| Financial Product | Description | Pros | Cons |
Accounts Receivable Financing | A Business line of credit or term securitized by a company's accounts receivables | - Lien placed only on accounts receivables - Business loans available for up to 90% of the A/R - Personal guarantee NOT required Business loans not dependent on credit score - Available to businesses less than two years old | Business loan amount dependent on amount of accounts receivables Must rotate the line in 120 days (depending on the business payment cycle) Accounts Receivables cycles longer than 90 days do not count for much (unless clients are blue chip) |
| Credit Card Receivables | A term loan for 150 percent of business credit card receivables over past quarter. This is an ideal business loan product for companies with a large volume of credit card sales. Example: Restaurants, Supermarkets, Retail Stores, Online consumer companies. | - Great financing alternative for businesses unable to get a business loan from a traditional lender - Personal guarantee NOT required - Not mentioned on the credit report - Will not affect debt-to-income ratio - Low credit score does not affect credit decision - Available to businesses less than two years old | - Usually more expensive than a normal business line of credit - Capped at 150k for a business regardless of higher credit card receivables - Payment processor needs to be switched and can lead to short-term operational disruption |
Unsecured Business Line of Credit
| An institution lends against the goodwill, business and personal credit score and overall credit worthiness of the business. This is an ideal business loan product for most industries. | - Not mentioned on credit report Will not affect debt-to-income ratio Takes two weeks to process Improves business credit score (tracked by D&B) Low closing costs Floating rates taking advantage of falling interest rates No prepayment penalties Can easily be rolled over for a new term | - May file a UCC lien - Usually only available for businesses more than 2 years old - nRequires good credit score (above 650) - Settling credit lines required by some banks at end of 1st year. Floating interest rate susceptible to rate hikes. |
| Business Term Loan | A fixed amount of money lent by a bank over a fixed term. This is an ideal business loan product for industries with large initial capital outlays. Example: Construction companies, car showrooms, retail stores, security companies | - Not mentioned on the credit report - Will not affect debt-to-income ratio - Takes about two weeks to process - Little paperwork required (for amounts around $100,000) - Improves business credit score (tracked by D&B) - Fixed interest rates | - May file a UCC lien - Usually requires healthy credit score - Difficult to access amounts over $100,000 from a single lender - Monthly payments involve interest and principal (for unsecured loans) - Prepayment penalties apply - Must pay interest on full business loan amount |
Inventory Financing | Factoring or general business financing with inventory held as collateral. This is an ideal product for businesses with high value inventory and/or solid client list (low risk). Example: Perfume distributors, diamond merchants, high-end fashion goods, high-end retailers, furniture stores, lifestyle stores | - Not mentioned on credit report - Will not affect debt-to-income ratio - Little paper work required - Low closing costs - Floating rates taking advantage of falling interest rates - No prepayment penalties | - Lender needs monthly updates on inventory count and average turn time - Floating rates are susceptible to interest rate hikes - Can involve filing a UCC lien - Promotional rates may increase after one year |
| Equipment Financing | A business loan with a floating or fixed rate securitized by business equipment. | - Cheaper than a business line of credit (50 to100 basis points) - Depreciation can be claimed for the equipment to lower tax liability - Lien only on the equipment - Personal guarantee NOT required | Funded up to 100 percent of equipment value |