from the business checking account — we insure the loan terms and daily payment structure is cash flow friendly.
- After a successful payback record is established, a business can renew the loan with a reduced paperwork process — even before the initial loan is fully paid off. More than 70% of loan customers take advantage of this option.
The cost of a New Idea Business Loan, and what size loan is available, depends on your business state, length in business, gross revenue, credit score, cash flow, and loan term.
A Loan Program Specialist will have all the details and can work with you to find a loan program that makes the most sense for your business — a program that is cash flow friendly and where your return can be greater than your investment — helping you get your business to where you want it to be.
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