Singaporean Entrepreneurs

While many traditional Chinese business owners detest the idea of taking out a business loan, the fact remains that leveraging is necessary to take a business to the next level. It is a very rare (or small) business that doesn’t require extra funding outside of sales receipts. For the majority of growing businesses, you will need to tap into extra funds.

This is especially so if you are expanding: hiring more people, stocking up on inventory, renting more premises. Even if your reserves and monthly revenues can cover your initial capital requirements, cash flow will be very tight.

Case in point is a retail mom and pop shop that was doing such brisk business it opened up 3 more within the year as they were able to secure really cheap inventory from Yiwu, China. Taking out a loan never crossed their mind as they were cash rich. In fact, the biggest mistake was that they never even had a relationship with the bank except for their savings account. This was a sole proprietorship and the year was 2007. We all know how fast & how bad things got Q3 2008 and well into 2009. People simply stopped spending as fears of lay-offs loomed. After several months of dwindling sales, the proprietors were no longer able to meet their rental obligations as all their reserves had been used up or taken up in inventory. To further compound their problems, their inventory continually rose in cost since they were housed separately in warehouses. Sadly, the 30+ year shop had to close all its doors forever as it sold off all its remaining assets.

Expansion and marketing strategies aside, I believe that had the couple simply taken out a business loan, they could have weathered the economic storm which proved to be much shorter than the media had predicted it to be. Unfortunately, banks don’t like to lend money to people who actually need it. In other words, you want to apply for a loan when you have money, not when you don’t have any.

But which kind of loan should you be getting since there are so many kinds?

Here are some more popular ones:

(1) Working Capital Loans
(2) Invoice Factoring
(3) Floor Plan Financing
(4) Consolidating Business Debt
(5) Lines of Credit
(6) Merchant Cash Advances

In my opinion, the best loan in terms of easy processing & fast funding is number 5: a line of credit. Why? Lines of Credit usually require NO Collateral, so you don’t have to worry about your personal assets should you hit a downturn. Furthermore, you don’t need to take out a loan when you don’t need the money. It’s just there, just in case you do.

But if you are in real dire straits like the couple mentioned above and the banks already know how much hot water you are in and refuse to give you a loan, then number 6: merchant cash advances is probably your best bet. Aside from the fact that you can get approved quickly (3-10 business days), there are no set monthly payments. Why? These are loans that purchase your future credit card receivables at a discount. So you only pay back the loan when you actually sell something. Of course, these loans will not be as big as the ones you can get from a bank, nor as cheap, but if you’re in a financial emergency and just need to tide things over, they are a good option to look into.

So go check out the different types of loans today, whether you need it or not. Who knows, you could be days away from getting the small business financing you need to start growing your business in a big way.