All businesses require a cash infusion at some point to acquire new customers and grow. Traditional bank loans are getting harder and harder for small to medium sized businesses, which are the backbone of the U.S. economy. Alternative sources of funding are available if you know where to look, but beware – some alternative funding options can have severe negative consequences from unscrupulous lenders. Learn how smart business owners are securing capital from reputable funding sources to generate new customers without crippling their cashflow.
With the rapid growth of e-commerce, the direct to consumer industry continues to expand and grow. Business owners and marketers now have a variety of ways to advertise their products and services directly to target consumers, who in growing numbers year over year prefer to make purchases online vs. retail stores. What were once businesses selling products available only in a local retail store now have a national and even global audience for their products.
Media is typically the largest expense to a product launch and its ongoing ramp up. Advertising drives consumer interest in purchasing products and can include television, radio, direct mail, print, and various forms Internet advertising. A slow ramp up in media because can lead to opportunity cost from competitors gobbling up more market share along with your potential new customers.
Advertising typically needs to be secured in one-week increments and paid for a week or so before it actually runs. From there it can take a week or more for the media purchased to fully run and generate traffic to your website or call center. Some sales are immediate and products with higher price points may require multiple touch points with the consumer to complete the purchase. This means the earliest you are likely to receive any sales is 7 days after the layout of money for the media, stretching out 14-21 days depending on your product offer and sales cycle. This decreases your cashflow at the exact time funds are required to ramp up the media and plan for necessary increases in available inventory.
Historically banks were where businesses turned for loans and financing. However, the 2008 recession led to increased regulation and lower risk tolerance for banks, and banks see small businesses as riskier than large businesses. Banking consolidation means there are fewer community banks which used to cater to small businesses, and big banks mainly focus on larger loans that are more profitable for them. Additionally, most banks require collateral to guarantee repayment and small business owners may not have adequate assets.
Because banks tightened the reigns on lending, the merchant cash advance industry has grown significantly in recent years to fill the void. While not considered a loan in the traditional sense, approval can be quick and funding received in a few days. However, the fees can be hefty and the payback typically happens every day as a fixed amount debited directly from your bank account, regardless of what your sales were that day. This structure can be crippling to cashflow and in some cases can put the business owner further underwater overall. Some merchant cash advance companies’ predatory lending practices even include language in the fine print of the application that allows them to seize funds and assets if the business owner falls behind on any repayments. Business owners should fully research the reputation of any potential merchant cash advance company and read the fine print carefully before considering that route.
There are a handful of companies that provide funding specifically for media, but most require that your credit card sales be diverted to a lock-box account where the funding company sweeps 100% of the money until the funded amount has been repaid in full. For many businesses, this makes their cashflow situation even worse and prevents them from being able to continue to order adequate inventory and pay associated vendors as the sales increase. This can spell disaster in terms of delayed shipping, an increase in returns, customer chargebacks and vendors shortening terms when payments are late. These media funding models are not designed to truly help a business grow and can put significant strain on a business overall.
Greenhouse Funding is one of the few options available for media funding that doesn’t cripple the business owner’s cashflow. The executives behind Greenhouse have owned their own small businesses and were frustrated by the lack of viable options available to business owners looking to increase their advertising. With Greenhouse Funding, media can be ramped up on accelerated basis week over week and rather than holding 100% of the credit card sales for repayment, a moderate percentage split is applied. This enables the business owner to receive most of their credit card processing funds daily to maintain and support the operations of the business. Because it’s based on a percentage it ebbs and flows with your sales for the day and you always know what to expect. Greenhouse Funding provides the bridge capital needed to fast-track new customer acquisition which generates increased cashflow for the business, until such time as the business has sufficient cashflow to support their own advertising efforts. And best of all, fees with Greenhouse are much lower than traditional media funding companies and cash advances.
In addition to media funding, Greenhouse also invests in innovative technology and software that incorporates payments in variety of industries, and can assist with merchant cash advances for expansion, equipment, and adding staff to support your growing business.
To learn more about Greenhouse Funding, visit www.ghouse.biz or call 207-321-6172.