Whether you’re looking for working capital for your own business or want to expand your business investments, syndicate lending offers an opportunity. Syndications make business investing easier for both sides of the transaction and make it possible for start-ups to get the money they need to take their business to the next stage, even when they would otherwise struggle to get a traditional small business loan. Here is what every new company owner needs to know about this kind of business financing in New York, NY.
What is syndicate lending?
Syndicate lending—also known as syndicated advances and syndication investment—is very similar to crowdfunding. It allows business investors to fund small businesses in various stages of growth without taking on the full burden of the risk themselves. The investments of the syndicate are pooled together and loaned to the business, so each investor is only exposed for the amount that they contribute to the overall investment.
What is the benefit?
This kind of lending is beneficial to business investors because they can take a chance on contributing to a start-up with a loan that may be too risky to take on as a whole. By banding together, investors can mitigate their risks, set themselves up for a strong return, and build the strength of the business community by helping new entrepreneurs become established. For business owners, syndicate lending is easier and faster to get than a traditional small business loan. Because the loans repayments are taken as a portion of future sales, there are fewer hoops to jump through to be approved.
How are loan syndicates managed?
Generally, a syndication management service will handle the transactions on behalf of various lenders, collecting the capital and distributing repayments. The management company will work with the entrepreneur to establish repayment terms and to collect those payments. This alleviates the confusion of multiple lenders attempting to collect payments individually.
For start-up businesses, purchase orders are a blessing and curse. They demonstrate that your product or service has a valid demand in the market and that people are willing to do business with you to bring it consumers. On the other hand, when you get a purchase order, you have to fulfill it, and that takes working capital. Although many small businesses turn to conventional lenders like banks for business loans, a merchant cash advance , or MCA, could be a better option. If you’re considering your options for business loans in New York, NY for a purchase order, here is what you need to know about making the order and your financing of it a success for your company.
Are you ready to fulfill a purchase order?
As enticing as a purchase order can be, if you accept one before you are ready to leverage it appropriately, it could actually set your company several steps back. Before you accept a purchase order and begin to take on debt to fund it, start by ensuring that you have suppliers you can count on to deliver quality goods, free from flaws, in a timely manner. If your supplier stumbles, then you do, too, and you could lose your ability to attract a new purchase order in the future. Examine the order to make sure it is not cancelable and does not have consignment or guaranteed sale clauses. These terms allow the company that delivered the purchase order to withdraw from it or refuse payment if you don’t meet sales goals, which would leave you with bad debt on your books.
How should you fund your order?
Most companies look to banks for business loans, but there are drawbacks to this conventional approach. Loans take time to process, which you may not have when you need to confirm an order, and the approval procedure is lengthy and invasive. If you’re a new business, you may struggle to be approved. MCA funding can be closed very quickly because it doesn’t involve the same approval process. Your loan is repaid as a portion of your future sales transactions, which means it is easy to budget for and doesn’t require you to come up with money you don’t have. MCA funding gives you the freedom to grow your business without fighting from behind, as you do when you take on a bank loan.
Marketing is an essential part of growing your business, but is can also be extremely costly. You can’t simply throw money at a marketing campaign and hope that it works. Because of the cost of campaigns, you have to carefully prioritize your working capital so that you invest wisely in your marketing, instead of overpaying for it. Before you seek business financing in New York, NY to fund your marketing efforts, be sure you are spending your money wisely.
Generally, marketing experts agree that you should spend 7 to 8% of your gross revenue on marketing if your business has less than $5 million in sales, but those numbers can vary depending on the size of your business, how established your business is, and how competitive your industry is. For example, some experts recommend that start-ups only spend 1% of their gross revenue on marketing, while some companies may need to spend up to 20% to stay ahead in a competitive industry.
Before looking for business financing, determine what percent of your budget is going towards marketing and how that compares to standards in your industry. If you’re overspending, you may need to direct working capital to another part of your business before refocusing on marketing.
In order to grow your business, identifying your customer segments is essential. Once you know your market, you can readily leverage a business cash advance as working capital in New York, NY to connect with them.
Watch this video to learn more about identifying your markets. For start-ups, niche markets are the easiest to manage, because devising a strategy to reach them is as simple as targeting what ties them together, such as a specific interest or age group. Reaching the mass market can be the most challenging, since there is so much competition for such a broad base of potential customers and clients. Mass market campaigns tend to require the most working capital, so consider a business cash advance to ensure your campaign is well funded.
Syndicated advances represent a tremendous opportunity for business investors and businesses alike. Whether you’re considering becoming involved in syndication investing or are interested in using a syndicated advance to raise capital for your business, here are the answers to some common questions you may have.
What are syndicated advances?
Syndicated advances take merchant cash advance deals and spread the risk amount multiple investors. When you become part of an advance syndicate, you lend money to a business, but you are not the sole investor. Multiple investors contribute money to fund the full cash advance the company needs, so that no single investor is carrying all of the risk. The idea is very similar to crowdfunding. Generally, a syndication management firm can bring investors together, supervise the syndicate investments, and ensure that payments are distrusted to investors appropriately.
How do merchant cash advance deals work?
Merchant cash advances are an alternative to traditional small business loans from banks. Businesses are paid a lump sum of money as they would be with a loan, but instead of making regular loan payments, a portion of each credit card transaction is withheld to pay back the investment. For businesses, merchant cash advances are attractive because they don’t require the same kind of credit check as bank loans and they can usually be approved and paid out much faster than traditional loans.
What are the advantages of syndicated advances for investors?
Investors appreciate that they don’t carry the risk of investing in a business alone. It also allows investors to tap into the potential of a business even if they do not have the capital to invest the full amount that the business needs. The ability to have syndication management handling the investment means that there is no need for investors to keep track of payments on their own. Many investors also like that sharing the risk makes it more practical to take a chance on investments that can’t get funding elsewhere that could eventually grow into successful businesses.
Every business faces cash flow issues at some point. The key is how you deal with them. For many businesses in New York, NY, merchant cash advance deals can be a superior choice over bank loans for coping with a cash flow problem.
Watch this video to learn about some of the common causes for cash flow issues for businesses. Inventory problems are a significant source of cash flow problems in many cases, as are marketing campaigns and the need to hire new staff. For most businesses, however, the core of cash flow issues is a lack of sufficient revenue. Merchant cash advances let you get the cash flow you need to overcome your need for short-term capital without over-leveraging your future earnings with a costly loan payment.
You might think that your company lives and dies by your ability to land clients and place deals, but in reality, your middle office plays an enormous role in your overall success. Your deal placement efforts in New York, NY, will grind to a halt without an efficient middle office, which is why Cardinal Equity is committed to providing your team with much-needed assistance.
Your middle office gives your sales team the support they need to get their jobs done. They manage submissions, handle data entry, and even work on the front lines of business development. Despite this important role, some brokerages only have one person working in their middle office, attempting to complete all of these services. When you allow Cardinal Equity to assist your middle office, we can provide your team with the tools they need to work more efficiently to increase your credibility with your existing customers and efficiently attract the business of new clients.
Small businesses are constantly balancing growth with the need for capital to sustain it. For someone who is interested in syndication investment in New York, NY , this need for capital can represent a tremendous opportunity. With syndicate investing in merchant cash advances, you can feel more confident in business investing since you can feel secure about getting your money back. Small businesses are constantly trying to raise capital through business loans for a variety of reasons, including the following needs.
Covering the Cost of Growth
For small businesses, growth doesn’t happen for free. Frequently, greater success means bigger expenses, and not having the capital for pay for opportunities as they arise could be the difference between a small business making it and having to fold. For instance, a large purchase order with a major retailer could come through, but without the capital to manufacture the product, a small business can’t deliver and won’t get another change. Merchant cash advances are perfect for raising this kind of capital, because they can be processed faster than a bank loan when time is of the essence, and the cash advance will then be repaid based on sales transactions instead of traditional loan payments.
Small businesses often need to invest in assets, such as machinery or vehicles, in order to complete their day-to-day operations. Sometimes, purchasing assets becomes necessary as the business grows or when existing equipment malfunctions. Asset funding can be achieved through merchant cash advances that are easier to incorporate into budgets and cash flow projections than traditional loans.
Frequently, small businesses simply find themselves in need of working capital, especially when they are in the early stages of their business or when they are in transition periods. Merchant cash advances let companies access this kind of capital quickly and without the extensive background and credit checks required by traditional lenders.
Deals that haven’t been placed and closed are money that isn’t being leveraged for your business. When you have high-risk files, you need the help of a service brokerage in New York, NY to help operate more efficiently and build your customer base. Are you ready to make deal placement assistance work for your business? Here are some of ways that service brokerages can help you place deals faster.
When you’re trying to place all your files and trying to find new clients, there are inevitable delays in communication that can be costly and frustrating for your existing clients. A service brokerage can facilitate the necessary communication so that deals can move forward more quickly. They also understand the kind of communication each party needs to proceed with the deal and can make sure the right information is included in the communications so that there is no unnecessary back and forth that wastes time and slows down the deal placement process.
One of the biggest client complaints about the deal process is that the submissions process can be confusing and overly lengthy. This is especially true if you don’t adequately scrub files for qualifications or you don’t obtain the right information in the right format for the underwriting process from the start. A service brokerage makes submissions a straightforward, simple process that your clients only have to deal with once. This makes your existing customers more satisfied, leads to faster deal placement, and frees up your time to bring in new clients.
Working with a service brokerage is like having an in-house continuing education department. Service brokerages stay current on new trends, technologies, and industry partners and can help you and your staff grow your business by continually introducing innovate ideas. You can leverage these educational opportunities into new procedures and techniques that mean faster service for your clients and faster growth for your business.
As a small business, finding a way to increase your profits should be at the top of your to-do list every day. One part of that may involve seeking the right support, such as deal placement and brokerage assistance in New York, NY . Another feature might be continuing to grow your understanding of your market. This video explains more.
When you’re a small company, you compete with bigger competitors by finding your niche market. However, you must ensure that your niche is not too restrictive or that the cost of servicing them is not too high. If you are dealing with a high cost of customer service or acquisition, increasing profits could be as simple as seeking deal placement assistance or other support that can help you target your market in a more efficient way, thus boosting your bottom line.