The results of a recent survey of small-business owners found that the number one barrier keeping them from meeting their financial goals in 2008 is lack of access to working capital small businesses indicated that their own “credit crunch” outweighs all other business obstacles they will face in 2008 including taxes, staffing, seasonality and energy costs.

For the past year, news headlines have cried out that the U.S. is in a full-blown “credit-crunch.” While the impacts of the crisis vary from industry to industry, the common factor is that access to lines of credit and traditional financing is increasingly difficult to obtain, credit and capital are getting more expensive when they are obtainable, and consumers are feeling the pinch as banks tighten approval requirements. Small businesses, which are also consumers of credit, are no exception.

As a result, we has seen a significant increase in business volumes particularly with “alternative funding providers” that offer capital to small and mid-size business owners with personal credit scores as low as 525.

As the industry matures, new funding alternatives have come to the market place at the end of 2007 that offer greater funding options for small business owners who have been able to keep their credit score above 600.

As awareness of alternative funding continues to grow in the business community and options expand, we anticipate more business owners will continue to seek professional, objective guidance about the best financing programs to meet their needs.

Your Personal "Credit Crunch" – 2008′s Biggest Obstacle is a post from: Business Cash Advance provider Instant Capital Solutions.

Last spring Harvard University‘s most famous dropout, Bill Gates of Microsoft, delivered the commencement address. A theme of the address, according to The Wall Street Journal, was complexity. An inspiration for Gates was a comment from Warren Buffett that complexity keeps people from understanding problems and how to solve them, and that prevents change and improvement.

Another of Gates’ inspirations was his experience with his charitable foundation. Once he decided to seek solutions for global poverty and disease, he discussed the issues with friends and associates. He found that while many people wanted to help, the complexity prevented most from understanding the causes and how they could help solve the problems.

I see the same pattern every day as business owners struggle with all the complexity of their current business environment and then, with little time, try to tackle the complex and constantly changing world of small business finance.

How do you get capital? What do you really need to do regarding your business credit? What about a lease? What about a line of credit? What about credit card advance?

Not only is their plenty of complexity and confusion untangling this mess, it changes constantly. And now, with the credit world upside down, leadership and direction is critically important.

It is even more difficult and expensive to venture into this world without contacts, experience and a clear direction of what you want to accomplish.

As the most successful Harvard dropout encourages: “Don’t let complexity stop you. Be activists. Take on the big inequities. It will be one of the great experiences of your lives.”

If becoming a small business financing “activist” does not excite you, hiring one in today’s world will undoubtedly save you hundreds if not thousands of dollars in financing costs.

The Problem of Complexity is a post from: Business Cash Advance provider Instant Capital Solutions.

We provide money to small business owners for many different reasons. While the purpose of funding needs differ, one similarity is a desire for “low cost money”. As a self proclaimed “cheap skate”, this seems like a logical starting point, but I have considered this position over the years and my thoughts have developed.

The objective of “low cost money” is not to pay more than necessary and that is where we should begin our analysis. The comparison point for most is whatever the bank charges for money, usually prime plus two or three points. For reasons we will discuss, this is not a logical barometer at all.

When we look at a traditional bank, their primary responsibility is to accept minimal risk when making a loan (to protect their shareholders). They do this by saying “NO” to most business loans and when they actually do make a loan, they require personal loan guarantees, over 100% collateral and income/debt ratios that are not practical for most business owners.

Why? Because they work on such narrow margins, they can never afford to make a mistake and therefore shift 100% of the risk in their business loan to you, the borrower – business owner. In their environment, they can only make safe, secure loans because they are not paid enough to accept more risk.

By creating an open marketplace with multiple small business funding companies, we often create an environment where you, the business owner, decides which form of business funding is best and what cost is appropriate for your business.

A couple months ago a client with below average personal credit needed funding to purchase another truck for his business, and he wanted the loan to be in the name of his company, without any personal guarantee (we do this all the time).

His initial Paydex Score was not above 75 as many of our lenders require, but one lender was willing to fund his truck at prime plus ten. We almost did not present the offer to him because we were confident we could help him raise his Paydex Score and get an offer (or two) at prime plus three or four.

“Waiting will cost me too much money – I need the truck and I need it tomorrow” was his reply. His response helped me realize that business owners are more qualified to determine the best price for their funding, not me and certainly not a bank.

Another client in Arizona needed funding to purchase two full containers of tires from China. He spent months locating every bank in town that would not loan him money before he found us. His only other alternative was a “business friend” who would provide the funds in exchange for 20% equity in his company! While his investors wanted a part of his company, our funding company just wanted “more” money (as compared to a bank).

An auto dealer in Colorado agreed our money was much less expensive that giving 33% of his profits on every auto carrier to a “friendly investor”. A restaurant owner in Ohio accepted funding to expand her banquet facilities and their sales boomed. Our money ultimately cost them less than 15% of new profits over six months.

A florist in California used our funding to bridge a slow period rather than permanently lose a campus location where he was two months behind his rent. Spending “more” in the short term was more appealing than losing 40% of his sales over the long term.

These examples and the dozens of others each month confirm that YOU, the business owner, are the best judge of the appropriate cost of funds. In most situations, cost is not the key; access to capital is the key. Given that, a smart business owner who knows their business well is the most qualified to determine how well priced the money is. Not by the cost of funds, but by the opportunity it creates for future growth and profits.

When Paying "More" is Better for Your Business is a post from: Business Cash Advance provider Instant Capital Solutions.