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3 Common Reason Owners Seek Business Property Loans

Every small-to-medium-sized business owner’s specific reason for seeking funding is different. Most times, they have no access to cash to nurture the current needs of the business. Here are three common reasons many owners decide getting a small business loan is the key to success:

1. Lack of Resources Is Stunting Business Growth

Many start-ups are funded completely out of the pockets of the owners. That means they have limited resources to grow the company. Over time, their resources dry up and they are left struggling to keep the business afloat.

The larger the company is, the more capital it needs to thrive. But where will the funds for that growth come from?
Business property loans provide the extra capital needed to give the business a boost. Small business financing can allow owners to address various needs, including:

  • Restock inventory
  • Operational costs
  • Expand location(s)
  • Hire employees and contractors
  • Pay off vendors

2. Co-Mingled Business and Personal Funds

This is one of the most common financial mistakes start-ups and other small business owners make. Finance professionals recommend never mixing your personal finances with your business finances. However, for most small business owners, this may be the only way to get their company started.

There are ways to handle this situation so things aren’t so complicated later on down the line. You must determine how much of your personal funds should be dedicated to growing the business and how much needs to go toward your personal bills and expenses. It’s also wise to always have separate personal and business bank accounts.

Make sure all accounts receivable go through the company bank account. Then, instead of paying your personal expenses from there, pay yourself a salary when needed. Keep that salary in your private account to pay bills unrelated to the business.

Take care to never allow the business bank account to hit a negative balance. Banks and lenders don’t like seeing those dreaded “NSF” charges on bank statements. It’s best to have no less than a couple thousand dollars in the company’s checking account at all times for emergencies and rainy days.

However, that’s easier said than done. How can a growing business ensure that they always have a positive balance and an emergency fund?
Asset-based loans provide you with access to capital when you need it via accounts receivable financing. By using a revolving line of credit for your business, your bank account never dips below zero. And you only pay for it if and when you use it.

3. You’re Waiting for a Big Payment

Businesses that depend on contracts to survive financially have special financing needs. These B2B companies invest a lot of time and money into projects, but they can’t bill their clients until the projects are complete. Even when billing does begin, some clients are slow to pay.

One prime example of a B2B model is the construction industry. Commercial real estate developers, investors, flippers, brokers, owners, and builders spend weeks or months getting their building projects off the ground.

Long before billing begins, there are many needs that must be met to complete a construction project, such as:

  • Buying materials
  • Zoning and planning costs
  • Hiring staff
  • Paying contractors
  • Operational costs
  • Leasing equipment
  • Paying vendors
  • Other accounts payable

Sometimes, waiting months to get paid is not an option. Many contractors already have new jobs lined up before completing the last one. Where will you get the funds needed to start the next project if you’re waiting for clients to pay off your accounts receivable invoices?

That’s where invoice financing comes into play. Asset-based lending provides you with an active business line of credit for times like this. Use the accounts receivable loan to pay off debt related to the current project while funding the start of the new one. That allows your business continues to grow, even when client invoices are still outstanding.