Magazine for the professional nail industry.
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BUSINESS} Know Your Options for Finding Financing With banks more reluctant than ever to lend to small businesses, salons must often look elsewhere for fi nancing. There are several options available should your business fall outside the scope of traditional bank fi nancing. BY NOAH BRESLOW Hiring skilled nail technicians, investing in salon equipment, and purchasing new inventory are all ways to keep your nail salon moving forward. However, there are also those unex- pected situations that arise — such as problems with plumbing or a broken pedicure chair — that bring your business to a halt. Having cash on hand is essential to growing your business. However, small businesses nationwide — not just nail salons — are experiencing dif⇒ culty securing the neces- sary working capital they need, especially from traditional lenders. Much of the reason small businesses have trouble getting loans is because the business that is looking for $10,000 or $50,000 doesn't offer a lot of upside for a bank. So instead of spending a signi⇒ cant amount of time and resources analyzing a business, they instead judge it based on the personal credit score of the owner. But the personal credit score doesn't re⇓ ect the health of the busi- ness, and as a result millions of perfectly healthy small businesses are unable to access capital. So where should a small business owner turn to secure ⇒ nancing? Fortunately, advancements in the lending arena are making capital more easily accessible to small businesses. Here are some options: Short-term business loan. The bene⇒ t of using real loans (not credit card advances) is that they enable you to extend payments over six to 18 months. These loans, typi- cally between $5,000 and $150,000, are not just based on your personal credit but also take into account your busi- ness performance and readily available electronic records (merchant processing, online banking, etc). This method also utilizes a daily debit repayment method, which means you are repaying a set, ⇒ xed amount every business day directly from your business checking account. This helps to better manage cash ⇓ ow issues. Furthermore, short- term business loans typically report back to the credit agencies, which helps strengthen your business credit. Short-term business loans are ideal for purchasing inven- tory, equipment, launching a marketing campaign, taking on an additional or seasonal employee, or general working capital. If you are looking to undertake a full end-to-end renovation, however, a short-term business loan typically won't ⇒ t the bill. > On Deck (www.ondeckcapital.com) is an example of this type of lender. Credit card advances. Credit card advances involve a lump sum payment to a business in exchange for an agreed upon percentage of future credit card sales. This form of ⇒ nancing is common among businesses with strong credit card sales, but poor personal credit. Repayment is in the form of a percentage of the busi- ness's daily credit card sales, directly from the processor that clears and settles the credit card payment. It's important to note this is not considered a loan (and therefore does not build your business credit), because it is a sale of a portion of future credit card sales. This option can often be expensive and may require a busi- ness to change processors. > You can ⇒ nd these services through a simple Internet search, although a commonly known one is AdvanceMe (www.advanceme.com). 96 | NAILS MAGAZINE | DECEMBER 2012 Using personal credit or assets. The bene⇒ t of using personal credit for your business is that applying is easy. However, if you're like many business owners, you've already drawn on your personal credit for your business, which may have impacted your personal credit score. Furthermore, because your credit is based on your personal credit history and not your business credit history, the amounts will be lower. So, while your project may require $40,000, you might only get $4,000. Obtaining this kind of ⇒ nancing can involve credit cards (personal and business), home equity, and social lending sites. Noah Breslow is the chief executive offi cer at On Deck. As the fi rst employee of On Deck, Breslow has overseen operating, marketing, and product development divisions as the company has de- livered close to a quarter billion dollars to more than 6,500 small businesses nationwide. For more information about On Deck, visit www.ondeckcapital.com. >>>