How to Budget for Your Business Despite Your Irregular Cash Flow

Uncertainty is the name of the game for many small businesses. You might not know how your orders will flow next month, whether demand for your product or service will change, or whether you’ll be hit by some unanticipated expense. Your business might be highly seasonal or might depend on external factors beyond your control. These contingencies can make for volatile cash flows that demand attention lest they deplete your working capital and possibly drive you out of business.

Budgeting for irregular cash flows is therefore a task at the heart of keeping your business alive and growing. Your suppliers will have only limited patience if you are forced to delay payments. The inability to purchase the planned amount of raw goods or inventory directly affects revenues, simply because you’ll have less product to sell. If you need to lay off workers and managers, you can expect a steep drop in morale and holes in your operations.

With stakes like these, it’s good to know that there are several steps you can take to smooth over irregular cash flows:

Prepare three budgets:

You’ll want to budget for the most likely scenario, but also for better-than-expected and worst-case ones. Unless you have reason for optimism, pay the most attention to the worst-case scenario and make sure you budget anticipates a drastic cut in sales or rise in expenses. Should events prove more benevolent, you’ll be fine. If things turn considerably worse than you choose to imagine, you might be more willing to pull the plug and cut your losses.

Line up sources of capital:

Establish business relationships with lenders. Don’t rely on banks, because they are famously fair-weather friends – when it rains, the bankers confiscate the umbrellas. Instead, work with a commercial lender that will stand by you through good times and bad. You will need a source of cash that can move quickly and provide friendly repayment terms. For instance, IOU Financial offers daily repayment instead of monthly, which means you don’t have to fear a mountainous outflow every 30 days.

Structure your company for flexibility:

If you operate in a volatile environment, it probably makes sense to use contractors and consultants rather than employees. This gives you the ability to quickly change staffing levels without disrupting peoples’ lives. You also sidestep issues concerning unemployment insurance, tax withholding, employee health insurance, retirement plans, etc. Choose suppliers and vendors who are willing to commit up front to extended repayment terms.

Share information:

The best practice today is to share your production data with your suppliers, who can then react faster to your changing needs. To the extent that you can make your suppliers your partners, you have the best chance of weathering bad times without facing lawsuits for nonpayment.

Factor in factoring:

When facing a cash crunch, consider factoring your accounts receivables. This will provide a fast cash infusion, but will cut your net income. Factoring can be useful, but is often more expensive in the long run than is simply borrowing at a fixed interest rate. You can also raise money by wholesaling inventory and selling off equipment, as long as this doesn’t permanently damage your revenues.

Find investors:

It’s not easy for small businesses to find outside investors, but if you can identify a willing angel investor or venture capitalist, you might be able to arrange a sale of equity. While this will bring in fresh money, it will also dilute your ownership. You might not be thrilled by having new partners in a business you created from scratch.

These options are useful, but the fastest and most convenient method to ride out volatile cash flows is to arrange a business loan with a reasonable interest rate and convenient repayment terms. If you agree, contact IOU Financial today and have funds deposited into your bank account in as quickly as one day.

Best Apps to Use to Better Manage Your Business Finances

Whatever small business you run, there is a core set of financial and related functions that just about every business must perform. In 2017, that means choosing apps that meet your requirements and are easy to use on your computer and smartphone without breaking the bank. Here are some of the top apps that fit the bill:

1. QuickBooks:

From tiny to midsize, your company needs a program like Quicken to manage its books and records. This is an easy to use accounting package with cash management capabilities. You can manage invoices, expenditures and revenue, generate financial statements, pay bills and salaries, and track your bank/credit card accounts. QuickBooks works with Square and PayPal, and lets you mark the tax status of transaction to facilitate. It’s a snap to set up recurring payment notifications, as is autopay and financial reminders, that automatically update your bank account balances. You can also set up alerts if your bank account is running low. Runners up: Wave and FreshBooks.

2. TurboTax:

From the makers of QuickBooks, TurboTax is an electronic tax preparer at an insanely low price compared to hiring a bookkeeper or tax accountant. Filing taxes couldn’t be simpler, even if you have complex transactions. When teamed up with QuickBooks, your company’s tax returns basically generate themselves. Runners up: Tax Act, H&R Block, TaxSlayer.

3. PayPal:

The granddaddy of payment systems, PayPal links to your credit cards, debit cards and bank accounts to move money around and make payments hassle-free. You can use PayPal in conjunction with a card-reading device to create a portable point-of-sales terminal for online checkout. PayPal charges 2.7 percent per card read (swipe or insert), 2.9 percent plus $0.30 for online invoicing and payments, and 3.5 percent plus $0.15 for sales entered manually. You can get standard merchant services for free, but the professional plan, at $30/month, adds features and flexibility.

4. Square:

A great alternative or adjunct to PayPal, Square is a convenient mobile card reading device and payment service that is a favorite among street vendors, food trucks, and farmers’ markets. It works just as well at your retail shop or beauty salon. Simply attach the Square reader to your phone or tablet and you have your own point-of-sale terminal. Square charges 2.75 percent for each card read. For a one-time charge of $49, you can add contactless collections via mobile wallets (like Apple Pay and Google Pay). The cost for a manually entered transaction is 3.5 percent plus $0.15. The app is free.

5. Skype:

You don’t need fancy equipment to have a video conversation or conference with Skype. You can also share files and text messages conveniently. Skype helps with your finances by allowing you to hold meetings with anyone, anywhere, without having to spend money on travel or fancy conference rooms. You can get basic Skype for free or spend as little $5/month for Skype for Business, and you can integrate Skype to run Microsoft Office for word processing, spreadsheet generation, and slick presentations. Runners up: Pushover for message distribution; Slack for instant messaging; Fuze for videoconferencing; and Addappt for remote control of calendars and address books.

6. Tripit:

If you are a businessperson on the go, Tripit lets you consolidate your travel plans into a single itinerary accessible from any device. All you have to do is forward your travel-related emails to Tripit and it takes care of the rest. Who needs a travel department anyway? Alternative: Expensify lets you track your business travel expenses and place them on your expense report. You can also photograph your receipts and let Expensify extract the expenses automagically. It costs $9 a month for each corporate user.

7. MailChimp:

Control you email advertising campaigns with MailChimp in a very cost-effective way. You can create mailing lists, newsletters, response emails and reports that track how recipients react to your emails. These reports can help you craft more effective email strategies and improve marketing performance while saving a lot of money.

Nine Things That Separate Good Business Lenders from Bad Ones

If you’ve ever had a bad experience applying for a bank loan, you understand how demeaning it can feel to be turned down. Regulation and low interest rates have made it tougher for banks to lend to small business. The tight-fistedness of the banks after the 2008 mortgage debacle created a vacuum which was filled by online business lending companies of varying quality. The best are a pleasure to work with, the worst are disappointing. Here are nine things to look for to distinguish the good from the bad:

Direct lender:

A direct online lender is a company that actually supplies the money it lends to borrowers. Many business-lending websites are mere matching services that send out your application to a network of lenders. That might sound good, but it’s not, because you end up paying much more for you capital. You see, the matching broker collects a fee from network lenders, who pass that fee onto you in the form of higher loan cost.

Ease of application:

Some lenders want extensive paperwork and documentation. A few operate over the phone, which is tedious. Look for a lender with a streamlined, paperless online application process that can be completed in minutes. And, perhaps it should go without saying, but we’ll say it anyway: Never pay an upfront fee to apply or qualify for a small business loan!

Quick approval:

There are two aspects to this. The first is that you’d like to be approved, so you will want to borrow from a direct lender with a high rate of loan approvals, say 85 percent. Secondly, you want the decision, and the money, quickly. A good lender looks beyond your credit score, makes a decision in minutes and gets you your money the next business day. A good lender will not do a hard pull on your credit. A bad lender may require extensive underwriting, which can waste days and still end up in a denial.

Sufficient amounts:

A business lender with a maximum loan limit of $25K or $50K won’t satisfy many small business borrowers who need more. Look for a direct lender who is willing to lend up to $150K.

Affordable rates:

A lean, efficient online business lender isn’t saddled with large overhead expenses that can drive up the cost of loans. Look for an interest rate well below the cost of a merchant cash advance. Merchant cash advance are not loans and can be very expensive.

Convenient repayment terms:

Hate that big monthly repayment that always seems to leave a gaping hole in your working capital? The best lenders take fixed daily loan payments directly from your bank account. It’s amazing how much more comfortable it is to spread the repayment over 20 daily installments rather than to pay it once a month. Only use lenders who offer fixed pay-back loans, so that you aren’t surprised by suddenly higher repayments.

Renewals:

Cash management is dynamic, and sometimes you need to renew a loan before the old one is paid off. Bad lenders won’t do this, but good ones will approve renewals after a certain portion, say 40 percent, of the original loan is repaid. This gives you the flexibility to take advantage of opportunities as they occur.

No prepayment fees:

Avoid a lender who soaks you with a prepayment fee or who charges you compound interest on your loan. Compound interest means you pay interest on your interest. Ouch! Go with a direct online lender who charges simple interest on your unpaid principal balance, and who never penalizes you for paying off your loan early.

Ratings:

Check a potential lender’s score from the Better Business Bureau and TrustPilot. If the score isn’t great, keep looking.

Not sure which online business lender to call? Try IOU Financial, a leading, publicly-traded small business lender. Contact us today for a no-strings-attached consultation.

Is Keeping a Debt Tracker Beneficial to Your Business?

If you run a small business, especially one in which you’ve empowered others to spend company money, you know how important it is to manage your cash flow. It comes down to a question of solvency: Does your business have enough short term cash to meet its obligations, including debt payments due throughout the next several months. One of the unfortunate things about most debts is the big monthly repayment that always seems to threaten your cash balance. We say most debts, because as we’ll explain below, some loans, like the ones offered by IOU Financial, avoid mammoth monthly payments altogether.

A debt tracking tool, which centralizes information about debts and debt payments, is therefore an excellent idea for the busy owner on the go. The tool can take the form of a downloaded computer program, online software, or a mobile app:

  1. Computer program: You can purchase or rent financial management software, such as QuickBooks, that provides debt tracking functionality, along with a host of other features. If you use a computer-based accounting system, you should be able to generate reports about cash and debt, but they might be less timely.
  2. Online software: A program like Mint provides information about your upcoming bills and warns you if your cash is running low.
  3. Mobile apps: Several apps exist for tracking debt, including Debt Tracker, LearnVest, Unbury.me and others. These have the advantage of always being available, even if you aren’t at your computer. Mobile wallets not only include debt information, but also provide mechanisms to make payments.

Functionality

So, what should a debt tracker do for you?

  • Accounts: The program should have full information about each debt account, including account number, method of payment, payment calendar, interest rate, outstanding balance and so forth. It should be able to sort the account display by various criteria, such as date, amount of next payment, interest rate and more.
  • Payments: Debt trackers should be prepared to give you full information about each payment you make, including penalty fees and interest. Comprehensive trackers also serve as a means to schedule and make payments, by generating online checks or performing real-time bill payment.
  • Cash management: Trackers should be able to report your available cash and near-cash reserves, and alert you whenever a payment will create a low-balance or overdraw situation. You would like a tracker to suggest the order in which to pay off debts, according to criteria that you set, such as remaining balance or interest rate. A nice feature is to have an earmarking function, in which you allocate a portion of cash inflows to specific objectives, such as building up a fund to act as equity for a property purchase. Naturally, part of cash management is to report who owes you money and when to expect it.
  • Usability: A debt tracker, whether standalone or a function of a larger system, should meet certain usability standards. It should be easy to operate, secure (using encryption, PINs, etc.), offer flexible reporting, and, if you choose, a method to make payments. Ideally, the tracker will be integrated with the rest of your company’s financial data, including all payables and receivables.

The Joy of Daily Repayments

We mentioned earlier how monthly debt payments require you to ensure you have sufficient cash when the payments come due. That’s a major benefit of debt trackers. IOU Financial takes a different, and better, tack. Instead of hitting you with a monthly lump-sum repayment, we evenly spread your payments over all the business days within the month, and we automatically debit your bank account so that you don’t have to take any special steps. Your debt tracker will show you how your balance goes down gently each day. IOU Financial can lend your business up to $150,000 in as little as 24 hours, so contact us today to experience the joy of daily repayments.

How to Get Your Finances Ready for Your Slow Season

Many small businesses experience one or more slow seasons each year. For a B2B business, the year-end holidays might be a slack time, while tourist-related businesses might have little to do during the coldest (or hottest) months. Although challenging, a slow season is at least predictable, which means you can make preparations to see your business through the lean months. Here are some suggestions:

Assess your cash needs:

Most businesses have a mixture of fixed and variable costs. You’ll need enough cash to cover your fixed costs and that portion of your variable costs that you can’t avoid. Your monthly and quarterly budgets should give you a good indication of an impending cash crunch and thus how much money you must have on hand.

Husband your cash:

In the months just prior to the slow season, accumulate excess cash, if any, in a bank account. If you have a lot of money tied up in unpaid invoices, consider factoring them for immediate cash. Cut your expenses and purchases during the slow season. If you hire contractors, it’s easy enough to reduce staffing. That’s a little harder to do with employees, but many places do furlough workers or give them unpaid extra vacation time. In the worst case, you can let go of some employees, but that may cause more problems in the long term. A better idea is to hire only the number of employees you need all year round, and then hire seasonal workers during the busy months.

Take a vacation:

If you run a mom and pop store, schedule your vacations for the slow season(s) and shut down the store during those times. For example, if you own a frozen yogurt store in Washington DC, the three coldest winter months might be an excellent time to take an extended holiday. This will cut your variable costs to the bone.

Make credit arrangements:

A short-term loan or line of credit can be just the ticket for smoothing out a choppy selling year. IOU Financial can lend you up to $150,000 on short notice and favorable terms, without all the hassles associated with a bank loan. Since the loan is short term – the length of the slow season – the total interest paid will be relatively modest.

Negotiate better terms with suppliers:

If your slow season is well defined, you should be able to work with your suppliers to loosen their terms during the slack period. It’s reasonable to ask for due dates to be extended from 10 to 90 days, especially if your payment record with the vendor is good. A good supplier will understand your business cycles and offer you flexible terms when you need them. It’s important to reach these agreements well in advance of the start of the slow season, so that you can adjust your budget accordingly.

Increase your social presence:

Use your extra time during the slow season to increase your social media footprint. It’s an excellent time to publish articles and send out newsletters or emails containing useful information. Update your entries in LinkedIn, Facebook and other outlets. You can even advertise over the web by buying ads from Google, LinkedIn and other social sites.

Plan sales events:

If you can’t close up shop during the slow season, why not schedule major markdown events for the period? Lower prices, suitably advertised, should draw in customers. You can also plan fun events, like raffles and free donut days, as well as instituting a buyer loyalty program.

IOU Financial is your source for affordable small business loans of up to $150,000, funded in as little as 24 hours. There are no upfront costs, and daily fixed repayments avoids large monthly payments. Let us see you get through your slow period and help you grow your business year-round.

5 Tips for Keeping Your Business Finances Secure in the Age of the Internet

The Internet has its tenterhooks into everything. Large businesses have IT Departments that use sophisticated techniques to keep their data safe, but if you run a small business, you probably have limited technical resources. Still, there is a lot you can do to secure your financial data, and it’s a really good idea to do just that. Hackers can steal your data or drop malware into your website. In some cases, you may have to pay ransom to get your website working again. Here are five tips to help keep your business data secure:

Secure your network:

You need to be able to discourage hackers while maintaining the functionality you need to do your business. Your WiFi must be encrypted and password protected. Hackers often do mischief by packaging malware within comments or email they send to your website.  You need a physical or site-level firewall to control access, and a continually executing malware identification and removal program to keep out Trojan horses, spam links and so forth. If you use a commercial webhost like GoDaddy, review your security status and upgrade it where necessary.

Control your online purchases:

If you purchase from an insecure site, there is a chance the data will be intercepted or otherwise misused. You might not have a fancy purchasing department, but you can set some rules regarding who you purchase from. Only purchase from trusted sites – ones you’ve dealt with in the past, or, if a new site, one that uses a reputable payment processor, like Google Checkout or PayPal. Always ensure you see the padlock icon on your browser to verify you are looking at a safe page.

Monitor your credit report:

Your business’ credit report will tip you off right away to fishy transactions. You should make arrangements to get fresh copies of your credit reports at least once a month. It’s worth the money. When you receive them, check them over for hinky items that may indicate identity theft. If you find these, contact your bank, the credit card issuer (if applicable) and the credit bureau right ways. You might also need to change account numbers and passwords.

Be careful with your email:

Phishing is big business and the crooks are getting better at it all the time. Your email provider is your first line of defense, alerting you to suspicious email and quarantining it in a spam inbox. Beware emails that ask you to click a link to fix some problem or claim a reward – it’s probably a ruse to load malware onto your computer or direct you to a malicious website. Never include private information, such as account numbers or tax ids, in your emails. If you get an email from a supposedly trusted source asking you to take some action, do not respond to the email. Instead, contact the company by phone or separate email to verify the situation.

Set banking alerts:

You should closely monitor your business checking account for suspicious activity. If you use a program like QuickBooks, download and review your transactions daily. Use a bank that offers account alerts, such as when a withdrawal or payment exceeds a certain amount, of if your balance falls below a given figure.

If you take suitable precautions, you can take advantage of all the efficiencies the Internet provides without undertaking undue risk. When you deal with IOU Financial, know that we follow the highest standards of data protection so that you can borrow money in confidence.

THE FINTECH PARADOX IN ONLINE BUSINESS LENDING

Technology is meant to be a productivity enabler whatever industry it serves.  The media and investment bankers are so keen on nicknames that they cannot help from creating neologisms to define new sectors or industries. A technology driven sector has to be named SOMETHING-TECH. Playing with words usually helps simplify complex concepts, until it just delivers the opposite, creates bad publicity and counter-productivity.

Most of the time, the INDUSTRY+TECH association conveys a positive connotation. Some companies called themselves likewise. Chemtech International, for example, is a global solutions provider for the manufacturing needs of various industries. Autotech defines various services to the car owner or industry, whether it is tuning, or innovative solutions to the auto industry. However, type Fintech and you will learn that it refers to “companies that use technologies and innovation in order to compete in the marketplace of traditional financial institutions in the delivery of financial services”.   With Finance, it is therefore different, and to make matters worse, Fintech is also referred as “Alternative Finance”. This stigmatizes an arrogance that is hard for banks to tolerate.

There is a good reason for banks to dislike Fintech.  It is the media and investment bankers banging the news on how much cooler and smarter they are at a time when high IPO valuations were needed, while banks were still trading below book value. Fintech’s debuts enjoyed being portrayed as leaner and smarter while banks were and often still are referred as dinosaurs, slow to move and improve service through innovation. Fintech companies and banks started off on the wrong foot; the media loved it and made the Fintech into the new alternative to legacy finance, de facto a business threat for banks.

The term “FinTech Lenders” was also a play to bring TECH multiples to online lenders who leveraged technology to automate many of the labor intensive repetitive processes endured by the traditional lending process. The term “alternative lending” was brought out as a way to label and define something that wasn’t traditional and wasn’t done through traditional sources (ie: Banks). After all – everyone loves newly created words defining disruptive technologies with the thought of abolishing old and tired processes full of bureaucratic rules. While the term “Fintech” may help people to understand the industry segment of interest or a specific vertical within the industry, it should not be used to primarily define lenders who leverage technology in a new and improved way.

The paradox of all this: Fintech offers innovative solutions to legacy financial institutions but its names says something else. Also, banks being so glacial early on, Fintech may have had no other chance but to try their technology for themselves, enforcing the alternative force within them! With a few years in business, some Fintech have been able to demonstrate the need for their product by generating strong demand. Small business online lending is a proven case with billions of dollars of loans made since the credit crisis.

However, not all Fintech business models have yet matured into profitability, key to the definition of success. A structural element of future success for new entrants resides in their ability to access cheaper funding and quality customers. Who can offer these things?  With that in mind, Banks, especially small ones, should feel confident they can monetize their position to bring down their cost of innovation.  By working with innovative companies in financial technology, they can quickly benefit from new and very cost efficient ways to grow revenues. Online lending could be the first expertise to explore in order to welcome small business back and help them grow.

It is true that technology has enabled new entrants to offer innovative services not available at banks, either as a product offering or at a more competitive price.  It is also true that banks have been slow at embracing technology as a growth engine, mostly due to lack of capital to fund innovation. This is especially the case for smaller banks who tend to lack financial and human capital to invest heavily in R&D and innovate. Large banks with deep pockets have found ways to either build or partner and grow their presence in areas where technology offer a clear competitive edge. Large banks have in fact recognized the win-win rationale for partnering with Fintech, an opportunity also open to small banks. Large banks love Fintech because they can afford it. Small banks can as well.

In the case of small business lending, these new online lenders saw a void left by banks in micro-lending (below $150,000 uncollateralized loans) and used technology to reduce underwriting cost accordingly. Online lenders did not actually steal market share from banks in micro lending. Instead, they offered an economical solution to underwrite small loans and managed to fill a gap left by banks.

How will the paradox divide disappear between banks and Fintech Alternative Lenders?  It will dissipate with the online lender taking time to educate banks about their efficient loan platforms and how they can help banks reach new customers, develop new funding sources and grow revenues, especially non-recourse fee income.  Banks should also be curious and consult with online lenders to better define how they can benefit from their technology and expertise in lending small.

Online Lending could be merely defined as – technology enabled lending through a secure website and internet based process. It doesn’t really stop there. Many “online lending” platforms are little more than a pretty form fill website application. The real battle is won (or lost) on the battlefield of cost-to-produce.

What happens after a business loan application is submitted online?

  • Processing workflows
  • Multi-database connectivity via API’s
  • Underwriting processes including risk scoring
  • Anti-fraud detection processes
  • Efficient client interactions
  • Comprehensive and effective post loan funding servicing
  • Post loan funding automated surveillance

This is where the “cost” rubber meets the road.

The total cost of the customer acquisition, headcount and operations to support the online lending operation.

Many online lenders require hundreds of employees behind the scenes to run their “automated processes”. Applications processed per employee, funded units per employee, total cost to produce in basis points. These are traditional metrics that hold true for traditional lenders and online lenders alike.

Now in analyzing these metrics and using units instead of dollars, allows to level the playing field from traditional lenders with 7 figure average loan sizes to online lenders with 5 figure average loan sizes. Profitable online lenders will be the ones who have shared their technology with small banks, and by doing so, help solve the circle quadrature: through partnerships with banks, provide small business with no collateral capital to grow.  An online lender who has been working tirelessly for years optimizing its processes, risk scores, data aggregation processes, headcount metrics and servicing techniques is a great match for any bank that genuinely seeks to lead its local business community towards growth and prosperity.

Fintech is good for banks who can see and exploit the opportunity. In fact, banks who take the lead in partnering with online lenders are the ones who can ensure that online lending becomes mainstream for very small business in North America.

Business Credit Basics: 3 Things You Need to Know Before Applying for a Loan

Applying for a business loan is a significant undertaking, and it’s a good idea to get your business operating as efficiently as possible before asking for a loan. The amount of preparation you’ll have to do really depends on whether you borrow from a bank or a commercial lender. A bank is going to grill you and demand a lot of information that a commercial lender will not need. Here are three things you need to get know when you apply for a bank loan, and how each one differs if you choose a commercial lender:

1. Know why you want the loan:

For some reason, banks feel the need to know exactly how you plan to spend every dime of your loan proceeds. We are not quite sure why this is so crucial for the bank to know, but the usual reasons include expansion opportunities, smoothing out working capital, investing in inventory or capital goods, and acquiring another company. Be prepared to show the banks how you will turn the loan money into profits (or how it will cut losses). On the other hand, a commercial lender like IOU Financial doesn’t really care how you plan to spend the loan proceeds. We assume that you know your business best, and we don’t like substituting our judgement for yours.

2. Know your books:

A bank is going to review all your books and records before approving a business loan. This includes all your past income statements, balance sheets, tax filings and all other public information. Be prepared for questions on why certain expenditures were made or why a particular strategy was worth the investment. You really don’t know what the bank loan officer or underwriting committee is going to ask. Sometimes, a line of questioning can lead to new questions in different areas, a process that can drag out for weeks or months. You can be sure the bank will calculate all your financial ratios, and will interrogate you on any that are below industry averages. We are really only looking for two things:

a. Does your business generate at least $100,000 a year in revenue?
b. Have you been in operation for at least one year?
If both are true, you are well on your way to obtaining a loan from us.

3. Know whether your cash flow allows you to repay the loan:

This is a very important question that every lender, including us, is going to ask. Now, a bank is going to want to analyze your sources and uses of funds, your cash management policies, and your projected and actual budgets. The bank may want to know about your collection policies and examine your bank statements. If it sounds like an extensive process, well, it is. We have a different view – we only ask two questions regarding cash flow:

a. Do you generate 10 or more deposits each month into your business bank account?
b. Do you maintain an average daily balance in your business bank account of at least $3,000?
Assuming you own at least 80 percent of your business (or 50 percent if owned with a spouse), you can qualify for a commercial loan from IOU Financial with just a few facts. With a bank, you are more likely to feel like a trial defendant under cross examination. Perhaps that’s why it takes days or months to get a bank loan, while we can lend you up to $150,000 in as little as one day.

Contact IOU Financial today for a free consultation about your small business’ loan needs.

5 Common Misconceptions About Alternative Lending

Alternative, or non-bank, lending got a big boost in 2008 when the mortgage meltdown caused banks to roll up their welcome mats. In that era of recriminations, no bank wanted to go out on a limb and lend to anyone other than the most creditworthy customers. Today, businesses have learned that alternative lending, which includes commercial business loans, factoring, peer-to-peer lending and crowdfunding, can solve many problems quickly and efficiently without a lot of the delay and paperwork associated with bank loans.

Still, some business owners have negative misconceptions about alternative lending, so we’d like to clear them up:

Only bank-rejects apply to alternative lenders:

While it’s true that many businesses find it easier to qualify for a loan from an alternative source than from a bank, many owners prefer dealing with alternative lenders, as they tend to be more flexible, less judgmental and faster to respond. Many alternative lenders do not require collateral, can process an application in a few hours, and fund a loan within a day or two. One feature that IOU Financial borrowers truly appreciate is daily automatic repayment, which means a business doesn’t have to face a large monthly payment that can disrupt the business’ cash position.

You have to be desperate to seek an alternative loan:

That’s just silly. Alternative lenders would soon go out of business if they lent only to companies on their last legs. The real story is that banks turn down loans for all sorts of reasons, many having nothing to do with creditworthiness. Alternative lenders assess the risk of each loan and assign an interest rate that makes sense. Companies with less than stellar credit scores can borrow from alternative lenders when needed, such as when they have to smooth out their working capital cash flows. Any good alternative lender wants to see its borrowers succeed, not fail, and will usually work with business owners to come up with solutions with the right fit.

You can hurt your credit score by borrowing from an alternative lender:

Poppycock! There is no truth to that myth, and in fact the opposite usually applies: If you pay back your loan responsibly, your business’ credit score should increase. Remember, business loans do not affect the individual credit scores of owners, they are strictly for business. The nice thing about getting an alternative loan is that by doing so, owners don’t have to pony up their own personal funds, which could indeed affect their credit scores.

You need high margins to make alternative loans work:

Loans from alternative lenders help all types of businesses, not just ones with high margins. IOU Financial has only four funding requirements, and none have anything to do with margins. We require that you own and operate your own business, have been in business for at least a year, make 10 or more deposits per month and have average daily balance of $3,000 per month. Margins schmargins!

Alternative lending is unregulated:

This is a common misconception stemming from the fact that alternative lenders do not have the same capital requirements as banks. But alternative lenders are not banks, they do not offer time deposit accounts and all the other services available from banks. The business model and cost structure of alternative lenders are much different from those of banks. Nonetheless, alternative lenders must adhere to federal and state lending regulations that require truthfulness and disclosure. There is also the whole area of contract law that governs alternative loans.

The alternative lending industry is strong and vibrant, because it serves the needs of many small businesses that otherwise wouldn’t be met. If you would like to discuss your own borrowing needs, call IOU Financial today for a free consultation.

Tax Season is Here: How to Properly Get Your Finances in Order Before You File

The new year is also the start of tax season, so it’s time for your small business to get organized, file business expenses correctly, and ensure you are getting the correct refund. The details of how to accomplish this depend, in part, on how your business is organized: sole proprietorship, partnership, LLC or corporation. Yet the ways you go about calculating your taxable business income are pretty much the same however you’re organized. Here are the basic steps you’ll need to file your taxes properly.

Collect your business records: Hopefully, you have a computer and/or file drawer that is carefully organized to maintain all your raw paperwork, such as invoices, receipts, tax documents, bank statements, business diaries, etc. But we know that some folks are in the habit of piling all their papers into a heap on a desk. Well, now is the time to attack those records, get them sorted and entered onto a spreadsheet or accounting package. If you use software like Quicken or QuickBooks, you can go through your transactions, flag tax-related items and associate them with the appropriate IRS tax forms and lines. Once complete, you can then import the data into tax preparation software and it will automatically prefill many of your forms and schedules. 

Resurrect missing information: If you are somewhat disorganized, you may not have done a 100 percent perfect job of preserving your receipts. For example, you know you went on a business trip last year, but can’t seem to locate any of the receipts for travel, lodging, meals, taxis and so forth. Unless you paid for everything in cash, you can resurrect the missing information by combing through your credit card and bank statements. In fact, it’s a good idea to scour the entire 12 months of these statements to make sure you haven’t missed any deductible expenses. If you operate on a cash basis, remember that tax-related events occur when money is collected or disbursed. Accrual-based businesses must instead use the dates on which income is earned and expenses are incurred.

Find the correct forms: The IRS is pretty picky on which forms you use to file your taxes – they want you to use the right If you are a sole proprietor or run a one-person LLC, this means you’ll be getting intimate with Schedule C of Form 1040. A corporation must instead file Form 1120 separately from your personal return. Partnerships have separate forms as well. Your tax software can quickly ascertain which forms it will use to collect and report your information.

Make 401(k) payment: Your tax software will keep a running total of your refund or taxes due as you fill in the required data. If it turns out you owe the IRS money and you file on Schedule C, remember that you can fund your personal 401(k) up until the tax filing deadline and deduct the contribution from last year’s income. For 2016, that contribution can be as much as $59,000, depending on your age and income.

File on time: If you need an extension, remember that only buys you time for filing, not for paying. You still must pay what you think you owe by the April 15 deadline. Note that if you file Form 1120S as a Subchapter S corporation, the deadline is March 15. If your fiscal year doesn’t coincide with the calendar year, adjust your dates accordingly.

Should you find yourself short of cash at tax filing time, it’s good to know that IOU Financial can lend you up to $150,000 in as little as 24 hours.