Bank Lending Down for Small Businesses in the UK

The trend of small businesses turning away from bank lending is not limited to the US- it’s worldwide. According to a recent survey, UK small-to-medium enterprises (SMEs) are at a record low for bank funding, just like their American counterparts. These results most likely come from a combination of the poor European business climate and the assumption that banks will not approve loan requests anyway. Success rates for small businesses trying to secure loans stand at about 42%. Banks in the UK were also rated low in communicating other sources of funding to denied applicants.

This survey helped show that banks are a tough source of financing for SMEs all over the world. Applications are time intensive, credit checks are necessary, and the approval process takes weeks. After approval, which is not likely in the first place, disbursement of funds can take anywhere from 30-90 days. For some small businesses in certain industries, waiting that long for cash is not feasible. Alternative financing, including factoring, is becoming more mainstream and popular as banks continue to turn away SMEs.

For the full article, see Small businesses turn their backs on banks

Knowing the Language of Factoring Helps Close Deals

According to Fred Leder from Xynergy Healthcare Capital LLC, factoring brokers can close more deals if they dress professionally and are knowledgeable about factoring. Clients are going to assume that the broker is a banker, and it is up to the broker to dress and act the part. Leder offers several tips for meeting with new clients:

  • Bring a “checklist” to see if the client qualifies for factoring and have them fill it out before you begin.
  • Speak industry lingo to improve credibility. For instance, always refer to factoring as “selling” rather than loaning, refer to interest rates as the discount fee, etc.
  • Accurately describe the process of factoring.

Credibility is key to closing factoring deals, and credibility is all about perception. Factoring is a relatively unknown and misunderstood industry- the average consumer or company might have trouble saying exactly what the process is. A factoring broker may be in charge of factoring invoices personally, but they need to know exactly how it is done in order to communicate effectively with a client. This includes learning the language of factoring, and being a fluent speaker.

For the full original post, see Learning the Language of Factoring

Credit Card Financing Risky for Start-Ups

For modern small businesses, plastic is a way of life– over 80 percent of small businesses use credit cards to finance their companies. However, there are several misconceptions about small business credit cards that a recent article clears up, including the following:

  • Business credit cards do not shield owners from personal liability
  • An owner’s personal credit standing is key to landing a credit card
  • Interest rates on business credit cards can rise at any point
  • For start-ups, even $1,000 in debt raises the probability of shutdown by 2.2 percent

    Start-ups especially depend on credit cards, because they are easier to come by than a business loan or an investor. It is very easy to become quickly overburdened by interest and vulnerable to economic shifts.

    Small business startups might want to consider other sources of financing before turning to credit cards. Detailed descriptions of other financing options can be seen in a previous blog post, Alternative to Bank Loans. In a nutshell, they include asset-based lending, lease-backs, and cash advances.

    See the original article: The Credit Card Mistake That Can Destroy Your Company.