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For creditworthy business owners, a Small Business Administration (SBA) 504c loan or SBA 7-a loan is typically the first go-to solution when working capital is needed. Alternatively or additionally, one might apply for a line of credit. These are great secured financing tools to help businesses get working capital – but for a small-to-medium sized company that wants to continue expanding, the need for more cash flow is always right around the corner. What are the options for getting it?
What Isn’t an Option?
First, let’s talk about what’s not an option: another secured loan. After an SBA loan is approved or a secured line of credit is extended, the bank puts a Uniform Commercial Code (UCC) blanket lien on all the business’s assets: from the buildings to the furniture, and from the fixtures to the equipment. The business has little to no ability to borrow any more money, because there is no collateral to back it.
The Only Alternative
The only other option, then, is an alternative financing solution. The loan must be unsecured, which means there is no need to put up collateral. Recently, I was asked to help a California-based concrete company that needed $400,000 to support a big project they had been hired for at Los Angeles International Airport (LAX). Without those funds, this client would have missed out on $500,000 profit – a situation no business wants to be in.
They fit the profile described above: maxed out on SBA loans and lines of credit with assets tied up in a UCC blanket lien, but good for the money because of the company’s history and the profits they were raking in. Because of this, I was able to provide an unsecured financing solution that didn’t require them to put up any collateral. Even after an SBA loan and secured line of credit, the cash flow options are still out there if you look. In alternative financing, we provide them.
One More Benefit
Another benefit of this is customization. Often, an alternative lender can customize programs for borrowers that fit this profile. In my case, the concrete company needed their first two months of payments to be smaller in scale so they could ramp up to their first milestone disbursement. As any business owner with an SBA loan knows, asking that of a bank is unheard of; in fact, the banker may literally laugh in their face. An alternative financier won’t. That concrete company? Their agreement contained a provision that allowed them to make smaller payments for the first two months. Like I said, the options are out there if you look for them.
Jeff Brannon is managing partner of Solve Capital Group. He can be reached at (949) 356-6601, or by e-mail at [email protected].
