Monthly Archives: December 2020

Loan Turndowns: Lenders, Requirements, and Business Financing

As banks raise their requirements on loans, business owners are trying ti figure out how they can get the working capital they need to cover obligations, maintain day-to-day operations, and even roll out plans for growth. Loan turndowns have been on the rise, and they are not just experienced by businesses going through a rough financial patch. Loan turndowns impact individual businesses, but have a greater impact on our economy as a whole.

What Triggers Loan Turndowns?

When a business applies for a loan, the lender will compare their requirements with the applicant’s profile. The largest portion of any loan consideration is credit score. For a business loan, lenders prefer their applicants to have credit ratings above 770, and ideally above 800. Anything below that frequently undisclosed number throws up a red flag that the business may not be able to repay the capital they borrow. Cash flow and sales are also major factors when lenders review business loan applications. If sales are low or cash flow is strained with expenses overshadowing revenue, then that poses another big risk to lenders. Any one of these factors could trigger loan turndowns for businesses.

The Impact of Loan Turndowns

Loan turndowns have a widespread impact. Prohibitively high requirements from lenders can result in businesses not getting the financing they need to sustain operations or grow. For a new or small business, a loan turndown can prevent them from successfully weathering those crucial first years ore keep them from getting a stable foothold in the marketplace. On a macro level, turndowns lower competition and place downward pressure on innovation in every industry. Businesses need a viable working capital solution without suffering through turndowns or relying on debt-based financing.

Avoiding Loan Turndowns

Instead of jumping through hoops only to receive turndowns from lenders, businesses use accounts receivable factoring. Factoring is a fast, efficient, and transparent process where unpaid receivables are turned into cash. Factoring does not place debt on the books and it preserves credit ratings while also boosting cash flow. Factoring is an ideal solution for new, small, and even large businesses so they can build up working capital without needing to navigate the red tape of traditional lending channels.

New Century Finance is a leader in accounts receivable factoring services. If you need working capital for your business and want to avoid turndowns, contact our offices today.

Relaunching Your Business without Cash Flow Concerns

As cities across the country start to lift COVID-19 restrictions, businesses are gearing up to resume operations. Starting back up may be challenging but sustaining cash flow the country reopens may be a bigger obstacle. Fortunately, there is a way to ensure a smooth transition so you can ensure success.

Obstacles to Relaunching Businesses

If your business is ready to start taking customer orders, there are a few things to think about before relaunching. After the first round of sales are made, how will you sustain operations? If your business issues invoices with payment schedules of 30 days or longer, then you could be waiting upwards of a month to see revenue. During that time, overhead expenses still need to be met, employees need to get paid, inventory and materials for production must be purchase, and much more. If sales are high, but the revenue is tied up in unpaid receivables, a business can run into serious financial issues right out of the starting gate.

The Business Landscape Is Not Loan-Friendly

Currently, lenders are tightening their requirements more than they did during the Great Recession in 2008. COVID-19 relief loans offer some ease to business finances, but not all businesses were able to obtain them. Besides, relief and recovery loans were a one-time offer that posed no risk to lenders because they were part of a government stimulus package. Banks and similar lenders have tightened requirements within their organizations, because until the economy is in full swing, a lack of steady cash flow will be seen as a risk.

Maintaining Cash Flow When Relaunching Your Business

For businesses that are relaunching, loans should not be a necessary evil. Banks may be tightening their requirements, but businesses do not want to take on unnecessary debt and place a further strain on cash flow. To overcome cash flow concerns, businesses are pivoting away from loans and using accounts receivable factoring instead. Factoring eliminates lags in cash flow by converting unpaid receivables into cash without placing debt on the balance sheet.

At New Century Financial, we provide comprehensive factoring services to businesses nationwide. We can turn unpaid invoices to cash and make funds available within 24 hours so you can maintain cash flow, cover financial obligations, and sustain your business through the economic recovery. Contact our offices today to get started.

Getting Insights to the Creditworthiness of Your Clients

Every day, businesses are trying to understand their clients better. From analyzing sales and marketing metrics to running focus groups and more, businesses know that if they can get better insights into their clients, they can gain a competitive advantage. One of the key points in dealing with new and existing clients is understanding their creditworthiness.

What Is Creditworthiness?

Creditworthiness is used a lot in the financial sector. It’s a metric used to gauge how likely it is that a potential borrower will default on a loan. The term goes beyond simple credit score calculation and takes into account the timeliness of paying down obligations, business history with vendors and suppliers, other factors. Repayment history is a major point with lenders, because it counts as 35% of a company’s credit ratings. This is why a business can have a history of consistently high sales, great relationships with clients, and still get turned down for a loan. But how can businesses make use of creditworthiness?

Creditworthiness and Your Clients

How would you conduct business if you were able to check the creditworthiness of your clients? To have the insight to see if they were likely to pay their invoices early, on-time, or if they would age out to collections could be a game-changer for your business. Fortunately, that service is available with accounts receivable factoring from New Century Financial. Our factoring services provide cash for your unpaid client invoices within 24 hours so you don’t have to experience gaps in cash flow. There are not long-term contracts, no debt, and we let you choose which invoices or parts of invoices to factor. As an added feature, we provide a tool so you can check on the creditworthiness of your clients to help you make crucial business decisions.

At New Century Financial, we provide accounts receivable factoring for businesses of all types. Our team will work with you to understand your needs and create a factoring strategy to help you reach your goals. Whether you want to correct cash flow issues, get fast access to working capital, or build up your reserves for growth projects, we can help. Contact New Century Financial today to get started.

The Post-COVID-19 Outlook for Business Financing

Businesses are making preparations to reopen, but many of them are in need of working capital. Since not all businesses qualified for or received PPP loans during the pandemic, people are looking for alternative solutions to get the capital they need. However, business financing takes many forms, but the outlook for the most popular programs varies greatly.

Traditional Loans

The outlook for loans does not favor small business owners. As lenders tighten their requirements, small businesses that need extra working capital may have to improve their credit ratings and put up more collateral to qualify for loans. Even if businesses do qualify for a loan, that does not guarantee they will get the amount they need. As the economy contracts, lenders tend to decrease the amount of business financing they offer. Additionally, debt can be an unnecessary burden for a business to take on when holding onto revenue is of the utmost importance.

Lines of Credit

Getting a new business line of credit might be challenging as the country reopens. Quite a few businesses have been drawing on their lines of credit throughout the pandemic to stay afloat. On a similar note, credit providers are more likely to increase their interest rates and raise the bar for qualification for small businesses to reduce perceived risk. In short, business financing that can directly impact credit ratings is not the most stable solution in the current landscape.

Cash Advances

Cash advances seem like a good alternative at first glance. The appeal of cash advances is base on the idea that they do not put debt on the books and do not impact credit ratings. There are no fixed payments, so businesses get an amount of flexibility that they can’t get with traditional loans. The devil is in the details, as they say. Cash advances have high interest rates and fees to offset the risk to the lender. Because there are no fixed payments, business owners can find themselves with a large balloon payment at the end of the agreement.

AR Factoring

AR factoring is not a loan. There are no fixed payments, and there is no debt. Unlike a cash advance, AR factoring is not structured around future sales. Instead, factoring allows businesses to leverage unpaid invoices for immediate access to working capital. There are no high requirements, no long processing times, and no arbitrary loan board decisions.

Get the Business Financing You Need

New Century Financial helps businesses get the working capital they need with our AR factoring services. If you want to improve cash flow, or if you simply need fast access to capital without the red tape and restrictions of loans, lines of credit, or cash advances, contact New Century Financial today.