What's a small business to do regarding financing?

Banks are still not lending to small business borrowers. It does not matter if you have excellent credit or a profitable business with great cash flow. Banks are just not lending to small businesses - even as we begin to see signs of a recovery.

It would seem that even with the large amount of bailout funding (which was supposed to stimulate lending) - banks still cannot get their act together. When this financial crisis first reared its head last year, banks tighten their lending policies regarding small business borrowers and started to only focus on maintaining relationships with their largest of customers or on acquiring failed banks.

When questioned about small business lending, nearly all banks state the same statistic - they are just not seeing qualified borrowers. However, I have to disagree. I see plenty of qualified borrowers seeking capital to either start or grow their business (maybe not as many as five or ten years ago - but they are still there) yet they still are being turned down.

The only explanation I have is that these banks are just not as financially viable as they want you or the government or the public at large to think they are. Regardless of what excuse they give - the bottom line is that banks today are just not an option for small businesses seeking capital.

So, if banks are not lending, what can a growing business do to acquire the funding needed to reach that next level? All businesses need some type of financial support from time to time and even more so in down or stagnate economies.

Almost all businesses today could use additional funding for operating cycle working capital, seasonal fluctuation (the holiday season is fast approaching), to meet payroll in down cycles, to purchase equipment or just for daily business development and growth in acquiring new customers and market share from shuttered, competing firms.

However, there are other options for entrepreneurs seeking needed business funding - you just have to get creative and pursue the avenues that are and have always been open to small businesses - from private branded, non-bank organizations or investor.

The three most common avenues in securing working or growth capital for your small business are:

Accounts Receivable Financing (Factoring). Non-bank organizations will purchase your accounts receivables for cash. Usually 80% of the invoice amount at funding and the remaining 20% when your customer pays the invoice, less the financing company's fee. Why wait 90 days for a customer to pay you - you are not earning interest on that money and besides you have your bills to pay.

Purchase Order Financing. A non-bank organization will fund your business the needed cash to complete a valid purchase order. You get the cash you need now to purchase inventory or supplies to complete the job or order. You can even use the funds to pay for required labor. Moreover, once completed, you get the revenue from the order or job; furthering your business and its profits.

Business Cash Advances. Does your business take credit cards as a form of payment? If so, you could get an advance against your FUTURE credit card receipts. Get money now to use for any purpose, business or personal, and pay the money back in small increments as your business generates more credit card sales. The greatest things about business cash advances is that they are not loans and are only repaid when you complete future sales. Therefore, you are not saddled with a fixed payment should you have a slow sales period.

The real tragedy here is that lending rates are at some of the lowest levels we have seen over the last 50 or 60 years. The opportunities that abound for small businesses are incredible if they could get banks to start letting money flow out their vaults. So, if your bank is not lending - you might think about these alternative sources of capital from companies that truly want your business and will work hard with you (not against you) to ensure a long and prosperous relationship.

Keep in mind that bank lending will loosen up again and the options mentioned above may be the perfect short-term strategy to keep your business afloat while the banks work to pull their oversized craniums out of their posteriors!

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