Choose the Alternative When It Comes To Financing
Alternative “anything", plug in a word, connotes a mindset of something not quite as good. Tell that to the artists who fall into the “Alternative” genre of music. If you’re lucky they’ll turn that concept on you with a guitar-lick demo or even a full-blown jam session that will have you screaming for more! Alternative music is hardly “not quite as good” as anything else, because it’s like nothing else - It’s just different.
Here at 12five Capital, we try to live our core values by being Happily Different, which means we are comfortable being different than other lenders and competitors. When most people think of "traditional" lenders, they generally think of brick-and-mortar banks.
When we talk to clients about a graduation from 12five, we talk about it generally in the sense of establishing a traditional bank line, or a line of credit. We think that’s the ultimate, perceived “best” direction of every business. Get established, prove you have a sustainable business, and then get a traditional bank line. In theory that looks and sounds like a winning formula.
Unfortunately, that’s just not how business works in most cases. What often happens is that businesses will have challenges well beyond what’s drafted in the business plan - if there even was a formal business plan in the beginning. At the root of many of the challenges that new, growing, or even established businesses face is cash flow. We’ve discussed cash flow versus profit in another blog. They are two very different things. Putting in place the right type of financing for your business - one that addresses cash flow at its very core - could be the sole key to its long-term success.
Back to being an alternative to the traditional lenders. How do you know the best type of financing for your business, ultimately? To answer that question it’s important to consider the key benefits of having an alternative financing/lending facility - all of which the traditional lenders can’t offer.
Flexibility: Traditional lending is usually structured as either an open line of credit, or a single, amortized loan for a capital purchase. Need something in the middle? Alternative financiers can often find ways to get you the cash you need with a lot of different potential payback options. Ranging from payback within a week, to 3 months, to 3 years, a plan can be put together easily to meet your needs with a payback schedule you are comfortable with.
Besides the payback options, an alternative lender can grow with you as your company grows. Many banks will establish a credit facility for your new business and you will be locked into the credit limit for a certain time period. With a more flexible lender, your credit facility will grow as you grow the business with creditworthy customers.
Speed: Things are going well with the bank when they let you know they need to go through the dreaded Loan Committee and get back with you. It's no secret closing on a loan with a bank is not a quick process. And while it is understandable that any lender is being diligent about assessing their credit risk, sometimes a faster solution is available. Depending on your needs, often an alternative lender can get cash into your account within a couple of days or a week.
Easier Collections: Following up on customers who need to pay their invoices can be time consuming. A bank is expecting payback from you, and does not care whether your customers are paying you or not. For some products, like factoring, you can give up some of the collections work and focus on finding and bringing in new sales.
Credit Review of YOUR Customers: Alternative lenders will often run credit on your customers, and as you make new sales, you will know upfront if it is a good or potentially risky company to whom you'll be selling. Nothing is more frustrating than making a sale and not being paid for your efforts. Knowing that your sale is to a creditworthy customer gives you additional peace of mind.
These are just a few of the many advantages of alternative financing over traditional financing. Being an alternative financing company is easy for 12five. We know we fit the profile, but we don’t think of ourselves that way. We consider ourselves to be the lender of first resort. Contact us through 12five.com today to learn more.