A cooperative business, or co-op, is a unique business model where individuals or businesses unite voluntarily to meet their common economic, social, or cultural needs. Unlike traditional business models, where profit maximization for owners or shareholders is the primary purpose, a cooperative prioritizes member benefits and operates under a democratic structure.

Each member-owner typically has one vote, ensuring equal voting power regardless of the amount of capital contributed. Cooperative businesses are often chosen by those seeking a socially driven, inclusive structure emphasizing collaboration and shared responsibility.

Cooperative organizations can take many forms, including consumer cooperatives, producer cooperatives, worker cooperatives, and purchasing cooperatives. Although their structures and purposes vary, they all adhere to the principles of joint ownership, democratic control, and community benefit.

The cooperative model is guided by seven principles, adopted by the International Co-Operative Alliance in 1995:

1. Voluntary and Open Membership: Cooperatives are open to all persons willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.
2. Democratic Member Control: Cooperatives are democratically controlled by their members, who actively participate in setting policies and making decisions. Each member has one vote, ensuring equal participation.
3. Member Economic Participation: Members contribute equitably to and democratically control the capital of their cooperative. As a condition of membership, they usually receive limited compensation, if any, on capital subscribed.
4. Autonomy and Independence: Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members.
5. Education, Training, and Information: Cooperatives provide education and training for their members, elected representatives, managers, and employees so that they can effectively contribute to the development of their cooperatives.
6. Cooperation Among Cooperatives: Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.
7. Concern for Community: While focusing on member needs, cooperatives work for the sustainable development of their communities through policies approved by their members.

These principles ensure that cooperatives remain true to their purpose of serving the needs of their members and the wider community.

Types of Cooperatives

Cooperatives come in various forms, each tailored to meet the specific needs of their members. Here are some common types:

1. Consumer Cooperatives: Owned and controlled by consumers who buy goods and services from the cooperative. Examples include grocery co-ops and retail co-ops like REI.
2. Producer Cooperatives: Owned and controlled by producers who supply goods and services to the cooperative. Ocean Spray, a cooperative of cranberry and grapefruit growers, is a prime example.
3. Worker Cooperatives: Owned and controlled by employees who work for the cooperative. Mondragón Corporation in Spain is a notable worker co-op, demonstrating the power of democratically controlled businesses.
4. Housing Cooperatives: Owned and controlled by residents who live in the cooperative’s housing units. These co-ops provide affordable housing options and a sense of community.
5. Agricultural Cooperatives: Owned and controlled by farmers who supply agricultural products to the cooperative. These co-ops help farmers pool resources, reduce costs, and access larger markets.
6. Credit Unions: Financial cooperatives that provide banking services to their members. Credit unions offer loans, savings accounts, and other financial services, prioritizing member benefits over profits.
7. Purchasing Cooperatives: Owned and controlled by businesses that purchase goods and services from the cooperative. Ace Hardware is an example, where independent retailers pool resources to reduce costs and compete effectively.

Each type of cooperative has unique characteristics and benefits, but all share the common goal of serving the needs of their members.

How do Business Co-Ops work?

Business cooperatives operate under a cooperative structure designed to benefit their members rather than external investors. Here are the core components of how a cooperative operates:

Membership and Ownership

Membership in a co-op is open to those who meet its criteria, such as local farmers in an agricultural cooperative or individuals in a housing cooperative. Members are also owners, contributing capital and receiving a share of the earnings generated by the cooperative enterprise.

Governance and Decision-Making

Co-ops are democratically controlled. Each member typically has one vote in electing the board of directors and on major decisions. This voting power ensures equitable decision-making and aligns with the co-op’s primary purpose.

Operations and Services

The cooperative model emphasizes self-help and mutual support. Whether it’s grocery co-ops providing fresh produce or worker co-ops ensuring fair wages and working conditions, co-ops aim to serve their members effectively while adhering to their mission.

Financial Structure

Co-ops are jointly owned and operate with limited liability for members. Profits are either reinvested in the cooperative or distributed among members as dividends based on their participation.

How do I start a Business Cooperative?

Starting a business cooperative involves several steps:

1. Identify the Need: Determine the common economic or social purpose that the cooperative will address, such as reducing costs or supporting local farmers.
2. Develop a Business Plan: Outline the cooperative’s goals, financial model, and operational strategies.
3. Recruit Members: Attract individuals or businesses that share the cooperative’s mission.
4. Choose a Cooperative Structure: Decide on the type of co-op (e.g., producer, worker, or purchasing co-op) that best suits the primary purpose.
5. Establish Governance: Draft bylaws and establish a co-op board to oversee operations and decision-making.
6. Secure Funding: Obtain financial assistance through member contributions, grants, or cooperative financial institutions.
7. Register the Co-Op: File the necessary legal documentation to formalize the cooperative as a legal entity.
8. Launch Operations: Begin offering services or products to members and the broader community.

What are the benefits of Business Co-Ops?

Business cooperatives offer numerous advantages. They provide a platform for collective decision-making, ensuring all members have a say in the cooperative’s operations. The democratic structure fosters transparency and accountability.

Co-ops also enable members to pool resources, reducing individual risks and costs. Additionally, profits are reinvested into the cooperative or distributed equitably among members, prioritizing social benefit over individual gain.

Cooperative businesses often emphasize sustainable practices and community development, making them attractive to socially conscious individuals and businesses.

What are the drawbacks of Business Co-Ops?

While business cooperatives have many strengths, they also face challenges. The democratic decision-making process can be time-consuming and may slow down operations.

Raising capital can be difficult as co-ops rely heavily on member contributions and may have limited access to traditional financing. Additionally, conflicts can arise among members due to differing priorities or expectations.

Operating within the cooperative model requires a high level of commitment and collaboration, which may not suit everyone. Despite these drawbacks, co-ops remain a viable option for many.

Business Cooperative Pros & Cons

Pros:

• Democratic decision-making ensures equal voting power.
• Profits are reinvested or equitably distributed.
• Encourages collaboration and shared responsibility.
• Promotes sustainability and community benefit.
• Provides members with direct benefits and services.

Cons

• Decision-making can be slow and complex.
• Raising capital may be challenging.
• Conflicts among members can hinder progress.
• Requires significant member commitment and participation.
• Limited profit opportunity.

Frequently Asked Questions

Here are some of the most common questions about business cooperatives.

How does a Co-Op differ from other Business Entities?

Cooperatives differ from traditional business models such as sole proprietorships, partnerships, and corporations. Unlike a sole-owner or shareholder-driven structure, they are democratically controlled by member-owners.

Profits are not the primary goal; instead, they focus on meeting members’ needs. The cooperative structure prioritizes social and economic benefits over maximizing earnings. Additionally, co-ops embody the principle of one member, one vote, contrasting with corporations, where voting power is often tied to the number of shares owned.

How do Worker Cooperatives benefit workers?

Cooperatives are unique in that they center the well-being of workers in their core values of democratic governance, shared wealth, and community focus. In these environments, workers tend to have access to living wages and pathways to advancement, which build economic mobility.

The principle of one worker, one vote ensures that each member has an equal say and that their workplace is governed democratically. This methodology enhances democratic engagement and cultivates civic stewardship.

As a result, successful worker cooperatives tend to produce stable, long-term employment by operating sustainably and fostering relationships within the social economy. This cooperative environment increases financial security and creates incredible opportunities for upward mobility, especially in sectors where legacy businesses are failing. In the shared ownership model, profits are shared back among the worker-owners, creating a more equitable economic return.

Additionally, cooperatives create a culture of community and support among workers, who are motivated to work together to achieve common objectives. This model fosters individual achievement and group flourishing, creating synergy between personal and institutional goals.

What’s the difference between a Business and Consumer Co-Op?

A business cooperative focuses on serving businesses or workers, such as producer cooperatives that support local farmers or worker co-ops owned by employees. In contrast, consumer cooperatives serve individual consumers, like grocery co-ops and housing cooperatives. While both types operate under the cooperative model, their primary purpose and membership base differ.

Can Business Cooperatives get small business loans?

Yes, business cooperatives can access small business loans, but they may face unique challenges. Cooperative financial institutions and credit unions are often more willing to provide funding.

However, traditional financial institutions may view co-ops as higher risk due to their unique structure and collective ownership. A strong business plan and financial track record can help overcome these hurdles. Financial assistance through grants or cooperative societies can support co-ops facing financial difficulties.

You may be interested in one of the following small business loans:

• Bad credit business loan.
• Business line of credit.
• Business loans for women.
• Business term loans.
• Equipment financing.
• Invoice factoring.
• Merchant cash advance.
• Revenue-based loan.
• SBA loans.
• Working capital loans.
• ERTC advance.

What Is a Cooperative Business – Final Thoughts

Cooperative businesses offer a distinctive approach to entrepreneurship, emphasizing shared ownership, democratic governance, and a commitment to community well-being. While they present unique advantages, such as equitable profit distribution and member-focused operations, they also face challenges, such as slower decision-making processes and difficulties raising capital.

Understanding the cooperative model is crucial for individuals and groups considering this structure, whether for its social benefits, economic opportunities, or alignment with shared values. Ultimately, the success of a business cooperative depends on strong collaboration, shared vision, and a commitment to the principles that define this unique and impactful business model.

Contact us if you have more questions about business structures or need to apply for a small business loan. Our alternative financing experts can help for-profit small businesses find the best loan for their needs.

The post What is a Cooperative Business? – The Essential Guide appeared first on Profunding Options.

Every October, National Women’s Small Business Month celebrates the achievements of women in business and highlights their contributions to the economy. Women-owned small businesses are an essential part of our country. They create jobs and drive innovation.

The history of National Women’s Small Business Month began in 1988. The U.S. Congress passed a resolution recognizing women’s role in small businesses. Since then, this month has grown in significance. According to a 2021 report, women own about 42% of all U.S. businesses. This shows how vital they are to the economy.

Celebrating National Women’s Small Business Month raises awareness and encourages support for women entrepreneurs. Communities can help by shopping at local women-owned businesses, and schools can teach students about successful female business leaders.

Recognizing this month helps inspire future generations. Young girls see role models who succeed against the odds. Empowering women in business leads to a more robust economy for everyone.

What are some ways to Celebrate National Women’s Small Business Month?

Women and other small business owners can take several actions to celebrate National Women’s Small Business Month.

Shop at Women-Owned Businesses: One way to celebrate and support women-owned businesses is by shopping at these enterprises. By supporting these small businesses, you are directly contributing to the success and growth of women entrepreneurs. Show your support by shopping at women-owned businesses throughout October and beyond.

Organize Local Events: Communities can organize local events to celebrate women-owned small businesses. These can include fairs or markets featuring only female entrepreneurs. Such gatherings allow people to discover new products and services while supporting women in business.

Social Media Promotions: Businesses can run social media promotions during this month. They can highlight their stories and achievements online. Sharing posts with the hashtag #WomensSmallBusinessMonth helps spread awareness. This approach connects women entrepreneurs with a larger audience.

Workshops and Seminars: Hosting workshops and seminars is another excellent way to celebrate. These events can focus on skills like marketing, finance, or leadership. They provide valuable knowledge for aspiring female business owners, and participants gain insights that help them succeed in their ventures.

Collaborations: Women-owned small businesses can collaborate with other female entrepreneurs. Partnering for special promotions or joint events can create a stronger impact. This teamwork showcases the power of women supporting women in business.

Become a Mentor: Supporting women’s entrepreneurship by becoming a mentor is a rewarding way to share knowledge, experience, and guidance with aspiring female business owners. By offering support and advice, mentors can help women navigate the challenges of starting and growing their businesses, ultimately contributing to their success and empowerment in the entrepreneurial world. Mentoring also provides an opportunity to build a strong network and make a meaningful impact on the next generation of female leaders.

What resources are available for Women-Owned Businesses?

Whether starting a new business or supporting an existing one, women business owners can access various resources to support their enterprises.

SBA Programs

The Small Business Administration (SBA) plays a vital role in supporting women business owners. The SBA offers programs like the Women-Owned Small Business (WOSB) Federal Contracting Program, which helps female entrepreneurs access federal contracts and aims to level the playing field for underrepresented businesses.

Eligibility for SBA programs requires U.S. citizenship. Businesses must also operate primarily within the United States. This ensures that support goes to those who genuinely need it.

Small Business Development Centers (SBDCs)

Small Business Development Centers (SBDCs) offer valuable support for women business owners by providing resources, guidance, and training to help them start and grow their businesses. These centers often offer workshops, one-on-one counseling, and access to networking opportunities specifically tailored to the needs of women entrepreneurs.

SBDCs can also assist with developing business plans, securing financing, and navigating the complexities of running a small business. These organizations are crucial resources for empowering women to succeed in the business world.

Women’s Business Centers (WBCs)

Women’s Business Centers (WBCs) provide resources, training, and support specifically tailored to female entrepreneurs. These centers assist in various areas, such as business planning, financial management, marketing, and capital access.

WBCs are crucial in empowering women to start and grow their businesses by offering workshops, one-on-one counseling, networking opportunities, and access to funding sources. These centers are valuable assets in promoting gender equality and economic empowerment through entrepreneurship.

SCORE Resources for Women Entrepreneurs

SCORE offers a variety of resources specifically tailored to women entrepreneurs, including mentoring, workshops, webinars, and online tools. These resources can help women navigate the challenges of starting and growing a business, providing valuable guidance and support along the way. SCORE’s network of experienced business professionals can offer insights and advice to help women entrepreneurs succeed in their ventures.

Government Programs

Federal, state, and local government programs offer valuable resources for women business owners looking to start or grow their businesses. As mentioned, the SBA provides various resources at the federal level.

Many states offer grants, loans, and mentorship programs for women entrepreneurs. For example, the California Governor’s Office of Business and Economic Development (GO-Biz) has initiatives like the California Small Business Loan Guarantee Program, which helps women-owned small businesses access capital.

At the local level, city and county governments often have resources like business incubators, networking events, and training programs specifically designed for women entrepreneurs. Women business owners can gain valuable support to achieve their entrepreneurial goals by taking advantage of these government programs at all levels.

Women’s Business Enterprise National Council (WBENC)

The Women’s Business Enterprise National Council (WBENC) offers various support resources for women-owned businesses, including access to networking events, mentorship programs, educational workshops, and certification assistance. Through these initiatives, women entrepreneurs can connect with other business owners, gain valuable knowledge and skills, and obtain the certification needed to access government contracts and corporate procurement opportunities.

Additionally, WBENC provides resources for women-owned businesses looking to scale and grow, such as access to funding opportunities, strategic partnerships, and marketing support. These support resources are crucial in empowering women entrepreneurs and helping them succeed in the business world.

What does it mean to be certified as a Woman-Owned Business?

A certified women-owned business is at least 51% owned, operated, and controlled by one or more women. To be officially recognized as a women-owned business, the company must undergo a certification process that verifies the ownership and control by women. This certification can provide opportunities for women-owned businesses to participate in government contracts, access resources, and gain visibility in the marketplace.

There are two primary certifications for women-owned businesses.

Women’s Business Enterprise (WBE)

This certification helps get private enterprises and state and local government contracts and grants. The eligibility requirements are:

• One or more women own at least 51% of the company.
• A for-profit company operating in the U.S.
• Owned by women who are U.S. citizens or legal residents.
• Governed by a board of women (where applicable).

Women-Owned Small Business (WOSB)

This designation helps with getting federal government grants and contracts. There is a subset of the certification, Economically Disadvantaged Women-Owned Small Business (EDWOSB). EDWOSB eligibility requirements are:

• Meet all the requirements of the women’s contracting program.
• Be owned and controlled by one or more women, each with a personal net worth of less than $750,000.
• Be owned and controlled by one or more women, each with $350,000 or less in adjusted gross income averaged over the previous three years.
• Be owned and controlled by one or more women, each with $6 million or less in personal assets.

There are several ways for a woman-owned small business to apply for certification. You can visit the U.S. Small Business Administration (SBA) to apply for certification.

Female entrepreneurs can also go through the Department of Veterans Affairs Center for Verification and Evaluation (CVE) or a third-party certifier (TPC). The four options for TPCs are:

• Women’s Business Enterprise National Council (WBENC).
• National Women Business Owners Corporation (NWBOC).
• U.S. Women’s Chamber of Commerce (USWCC).
• El Paso Hispanic Chamber of Commerce (EPHCC).

Being certified offers many advantages. Certified Woman-Owned Businesses can access special grants and funding opportunities. Some government contracts are reserved for these businesses. This opens doors to new clients and projects.

Certification can enhance credibility. Customers often prefer to support women-owned companies, and they see value in promoting diversity in the marketplace.

Are there funding options to help Women Business Owners succeed?

Women entrepreneurs often seek funding to grow their business ventures. Many options exist, including grants, loans, and investors. The Small Business Administration (SBA) offers specific programs for female entrepreneurship. These programs provide capital and support tailored for women business owners.

Grants: Numerous grants are available for women business owners. Organizations like the Amber Grant and the Eileen Fisher Women-Owned Business Grant provide financial support to help women entrepreneurs succeed.

Business Loans for Women: Some lenders offer specialized business loans for women to help overcome the gender gap in capital access. Although women comprise a significant percentage of small business owners, many still have unequal access to funding. Per the SBA, women needed a male relative to co-sign any business loan until 1988. While the Women’s Business Ownership Act of that same year helped change things, women still face challenges securing funding. These loan programs are designed to correct that imbalance and promote gender parity in entrepreneurship and business financing.

Investment Opportunities: Investing in female entrepreneurship is growing in popularity. More venture capital firms focus on funding women business owners, reflecting a commitment to diversity in the business world. Women entrepreneurs can leverage these opportunities to advance their businesses.

National Women’s Small Business Month – Final Thoughts

National Women’s Small Business Month is a time to recognize and celebrate the achievements of women entrepreneurs. You learned about ways to celebrate, the resources available, and what it means to be certified as a woman-owned business. Funding options are out there to help you thrive.

Embrace this month as an opportunity to support and elevate your business. Connect with fellow women entrepreneurs, utilize available resources, and explore funding options. Your journey matters. Share your story and inspire others. Let’s uplift each other and make a lasting impact together.

The post National Women’s Small Business Month 2024 – Resources, How to Celebrate, & More appeared first on Profunding Options.

More banks tightened lending terms for small businesses in the first quarter of 2024, continuing a trend from 2023. Many traditional financial institutions fear the current economic outlook and have become more risk-averse. As a result, they are approving fewer commercial and industrial loans (C&I loans), charging more for the loans they do approve, and issuing smaller loan amounts.

Generally speaking, banks have been hesitant to lend to businesses since the economic crisis of 2008. At that time, alternative lenders stepped in to support small businesses by providing access to capital when the banks wouldn’t. This has also impacted consumer loans, such as mortgages or auto loans.

Economic growth led to banks lending more in the years before 2020, but the COVID-19 pandemic caused similar economic turmoil. While the economy is recovering, 2023 saw yet more setbacks with the banks, starting with bank runs on Silicon Valley Bank and Signature Bank.

Those bank runs, combined with economic uncertainty, created a perfect storm of risks and challenges regarding small business loans from a bank. Those challenges include:

• Regulatory constraints.
• Higher interest rates from the Federal Reserve Bank.
• Disruption to commercial real estate loans.
• Recession fears.
• Fewer bank deposits.

In a survey of loan officers from banks, they mention economic uncertainty as the primary reason for the continued decrease in lending and increase in credit scrutiny. One of the more alarming aspects of this trend for small business owners is that community banks – the traditional go-to source for small business loans – have also been tightening credit standards.

Will Banks continue to Tighten Credit Criteria for Small Business Loans?

Banks may continue to tighten credit criteria and reduce lending to small businesses due to economic uncertainty and potential risks associated with lending. Factors such as fluctuating market conditions and concerns about borrower repayment ability could contribute to stricter lending standards.

Unfortunately, the Federal Reserve has not reduced interest rates, which continues to drive the current credit crunch. Despite increases in jobs and inflation starting to level off, the Fed still fears lowering rates due to CPI numbers. Until the Fed lowers rates, it’s unlikely to see banks start lending again and easing credit standards.

What are my alternatives to Small Business Loans from a Bank?

Fortunately, alternative lenders (and marketplaces like PFO) continue to step up and provide access to capital when the banks say no. Here are some alternative small business loans available through our lender network.

Business Line of Credit

• Funding Amount: $1k – $1 million.
• Factor Rates: Starting at 1% p/mo.
• Term: Up to 36 months.
• Speed: 1-3 business days.

A business line of credit is a flexible financing option that allows businesses to borrow funds up to a predetermined limit. It can be used for various purposes, such as managing cash flow, purchasing inventory, or covering unexpected expenses. Unlike a traditional loan, businesses only pay interest on the amount they actually use from the line of credit.

Business Term Loans

• Funding Amount: $10k – $5 million.
• Factor Rates: Starting at 1-4% p/mo.
• Term: 3 months to 5 years.
• Speed: 1-3 business days.

Business term loans provide businesses with a lump sum of money upfront, which is then repaid over a fixed term with interest. These loans are commonly used for significant investments, such as equipment purchases or expansion projects. The terms of business term loans can vary in length, interest rates, and repayment schedules depending on the lender and the borrower’s financial situation.

Equipment Financing

• Funding Amount: Up to $5 million per piece of equipment.
• Factor Rates: Starting at 3.5%.
• Term: 1 – 10 years.
• Speed: 3-10 business days.

Equipment financing allows businesses to acquire the necessary tools and machinery without a considerable upfront cost. This type of financing can help companies preserve cash flow and stay competitive by accessing the necessary equipment. It often involves leasing or borrowing funds to purchase equipment, with flexible repayment options tailored to the business’s financial situation.

Invoice Factoring

• Funding Amount: $10k – $10 million.
• Factor Rates: Starting at 1% p/mo.
• Term: Up to 24 months.
• Speed: 1-2 weeks.

Invoice factoring is a financial transaction where a company sells its accounts receivable to a third party at a discount. This helps businesses improve cash flow by receiving immediate funds instead of waiting for customers to pay invoices. It is a common form of financing companies use to manage working capital and maintain operations.

Merchant Cash Advance

• Funding Amount: $5k – $1 million.
• Factor Rates: Starting at 1-6% p/mo.
• Term: 3-24 months.
• Speed: 1-2 business days.

A merchant cash advance is a type of financing where a business receives a lump sum payment in exchange for a percentage of future credit card sales. This alternative funding option can benefit businesses with fluctuating revenue streams or those needing quick access to capital. However, it is essential to carefully consider the terms and fees associated with merchant cash advances before pursuing this financing option.

SBA Loans

• Funding Amount: $50k – $5.5 million.
• Factor Rates: Starting at Prime + 2.75%.
• Term: 10-25 years.
• Speed: 8-12 weeks.

SBA loans are government-backed loans designed to help small businesses access funding for various needs, such as starting up, expanding, or recovering from disasters. These loans often have favorable terms and lower interest rates than traditional bank loans, making them an attractive option for entrepreneurs seeking financial assistance.

What are the pros and cons of Alternative Small Business Loans?

Alternative small business loans offer several advantages over traditional bank loans. They often have faster approval processes, allowing businesses to access funds quickly. Additionally, alternative lenders may be more willing to work with companies with less-than-perfect credit scores. These loans also offer more flexibility in terms of repayment options, making them a viable option for small businesses looking for financial assistance.

One major disadvantage of alternative small business loans is the higher interest rates than traditional bank loans. This can result in increased costs for the business over time, affecting profitability.

Alternative Small Business Loan Pros & Cons

Pros:

• Faster approval process compared to traditional bank loans.
• More flexibility in terms and repayment options.
• Available to businesses with less-than-perfect credit scores.
• Can be used for a variety of business purposes.

Cons:

• Higher interest rates than traditional bank loans.
• Shorter repayment terms may result in higher monthly payments.
• Some lenders may require personal guarantees or collateral.

How do I apply for an Alternative Small Business Loan?

You can apply for a small business loan through our lender network by following these steps:

Step 1 – Apply online in a few minutes: Use our simple online application to submit a request for business funding. If you need any help along the way, give us a call, chat, or email.

Step 2 – Get expert advice on loan options: An expert, knowledgeable director of operations will walk you through all the fine details and requirements. This is to ensure you have all the info you need.

Step 3 – Finalize your application and get funded: Once your funding has been approved and closed, the lender sends the funds to your account so you can start using them to grow your business.

Frequently Asked Questions

Here are the most common questions about why banks are still tightening credit for small businesses.

Are Banks charging more for Small Business Loans?

In addition to tightening credit, banks are also raising the costs of small business financing. 10% of banks stated they raised the cost of credit lines. Another 10% stated they increased premiums on riskier loans, per Inc.com.

Will the Federal Reserve lower interest rates?

While there was hope that interest rates would decrease at the end of 2023 or the first quarter of 2024, that didn’t happen. It’s difficult to predict if and when it will reverse course and begin lowering rates.

Much of that decision depends on economic performance in 2024. While some experts say a decrease may be possible by the end of 2024, others say rates might not start coming down until March 2025.

Are there Small Business Loan options for Bad Credit?

Despite banks now requiring even better credit for small business loans, credit-challenged business owners still have options thanks to alternative lenders. Many online and fintech lenders specialize in business loans for bad credit. These specialized loans help provide access to funding even if you have a credit score below 600.

Bad credit business loans through our lender network offer the following features:

• Funding Amount: $1k – $1 million.
• Factor Rates: Starting at 1% p/mo.
• Term: Up to 36 months.
• Speed: 1-3 business days.

These loans can help businesses improve their cash flow, invest in growth opportunities, and strengthen their financial position over time. Additionally, by successfully repaying a bad credit business loan, businesses can start to rebuild their credit score and potentially qualify for better financing options in the future.

However, these loans typically come with higher interest rates, which can significantly increase the overall cost of borrowing. Lenders may require collateral or personal guarantees to secure the loan, putting the borrower at risk of losing valuable assets. Limited loan amounts and shorter repayment terms are also common drawbacks of bad credit business loans, making it challenging for businesses to access the necessary funding for growth and expansion.

Some small business owners use bad credit business loans as bridge financing until they can qualify for more advantageous options. Exercise caution when pursuing this type of loan. It can provide the necessary funding to support your business, but failing to make payments would make it even more challenging to get financing in the future.

Banks are Still Tightening Credit for Small Businesses – Final Thoughts

The continued trend of banks tightening credit for small businesses poses significant challenges for entrepreneurs seeking financial support. This highlights the importance of exploring alternative funding options and maintaining strong financial health to successfully navigate the current economic landscape.

Small businesses must adapt to these changes and proactively seek resources to sustain and grow their operations when facing limited credit availability. The businesses that will succeed are the ones willing to take action and find creative funding solutions.

Contact us if you have more questions or to apply for a small business loan. Our alternative financing experts can help you find the best funding options for your business needs.

The post Banks Tightening Credit Criteria for Small Business: Exploring Your Options appeared first on Profunding Options.

National Small Business Week is an annual celebration that recognizes the crucial contributions of small businesses to the nation’s economy. It typically takes place during the first week of May and highlights the importance of small businesses nationwide. The event includes various virtual events such as webinars, virtual summits, and workshops to support and empower small business owners.

National Small Business Week focuses on honoring the hard work and dedication of America’s entrepreneurs who drive innovation and create jobs in their communities. This week-long observance also serves as a platform to provide small business owners with valuable resources, tools, and networking opportunities to help them thrive in a competitive market.

For small business owners, National Small Business Week holds significant meaning as it offers a chance to showcase their achievements, share success stories, and connect with other like-minded individuals. It provides a unique opportunity for team building, learning from industry experts, and gaining insights into best practices for sustainable growth.

When is National Small Business Week?

National Small Business Week in 2024 is celebrated from April 28 to May 4. Mark your calendars! The week-long event is significant for small businesses across the United States. The SBA and SCORE will co-host the NSBW Virtual Summit from April 30 to May 1. Small business owners can register for the free virtual summit.

The Small Business Administration (SBA) carefully selects National Small Business Week dates each year. They consider various factors like the economic climate, historical significance, and opportunities for small business growth. The goal is to ensure that the week aligns with supporting and promoting the vital role of small businesses in the economy.

During National Small Business Week, many exciting events and activities will celebrate and support small businesses. These may include workshops, seminars, networking opportunities, awards ceremonies, and more. It’s a fantastic chance for entrepreneurs to connect, learn new skills, and gain valuable insights to help their businesses thrive.

Some standout events include:

• Small Business Administration Awards Ceremony
• Building a Foundation for Online Marketing Success (with Constant Contact)
• Virtual Conference for Small Business Owners
• Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Events
• Unlock AI’s Potential for Your Small Business (with Grow with Google)
• Networking Events for Small Business Owners
• Workshops and Training Sessions for Small Business Growth
• Navigating Your Cash Flow (with Chase for Business)

Why is National Small Business Week important?

Small businesses are crucial in driving economic growth by creating jobs, fostering innovation, and contributing to local communities. Their resilience and creativity are vital in shaping the future of the country’s economic landscape.

National Small Business Week aims to celebrate and recognize the significant contribution of small businesses to the economy. It provides a platform for highlighting the importance of entrepreneurship and fostering a supportive environment for small business management and growth.

Small Business Resources Available

During NSBW, small business owners can access resources from various organizations to help connect with other businesses and develop growth strategies.

Small Business Administration (SBA): SBA hosts various events and activities during NSBW to celebrate and support small businesses nationwide. These events often include workshops, networking opportunities, panel discussions, and recognition of outstanding small businesses. Small business owners can use these resources to learn, connect, and grow their businesses during this special week dedicated to their success.

SCORE: The nonprofit organization SCORE offers valuable resources, including access to volunteer mentors who can guide and support entrepreneurs. These experienced mentors can offer insights, advice, and expertise to help small business owners navigate challenges and achieve their goals. Additionally, SCORE co-hosts the Virtual Summit during National Small Business Week, providing a platform for networking, learning, and collaboration among other business owners and industry experts.

National Federation of Independent Business (NFIB): The NFIB provides resources such as business advocacy, legal assistance, and access to industry experts for small business owners. Through their network, NFIB offers valuable tools and support to help entrepreneurs navigate challenges and grow their businesses successfully. Small business owners can benefit from the expertise and resources available through NFIB to enhance their operations and address various business needs.

Small Business Development Center (SBDCs): During National Small Business Week, SBDCs offer various resources to support entrepreneurs and small business owners. These may include business counseling, workshops, training programs, access to financing options, local events, and assistance with developing business plans.

How do small business owners celebrate NSBW?

Small businesses have several options to get involved and celebrate National Small Business Week.

Host a Special Event or Promotion for Customers

Small business owners can host a special event or promotion for customers during NSBW, such as offering discounts, hosting a networking event, or launching a new product or service to attract more customers and increase sales. It’s an excellent opportunity to show appreciation for loyal customers and attract new ones.

Partner with Local Small Businesses for a Collaborative Celebration

Small business owners can partner with other small business owners or a local small business to create a collaborative celebration for NSBW, such as hosting joint events, offering cross-promotions, or organizing a community-wide sale. This collaboration fosters a sense of community and helps increase visibility and support for all participating businesses.

Share Stores on Social Media & Use Appropriate Hashtags

Small business owners can utilize social media platforms to share customer testimonials or success stories, showcasing the positive experiences of their clients and building credibility with potential customers. By sharing these stories, they can create a sense of trust and authenticity, ultimately attracting more customers to their business.

Utilize the official NSBW hashtags on social media to join the online conversation:

• #SmallBusinessWeek
• #NSBW
• #NationalSmallBusinessWeek

Attend Networking Events or Workshops

Small business owners can celebrate NSBW by attending workshops to connect with other like-minded entrepreneurs, share experiences, and gain valuable insights into running a successful business. These workshops provide a platform for networking, learning new skills, and forming collaborations to help grow their businesses.

Acknowledge Your Employees

Small business owners celebrate NSBW by acknowledging employees and expressing gratitude for their hard work and contributions to the business’s success. This could include hosting a special event, giving out awards or bonuses, or simply taking the time to personally thank each employee for their dedication.

Frequently Asked Questions

Here are the most common questions about celebrating National Small Business Week.

When did National Small Business Week begin?

National Small Business Week, which falls in May, has a rich history dating back to the 1960s. The event was first established in 1963 by President John F. Kennedy to honor and recognize the contributions of small businesses to the economy. It has since become an annual tradition celebrating the vital role that small businesses play in communities across the United States.

NSBW’s origins stem from a desire to highlight small business owners’ resilience, innovation, and entrepreneurial spirit. This week-long event typically features various activities, workshops, and networking opportunities to empower and support small businesses. By showcasing success stories and providing resources, National Small Business Week is a platform for fostering growth and sustainability within the small business sector.

What’s the SBA’s role in National Small Business Week?

The Small Business Administration (SBA) plays a crucial role during National Small Business Week by organizing various events and activities to celebrate and support small businesses nationwide. These initiatives aim to raise awareness about the importance of small businesses in driving economic growth and creating job opportunities.

During this week, the SBA collaborates with state and local governments, as well as other partners, to provide resources, training sessions, workshops, and networking opportunities for small business owners. This support helps entrepreneurs enhance their skills, expand their networks, and access funding to grow their businesses.

What are National Small Business Week SBA awards?

National Small Business Week celebrates small businesses’ contributions to the economy. The SBA presents various awards during this week, honoring achievements in different categories like innovation, growth, and community involvement. These accolades highlight the resilience and creativity of small business owners nationwide.

Types of Awards

• Small Business Person of the Year: Recognizes an individual’s exceptional leadership and success in running a small business.
• Small Business Exporter of the Year: Acknowledges companies with significant export achievements.
• Phoenix Award for Disaster Recovery: Commends businesses that have recovered from natural disasters successfully.
• Federal Procurement Awards: Federal government contracts given to businesses or individuals for providing goods or services to federal agencies.

The awards serve as a platform to showcase exemplary business practices and inspire others in the entrepreneurial community. They motivate small business owners to strive for excellence and contribute positively to society through their endeavors.

How does Profunding Options celebrate National Small Business Week?

Here at Profunding Options (PFO), we celebrate small businesses each and every week, but NSBW represents a unique opportunity to reaffirm our commitment to small business success. Our company succeeds when you succeed. Moreover, we recognize the importance of small businesses in creating and growing local economies and the overall national economy.

Some ways we aim to contribute to small business success include:

• Facilitating small business loans through our network of 75+ lenders.
• Specializing in assistance for businesses across various industries.
• Providing fast and accessible funding solutions for timely financing.
• Helping small business owners who can’t qualify for traditional financing find creative funding solutions.
• Providing dedicated representatives to help small business owners find the appropriate funding program for their business goals.
• Providing access to various business success strategies and tips on our blog.
• Committing to ongoing success through renewal programs.

Celebrating National Small Business Week – Final Thoughts

Recognizing the crucial role of small businesses in our economy is essential, and supporting them during NSBW showcases your appreciation for their hard work. The Small Business Administration’s involvement and the awards given during this week highlight the dedication and achievements of small business owners across the country.

Small business owners can leverage this week to network with other entrepreneurs, promote their businesses, recognize customers and employees, and celebrate the success of small businesses nationwide. This is your opportunity to be in the spotlight and get recognition for your contributions to job and economic growth.

Contact us if you want to connect and celebrate NSBW or if you need to apply for a small business loan. Our dedicated reps are here to help you find funding solutions that can help drive continued success.

The post Celebrating National Small Business Week 2024: A Guide to Success appeared first on Profunding Options.

The Francis Scott Key Bridge in Baltimore collapsed on March 26, 2024, when the Dali cargo ship crashed into the bridge following a power failure. Despite issuing an SOS, it was unable to avoid collision. The impact caused a section to give way and fall into the water below.

Small businesses relying on the Key Bridge for transportation may face disruptions impacting daily operations. Access to supplies and serving clients becomes challenging, potentially leading to financial losses. The collapse directly affects businesses near the bridge, hindering deliveries and client services.

What financing is the SBA offering to Businesses Affected by the Bridge Collapse?

The SBA is issuing disaster loans for small businesses in the Mid-Atlantic region affected by the bridge collapse. SBA Administrator Isabel Casillas Guzman announced the program on April 3, 2024.

The announcement came after Maryland Governor Wes Moore wrote a letter requesting a disaster declaration on March 29, 2024. The declaration applies to small businesses, small agricultural cooperatives, small aquaculture businesses, and private nonprofits.

These SBA Disaster loans include:

• Loan Amounts: Up to $2 million.
• Interest Rates: 4% for small businesses and 3.25% for nonprofits.
• Terms: Up to 30 years.

Interest will not accrue for these loans until 12 months after the initial disbursement. In addition, the repayment period for SBA disaster loans does not begin until 12 months. These loans are intended to help businesses that have experienced revenue decline due to the bridge collapse.

What areas are eligible for SBA Disaster Loans for the Francis Scott Key Bridge Collapse?

The disaster area applies to the entire state of Maryland and Washington D.C. Several counties in surrounding states are also eligible.

Delaware counties:

• Kent.
• New Castle.
• Sussex.

Pennsylvania Counties:

• Adams.
• Bedford.
• Chester.
• Fayette.
• Franklin.
• Fulton.
• Lancaster.
• Somerset.
• York.

Virginia Counties:

• Accomack
• Independent City of Alexandria.
• Arlington.
• Fairfax.
• Loudoun.

West Virginia Counties:

• Berkley.
• Grant.
• Hampshire.
• Jefferson.
• Mineral.
• Morgan.
• Preston.

How can my Business apply for SBA Relief following the Bridge Collapse?

To start the application process, visit the SBA website dedicated to assisting businesses affected by the Francis Scott Key Bridge collapse. Before proceeding with the application, ensure that your business meets all service requirements specified on the website.

In addition, small business owners can call SBA’s Customer Service Center at (800) 659-2955 or email disastercustomerservice@sba.gov for more information.

The SBA also announced that starting on April 1, 2024, Customer Service Representatives at the SBA’s Business Recovery Center can help small business owners complete their disaster loan applications, accept documents for existing applications, and provide status on loan applications.

Contact information for the Recover Center is:

Business Recovery Center (BRC)
Baltimore County

Dundalk Renaissance

11 Center Place, Suite 201

Dundalk, MD 21222

Hours:

Monday – Friday: 8 a.m. to 6 p.m.

Saturday: 10 a.m. to 2 p.m.

Sunday: Closed

Required Documents

Gather all essential documents needed for your application. These may include proof of business ownership, financial statements, and any other paperwork requested by the SBA to support your claim. Be sure to have these ready beforehand to streamline the process.

What are the benefits of SBA Disaster Loans?

Small businesses impacted by the Francis Scott Key Bridge collapse can benefit significantly from SBA Disaster Loans. These loans provide direct financial assistance to help businesses recover and rebuild after a catastrophic event.

By accessing SBA Disaster Loans, businesses can receive the necessary funds to cover operational expenses if they experienced financial hardship due to the bridge collapse. This financial support is crucial in ensuring the survival and continuity of affected businesses in the face of adversity.

The SBA offers updates on service requirements to further assist businesses in need and establishes partnerships with organizations to streamline the loan application process. They may provide extensions or offer additional hours to accommodate the high demand for assistance following the bridge collapse.

What are the drawbacks of SBA Disaster Loans?

Businesses impacted by the Francis Scott Key Bridge collapse may face challenges with SBA Disaster Loans. The extensive service requirements and documentation necessary for loan approval can delay receiving direct assistance.

Small businesses, in particular, might spend additional hours dealing with paperwork and communicating with SBA officials to fulfill these requirements. This process can be time-consuming and overwhelming for business owners already grappling with the aftermath of the bridge collapse.

While these loans offer many benefits that can help affected businesses stay in operation, they still come at a cost. Businesses must repay the loan amount plus interest. However, the low interest rates and extended repayment terms make the repayment process much more manageable.

SBA Disaster Loan Pros & Cons

Pros:

• Low-interest rates.
• Long repayment terms.
• Available to businesses of all sizes.
• Can be used for a variety of expenses, including payroll and inventory.

Cons:

• Strict eligibility requirements.
• Lengthy application process.
• Collateral may be required for larger loan amounts.
• Funding may not be immediate in times of high demand.

Frequently Asked Questions

Here are the most common questions about the SBA Disaster Loan Program.

Does the SBA offer other Disaster Loans?

The Small Business Administration (SBA) offers disaster loans to help businesses, homeowners, and renters recover from natural disasters such as hurricanes, floods, wildfires, and other emergencies. These low-interest disaster loans offer long-term repayment options to assist those affected by disasters in rebuilding and recovering.

To be eligible for SBA assistance, applicants must have suffered physical or economic damage due to the declared disaster. Businesses of all sizes, non-profit organizations, homeowners, and renters may qualify for these loans if they’re in declared disaster areas.

Additionally, applicants must have exhausted all other funding sources, including insurance payouts, before receiving an SBA disaster loan. It is essential to carefully review the eligibility requirements and application process to ensure a smooth and successful loan application.

How can Small Businesses use SBA Disaster Loan Funds?

This loan program is intended to help businesses that suffered financial loss due to the bridge collapse. As such, businesses can use the funds to cover everyday operational expenses. Examples include payroll, inventory, rent, utilities, fixed debts, and accounts payable.

What other SBA Loans are available?

SBA disaster loans are specialized financing options within the larger SBA Loan Program. In fact, disaster loans are the only option in the program that allows business owners to apply directly to the SBA.

All other SBA loans require applying to an SBA-approved lender, which could be a bank, credit union, or alternative lender. Available loan programs include the following.

SBA 7(a) Loans: The most common type of SBA loan, SBA 7(a) loans, can be used for various business purposes, including working capital, equipment purchases, and real estate acquisition. The Small Business Administration guarantees these loans, making them more accessible to small businesses that may not qualify for traditional bank loans. The maximum loan amount for SBA 7(a) loans is $5 million.

SBA 504 Loans: SBA 504 loans are designed to help small businesses purchase fixed assets such as real estate or equipment. These long-term loans offer fixed-rate financing with low down payments, making them popular for businesses looking to expand or acquire property. The funds from an SBA 504 loan can be used for construction, renovation, or purchasing land and buildings.

SBA Express Loan: SBA Express Loans offer a faster approval process and quick access to funds, making them ideal for small businesses needing immediate financing. These loans have a maximum loan amount of $350,000 and can be used for various business purposes such as working capital, equipment purchases, and refinancing debt. Additionally, SBA Express Loans have a streamlined application process, making them a convenient option for entrepreneurs seeking financial assistance.

SBA Microloan Program: SBA microloans are small loans provided to small businesses and nonprofit childcare centers for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery, or equipment. These loans can be up to $50,000 and are typically used by entrepreneurs who may not qualify for traditional bank loans. Microloans are an excellent option for those looking for smaller loan amounts with flexible terms and lower interest rates.

SBA Disaster Loans Following the Francis Scott Key Bridge – Final Thoughts

The total fallout from the tragic incident is still being determined. However, many businesses relied on the bridge for the transportation of goods and supplies.

The SBA’s decision to offer funding for these businesses should ease a significant portion of their financial hardships. We will provide any relevant updates about the loan program and eligibility.

Contact us if you have more questions about SBA disaster loans or to apply for a small business loan. While small business owners must apply directly to the SBA for disaster loans, our alternative financing experts can assist you with funding options for most other business needs.

The post SBA Disaster Loans for Businesses Impacted by the Francis Scott Key Bridge Collapse appeared first on Profunding Options.

Credit card transaction fees are charges merchants pay to process credit and debit transactions. These fees are typically a percentage of the total transaction amount plus a fixed fee per transaction. Visa and Mastercard, two of the largest payment networks in the world, play a significant role in setting these fees.

Visa and Mastercard do not directly charge merchants transaction fees. Instead, they set interchange fees, which are fees paid by the merchant’s bank to the cardholder’s bank for processing the transaction. These interchange fees are then passed on to the merchant as part of their overall transaction costs.

The interchange fees set by Visa and Mastercard can vary depending on factors such as the type of card used, the size of the merchant, transaction volume, and the industry in which the merchant operates. These fees are typically non-negotiable for merchants and can significantly impact their bottom line.

Overall, Visa and Mastercard play a crucial role in determining merchants’ transaction fees. Understanding how these fees are set and how they impact business operations is essential for merchants looking to optimize their payment processing costs.

What is the Visa Mastercard $30 Billion Settlement?

The Visa Mastercard $30 billion settlement is a legal agreement between Visa, Mastercard, and merchants that addresses antitrust concerns related to card transaction fees and pricing. The lawsuit resulting in the Visa Mastercard $30 Billion Settlement began in 2005, sparking a long legal battle.

Merchants will experience changes in settlement terms, affecting transaction fees and chargeback processes. These modifications aim to create a fairer environment for businesses dealing with card disputes.

Due to the settlement terms, small business owners will see an impact on their pricing strategies and sales volume. The adjustments may influence how they set prices and manage their revenue streams.

Lead counsel played a crucial role in negotiating the settlement terms on behalf of merchants. Their involvement ensured that merchant interests were represented effectively during the settlement discussions.

Member banks also played a significant role in reaching this agreement, working alongside lead counsel to finalize the terms. Their collaboration helped shape the outcome of the settlement for merchants across various industries.

What does the Visa Mastercard Settlement mean for merchants?

Understanding the settlement terms is crucial for merchants to grasp its direct impact. The settlement influences transaction fees and interchange rates, especially for small business owners. Member banks must comply with antitrust laws, affecting how charges are levied.

Due to the settlement, merchants may experience changes in chargebacks and customer disputes. This could lead to alterations in customer support strategies. Sales strategies might also need adjustment to align with the new regulations.

Key points on the impact of the settlement for merchants include:

• Implications on transaction fees and interchange rates.
• Changes in chargebacks and disputes.
• Adaptation of customer support and sales strategies.

The settlement’s effects on businesses’ bottom lines could be significant, prompting providers to review their policies. Merchants must stay informed about these changes to navigate potential challenges efficiently.

What does the Visa Mastercard Settlement mean for cardholders?

Cardholders will benefit from improved customer support and services due to the settlement terms. The changes may result in reduced transaction fees and more transparent interchange rates.

The settlement could decrease chargebacks and customer disputes, which would mean fewer inconveniences and smoother transactions for cardholders. Moreover, member banks will likely enhance their services to cardholders following the settlement.

This could translate into better customer support experiences and increased satisfaction overall. In essence, the Visa Mastercard Settlement aims to create a more favorable environment for cardholders, ensuring smoother transactions and improved services from member banks.

How much will the Settlement Reduce Swipe Fees?

The Visa Mastercard settlement means merchants might pay lower rates to accept these cards. Visa states that most of its customers are small business owners. The settlement includes reducing interchange rates, capping rate reductions for five years, and offering more surcharge options for merchants.

Interchange rates depend on factors like the type of merchant, card presence at purchase, and card type. Rates will decrease by 0.04% for three years and won’t exceed 2023 rates for five years. The average swipe fee must be at least seven basis points lower for five years. Merchants can charge more for credit card rewards and negotiate swipe fees with Visa and Mastercard.

When will the Swipe Fee Reduction begin?

The lower swipe fees resulting from the Visa Mastercard settlement are expected to go into effect in the near future, pending court approval. While an exact date has not been officially announced, it is anticipated that merchants will start to see the impact of these fee reductions sometime in late 2024 or 2025.

This reduction in swipe fees aims to provide relief to businesses that rely on card transactions, ultimately benefiting merchants and consumers. Stay tuned for more updates on when these changes will officially take effect.

What are the pros & cons of the Visa Mastercard Settlement?

Merchants stand to benefit from the Visa Mastercard settlement in several ways. One significant advantage is the potential for reduced credit card interchange fees, which are the fees paid by merchants to credit card networks for processing transactions.

With the settlement, merchants may see lower fees, ultimately leading to cost savings for their businesses. The settlement may also give merchants more transparency and control over their payment processing, allowing them to manage their finances and operations better. Overall, the Visa Mastercard settlement has the potential to positively impact merchants by lowering costs and improving payment processing practices.

One significant drawback of the Visa Mastercard Settlement for merchants is that it may not go far enough in addressing the high interchange fees that merchants are charged for processing credit or debit card transactions. While the settlement does require Visa and Mastercard to reduce these fees, some merchants argue that the reductions are not substantial enough to significantly impact their bottom line.

Additionally, the settlement does not address the issue of transparency in how these fees are set, leaving merchants feeling frustrated and powerless to negotiate better rates. While the settlement may offer some relief for merchants, it falls short of fully addressing their concerns about the cost of accepting credit card payments.

Visa Mastercard Settlement Pros & Cons

Pros:

• Provides compensation to merchants for overcharging on credit card fees.
• Increases transparency in credit card processing fees.
• Encourages fair competition among credit card companies.

Cons:

• Settlement may not fully compensate all affected merchants.
• Could lead to increased costs for consumers as credit card issuers adjust their fees.
• A lengthy legal process may create delays in receiving compensation.

Frequently Asked Questions

Here are the most common questions about the Visa Mastercard Settlement.

Will there be more fee reductions in the future?

Monitoring transaction fees closely is crucial for merchants to anticipate any potential reductions. Staying informed about competitive pricing strategies from other providers allows businesses to prepare for changes.

Considering the impact of chargebacks on pricing is essential as they may influence fee adjustments. Keeping an eye on Visa and Mastercard’s settlement terms helps gauge potential effects on pricing.

Merchants should analyze these factors to make informed decisions that benefit their bottom line. Being proactive in understanding these elements can lead to better financial outcomes for small business owners.

• Merchants need to track transaction fees.
• Understanding competitive pricing is vital.
• Chargebacks can affect pricing adjustments.
• Monitoring settlement terms is crucial.

Did the courts approve the Visa Mastercard $30 Billion Settlement?

The agreement is still pending approval by the Eastern District Court of New York. It may take some time before final approval is granted. If approved, the new rules will likely go into effect in late 2024 or early 2025.

How long will the Swipe Fee Reduction last after Settlement?

The settlement stipulates that Visa and Mastercard will lower interchange rates by four basis points for the next three years. In addition, the companies won’t raise exchange rates above 2023 levels for the next five years. According to Yahoo! Finance, it’s estimated the settlement will reduce credit card fees by $30 billion over the next five years.

Why are merchant fees so high?

Merchant account fees are significantly influenced by interchange rates established by card networks like Visa and Mastercard. These rates, set by the networks, directly impact merchants’ costs for processing transactions. The higher the interchange rate, the more merchants pay in fees.

Chargebacks also play a crucial role in escalating merchant fees. When customers dispute transactions and initiate chargebacks, merchants lose the sale and incur additional fees. This can severely affect the bottom line of small business owners, leading to financial strain.

The competitive landscape among payment providers is another factor affecting merchant fees. Providers use competitive pricing strategies to attract merchants, offering different fee structures and services. Understanding these pricing models is essential for merchants to make informed decisions that benefit their businesses.

Merchants must grasp pricing structures and negotiate effectively with providers to mitigate high per-transaction fee rates. By negotiating lower transaction fees, merchants can improve their profit margins and enhance their competitiveness in the market.

What the Visa Mastercard Settlement Means for Merchants – Final Thoughts

The Visa Mastercard settlement could have a significant impact on merchants, especially in terms of reducing swipe fees and increasing competition in the payment processing industry. While the details of the settlement are still being finalized, merchants could stand to benefit from these changes.

It is crucial for merchants to stay informed about any updates related to the settlement and to consider how they can leverage these changes to improve their bottom line. In theory, this settlement represents a positive step toward creating a more fair and competitive payment processing landscape for merchants. However, some critics say it doesn’t go far enough and may hinder future attempts to reduce interchange rates.

Contact us if you have more questions about the settlement or to apply for a small business loan. Our alternative funding experts can help you find the best business financing options to achieve your goals.

The post What the Visa Mastercard Settlement Means for Merchants: The Essential Guide appeared first on Profunding Options.

Mom-and-pop shops are smaller businesses typically run by family members. They offer personalized service and unique products and stand out for their close-knit atmosphere and community connection.

Supporting mom-and-pop shops is crucial to helping them thrive in the competitive market, fostering local economies, and preserving authenticity. By choosing these businesses, customers contribute to the growth of their neighborhoods.

Examples of mom-and-pop shops could be:

• Local bakery.
• Family-owned bookstore.
• Neighborhood coffee shop.
• Independent hardware store.
• Corner deli.
• Vintage clothing store.
• Handmade jewelry shop.
• Small family-owned local restaurants.

Why are Mom & Pop Shops important?

Mom & Pop shops, also known as small or local businesses, are vital for our communities. These businesses offer unique products and services that big corporations do not provide.

The owners of these establishments are often passionate individuals who take pride in their work. They deliver personalized customer service, fostering strong connections within the community.

Supporting mom-and-pop shops directly impacts livelihoods, preserves traditions, and enhances the sense of belonging in local areas. Customers who choose these businesses play a significant role in sustaining the community’s economy.

Contributions of mom-and-pop shops include:

• Unique products and services.
• Personalized customer service.
• Contribution to community vibrancy.

What is National Mom and Pop Business Owners Day?

National Mom and Pop Business Owners Day is a significant celebration of small and local businesses. It’s celebrated annually on March 29. This holiday recognizes the hard work and dedication of mom-and-pop business owners who contribute to their communities.

Established to honor family-owned businesses, this day commemorates their vital role in the economy. It serves as a tribute to the founders who have built their companies from the ground up.

National Mom and Pop Business Owners Day reminds people to support these small enterprises. Customers can experience unique products and services not found in larger chains by patronizing mom-and-pop shops.

It is crucial to show appreciation for small business owners. These individuals often invest their hearts and souls into their companies, striving to provide exceptional customer experiences.

What are some ways to celebrate National Mom and Pop Business Owners Day?

Here are some ways to celebrate National Mom and Pop Business Owners Day.

Shop Local: On this special day, support local businesses by shopping at mom-and-pop stores. You directly contribute to the community’s growth by purchasing products from these establishments.

Share Stories: Engage with business owners by sharing their inspiring tales on social media platforms. These stories highlight the hard work, better service, and dedication put in by founders to establish their enterprises.

Attend Events: Participate in local events or markets organized to commemorate National Mom and Pop Business Owners Day. These gatherings provide an excellent opportunity to interact with various small business owners and discover unique products.

Promote Small Businesses: Encourage your friends and family members to join the celebration by promoting small businesses within the community. Word-of-mouth recommendations play a crucial role in attracting new customers to shop small at these establishments.

What hashtags are used for National Mom and Pop Business Owners Day?

To show support for National Mom and Pop Business Owners Day, use hashtags like #MomPopBusinessOwnersDay, #MomAndPopDay, #SupportLocalBusinesses, and #SmallBizOwners. You can also create unique hashtags such as #ShopSmall, #FamilyBusinessLove, and #LocalFavorites to highlight the importance of pop businesses.

Incorporate popular hashtags like #BuyLocal, #SupportSmallBiz, and #ShopLocal to encourage customers. Engage with trending hashtags such as #SmallBusinessSaturday, #LocalFirst, and #CommunitySupport to join the online conversation.

What are the benefits of Mom & Pop Businesses?

Mom-and-pop businesses enhance the local economy by keeping revenue within the community, aiding in sustained growth. They provide personalized service, catering to customers with a unique touch that is often missing in larger companies. These businesses offer unique and specialized products or services not easily found in big chain stores.

Mom-and-pop business owners actively engage in community support, contributing to events, charities, and local initiatives. Their involvement fosters a sense of togetherness and support among residents. By nurturing these small businesses, communities thrive economically and socially.

Frequently Asked Questions

Here are the most common questions about National Mom and Pop Business Owners Day.

Why are Mom & Pop Businesses good for the local economy?

Mom-and-pop businesses contribute to the local economy by creating job opportunities for people in the community. These small businesses play a vital role in boosting economic growth by providing employment opportunities to local residents.

In addition, these small, local business owners often prioritize personalized customer service, which enhances the overall shopping experience for customers. This customized touch fosters a strong sense of community and loyalty among patrons.

Supporting small businesses helps retain money within the local area. When people purchase from small shops or a family business, they reinvest their money into the community, which circulates wealth locally.

How do Mom & Pop Shops compete with larger businesses?

Small businesses, also known as mom-and-pop shops, employ various strategies to compete with larger corporations, such as big box stores. They utilize social media platforms effectively to promote their products and services, engaging customers and fostering a loyal customer base.

Small businesses establish a connection with their customers by offering personalized customer service and creating a unique shopping experience that larger companies often struggle to replicate. This personal touch sets them apart in the market.

Collaboration is vital for mom-and-pop shops. By partnering with other local businesses, they can cross-promote products and services, expand their reach, offer lower prices, and form a robust support network within the community.

Moreover, small businesses focus on delivering quality over quantity. They emphasize attention to detail, craftsmanship, and care in their offerings to differentiate themselves from larger competitors solely focused on mass production.

In summary, the following actions can help local businesses compete with larger enterprises:

• Utilize social media for promotion.
• Offer personalized customer service.
• Collaborate with local businesses.
• Emphasize quality over quantity.

Are there big businesses that started as Mom & Pop Shops?

Yes, some of the biggest names in business got their start as small, community businesses. Here’s a brief list of some commercial enterprises that started as mom-and-pop shops.

Walmart: In 1962, Sam Walton founded Walmart as a small mom-and-pop shop in Rogers, Arkansas. Initially called Walton’s Five and Dime, the store focused on providing affordable goods to the local community. Through strategic expansion and innovative business practices, Walmart grew into the retail giant we know today, with thousands of stores worldwide.

McDonald’s: McDonald’s actually started off as a mom-and-pop restaurant in 1940, founded by brothers Richard and Maurice McDonald in San Bernardino, California. Initially a small barbecue restaurant, it wasn’t until Ray Kroc joined the company in 1954 that McDonald’s began to expand into the global fast-food chain we know today. Despite its humble beginnings, McDonald’s has grown into one of the world’s largest and most successful fast-food chains.

Starbucks: In 1971, Starbucks began as a small mom-and-pop shop in Seattle’s Pike Place Market. Jerry Baldwin, Zev Siegl, and Gordon Bowker opened the store, selling high-quality coffee beans and equipment. Over time, Starbucks grew into a global coffeehouse chain.

Nike: Now one of the world’s most recognizable athletic apparel and shoe brands, Nike started as a small mom-and-pop shop. The company was founded in 1964 by Bill Bowerman and Phil Knight, who initially sold shoes out of the trunk of their cars at track meets. The brand was initially known as Blue Ribbon Sports before officially becoming Nike in 1971. Despite its humble beginnings, Nike has since grown into a global powerhouse in the sports industry, known for its innovative designs, iconic logo, and high-profile endorsements. The transition from a small shop to a multinational corporation is a testament to its founders’ hard work and vision.

Apple: Now a tech giant, Apple started as a mom-and-pop business in a garage in Los Altos, California. Steve Jobs and Steve Wozniak began by selling DIY computer kits before eventually expanding into the global corporation we know today. Apple’s humble beginnings show that even the most prominent companies can have small, grassroots origins.

Whole Foods: In 1978, John Mackey and Renee Lawson Hardy founded Whole Foods Market, initially a small mom-and-pop shop in Austin, Texas, called SaferWay. Starting with a limited selection of natural and organic foods, the store quickly grew in popularity. By 1980, it expanded and rebranded as Whole Foods Market, now a prominent grocery chain known for quality and sustainability.

How can individuals show support for Mom & Pop Businesses on this day?

To celebrate National Mom and Pop Business Owners Day, individuals can shop locally, share positive reviews on social media, participate in local events, promote small businesses online, or thank small business owners for their hard work and dedication.

National Mom and Pop Business Owners Day – Final Thoughts

Now that you know the significance of mom-and-pop shops, take the time to celebrate National Mom and Pop Business Owners Day. Supporting these local businesses benefits your community and contributes to a thriving local economy. By shopping at mom-and-pop shops, you are investing in your neighborhood’s unique character and charm while helping these small businesses grow and succeed.

Make a difference today by supporting mom-and-pop shops in your area. Every action counts, whether through a purchase, a kind word, or sharing their story on social media. Let’s unite to honor the hard work and dedication of these small business owners who play a vital role in shaping our communities. Your support can make a world of difference.

Contact us if you have more questions about celebrating local businesses or to apply for a small business loan. Our alternative funding experts can help mom-and-pop business owners find the funding they need to achieve their goals.

The post National Mom and Pop Business Owners Day: Celebrate and Support Local Shops appeared first on Profunding Options.

Commercial and industrial loans have been declining throughout the year. The decline rate is small and consistent with other loan types. However, some small business owners may be concerned about the larger economic impact and lending options.

Recession Fears

The impact of a potential economic recession has significantly influenced the decrease in business loans issued by banks. Reduced economic growth and declines in loan volume further contribute to the reluctance of both banks and businesses to engage in extensive borrowing activities.

Two years ago, the Wall Street Journal‘s survey of economists suggested the likelihood of recession was 16%. However, the most recent survey showed a recession probability of 48%. While that is down somewhat from the 63% probability one year ago, the increased recession probability has led to banks tightening lending standards and reducing loan availability.

Fewer Bank Deposits

Bank deposits have also declined by roughly $313 billion since February 2023, almost 2%. The decline in bank deposits can significantly impact the availability of business loans. With fewer deposits, banks have less capital to lend out to businesses. This can result in stricter lending criteria, fewer loans, higher interest rates, and reduced access to credit for small and medium-sized enterprises.

Banks are feeling the pinch from the drop in deposits. Core deposits, which are the total deposits minus large certificates of deposit, have gone down by $1.1 trillion, or 6%, since February 2023. But it’s even worse than that. Both checking account balances and money market deposit accounts have also fallen. To make up for the shortage, banks have turned to using large and brokered small CDs.

How much have Business Loans from Banks declined?

Commercial loan volume has seen a notable decrease, declining by $33 billion since February 2023. While that sounds significant, it’s only about a 1% decline. However, if the trend continues, it will be more of a concern.

Decreased loan demand from businesses reflects declining investments and is attributed to the recession and concerns about economic growth. In September, there was a 2% decrease in business loans from banks, marking the sixth consecutive month of declines, according to the Fed’s latest batch of H8 data.

Are banks tightening Credit Criteria for Business Loans?

Banks are indeed tightening credit standards for business loans. Recession fears have led banks to be more cautious in lending to businesses. Consequently, there’s been a decrease in the volume of business loans and credit contracts being approved by traditional financial institutions like banks.

This change leads to decreased loan demand from businesses due to economic uncertainty. The potential of a recession has made banks more cautious in lending to companies.

Is there less demand for Business Loans?

Business loan demand has decreased notably due to economic struggles and increased interest rates. As the economy experiences a downturn, businesses are more cautious about taking on additional debt in the form of business loans. The uncertainty and financial strain caused by the economic struggles have led many companies to scale back their borrowing activities.

Tightened Lending Standards

As mentioned, banks have been tightening lending standards, contributing to a reduction in business loan volume. This means that businesses face greater challenges when applying for loans from traditional banking institutions. With stricter criteria and requirements, fewer businesses meet the qualifications for obtaining bank loans.

Impact of Higher Interest Rates

The decline in loan demand reflects the influence of higher interest rates. When faced with higher interest payments, businesses may find it less appealing to borrow money.

How does Alternative Business Lending work?

With banks more hesitant to lend, in a cycle similar to the Great Recession of 2008, alternative lenders are stepping up to help business owners get the funds they need to grow. Here’s what you should know about alternative business loans.

Flexibility in Lending: Alternative business lending operates outside the realm of traditional bank loans, providing businesses with funding options that are more adaptable to their needs. These lenders offer more flexible lending standards, enabling a wider range of businesses to qualify for loans.

Quick Access to Funds: Unlike banks, alternative lending institutions provide quicker access to funds, which can be crucial for companies needing immediate financial support. This swift process allows businesses to address urgent financial requirements without enduring lengthy approval periods.

Competitive Interest Rates: Companies can borrow from alternative lenders at competitive interest rates based on their credit and business accounts. This offers businesses an opportunity to secure necessary funds without being burdened by exorbitant interest charges.

Alternative Business Loans Pros & Cons

Pros:

• Quick access to funds.
• Flexible repayment options.
• Can be used for various business needs.
• Less stringent eligibility criteria compared to traditional bank loans.

Cons:

• Higher interest rates.
• Potential for hidden fees.
• Shorter repayment terms.
• May require a personal guarantee or collateral.

Why is Profunding Options unaffected by the decrease in bank lending?

Here at PFO, our lender network has flexible lending standards, making it easier for businesses to qualify for loans. Unlike traditional banks with strict credit standards, our private and non-bank lenders consider a wider range of factors when assessing loan applications.

In addition, our team of loan executives is adept at navigating business loan options and finding creative solutions when the banks say no.

Resilience During Economic Downturns

Even during economic downturns or recessions, Profunding Options continues to offer business loans. While banks may reduce their loan volume due to economic uncertainty, we remain committed to meeting the borrowing needs of companies.

Focus on Meeting Borrowing Needs

Profunding Options prioritizes meeting the borrowing needs of businesses, regardless of fluctuations in the economy. This focus enables us to maintain a steady flow of business loans, catering specifically to the diverse financial requirements of companies across various industries.

What are my options for Alternative Business Loans?

The following small business loans are available through our lender network.

Bad Credit Business Loans

• Amounts: $1k – $5 million.
• Rates: Factor rates starting at 1-6% p/mo.
• Terms: 3 months – 5 years.
• Speed: 1 – 3 business days.

Bad credit business loans are designed for entrepreneurs with less-than-perfect credit scores. These loans typically have higher interest rates and shorter repayment terms but can provide funding when traditional lenders may not. Options include short-term loans, merchant cash advances, and microloans from alternative lenders.

Business Line of Credit

• Amounts: $1k – $1 million.
• Rates: Factor rates starting at 1% p/mo.
• Terms: Up to 36 months.
• Speed: 1 – 3 business days.

A business line of credit is a flexible financing option that allows businesses to access funds up to a set credit limit. It can be used for various business expenses, such as inventory purchases, payroll, or equipment upgrades. Interest is only paid on the amount borrowed, making it a cost-effective solution for managing cash flow.

Business Term loans

• Amounts: $10k – $5 million.
• Rates: Factor rates starting at 1-4% p/mo.
• Terms: 3 months – 5 years.
• Speed: 1 – 3 business days.

A business term loan is a lump sum of money borrowed from a financial institution for a specific period with a fixed or variable interest rate. The loan is typically used for long-term investments such as purchasing equipment, expanding operations, or acquiring real estate.

Equipment Financing

• Amounts: Up to $5 million per piece of equipment.
• Rates: Starting at 3.5%.
• Terms: 1 – 10 years.
• Speed: 3 – 10 business days.

Equipment financing is a type of business loan used to purchase or lease equipment. It allows businesses to acquire the necessary equipment without a significant upfront cost. The equipment itself serves as collateral for the loan, making it a less risky option for lenders.

Invoice Factoring

• Amounts: $10k – $10 million.
• Rates: Factor rates starting at 1% p/mo.
• Terms: Up to 24 months.
• Speed: 1 – 2 weeks.

Invoice factoring is a financing option where a business sells its accounts receivable to a third-party company at a discount. This provides immediate cash flow for the business, as they receive a percentage of the invoice amount upfront and the remainder when the invoice is paid.

Merchant Cash Advance

• Amounts: $5k – $1 million.
• Rates: Factor rates starting at 1-6% p/mo.
• Terms: 3 – 24 months.
• Speed: 1 – 2 business days.

A merchant cash advance is a financing option for businesses needing quick capital. It involves receiving a lump sum payment in exchange for a percentage of future credit card sales. This alternative to traditional loans can provide fast funding for businesses with fluctuating revenue.

SBA Loans

• Amounts: $50k – $5.5 million.
• Rates: Starting at Prime + 2.75%.
• Terms: 10 – 25 years.
• Speed: 8 – 12 weeks.

SBA loans are government-backed loans designed to help small businesses access financing with low interest and favorable terms. They can be used for various purposes, including equipment purchases, working capital, and real estate. The Small Business Administration (SBA) guarantees a portion of the loan, making it easier for businesses to qualify for funding.

Working Capital Loans

• Amounts: $1k – $5 million.
• Rates: Starting at Prime + 2.75%.
• Terms: 3 months – 10 years.
• Speed: 1 – 3 business days.

Working capital loans are short-term loans used to cover day-to-day operational expenses. They are often used to manage cash flow, purchase inventory, or cover payroll. These loans can help businesses bridge the gap between paying for expenses and receiving revenue. They are a valuable tool for maintaining financial stability and growth.

Frequently Asked Questions

Here are the most common questions about the trend of fewer business loans from banks.

Is it hard to get a Business Loan through a Bank?

Yes, getting bank financing has always been challenging, but it’s becoming increasingly difficult now. Banks have raised their standards for business loans, making it difficult for many small businesses to qualify.

Will Business Bank Loans Continue to decrease?

The overall economic growth slowdown could be contributing to the decrease in loan volume. When the economy is not performing well, banks might hold off on lending money as they anticipate lower returns on investment.

If the economy continues to struggle, loan volume will likely continue to decrease. As the economy improves, more loan options will become available.

Bank lending standards are becoming stricter, making it more challenging for businesses to qualify for loans. This means that banks are more cautious about whom they lend money to and may require higher credit scores or more collateral.

Businesses are showing less interest in taking out loans from banks. As a result, the demand for business loans is declining. Some businesses might be hesitant to borrow due to economic uncertainty or maybe explore alternative financing options.

Fewer Business Loans from Banks – Final Thoughts

The decline in traditional bank loans for businesses is real and happening for various reasons. The landscape is changing from tighter credit criteria to the rise of alternative lending options.

Alternative business lending, like the solutions offered by Profunding Options, provides a viable pathway for entrepreneurs to secure the funding they need. While traditional bank loans may be decreasing, the world of business lending is still full of opportunities if you know where to look.

If you’re a business owner feeling the squeeze from traditional banks, it might be time to explore alternative lending options. Don’t let the decline in bank loans hold your business back. Contact us to explore your small business loan options.

The post Fewer Business Loans from Banks: Exploring Small Business Funding Alternatives appeared first on Profunding Options.

PayPal offers loans ranging from $5,000 to $500,000 based on various factors, such as your business’s financial history and performance. With PayPal business loans, you can access funds quickly and easily through your existing PayPal account. The application process is streamlined, and the repayment terms are designed to fit your business’s cash flow.

Various industries, such as retail, e-commerce, hospitality, and service-based businesses, can benefit from PayPal business loans. For instance:

• Retailers can utilize these loans to stock up on inventory during peak seasons.
• E-commerce businesses can invest in marketing campaigns or website enhancements.
• Service-based companies can use funds for equipment upgrades or staff training.

PayPal Business Loan Pros & Cons

Here’s a summary of the benefits and drawbacks of PayPal business loans.

Pros:

• Fast approval process.
• Flexible repayment options.
• No collateral required.
• Competitive interest rates.
• Accessible to businesses with lower credit scores.

Cons:

• Limited loan amounts.
• Repayment through daily deductions from PayPal sales.
• Not suitable for startups or very small businesses.
• Potential for higher fees compared to traditional bank loans.
• Limited to businesses with a PayPal account.
• The company is scaling back on business lending.

Why is PayPal pulling back on Business Loans?

PayPal’s loans and merchant cash advances in 2023 are down significantly compared to 2022. Through the first three quarters of 2023, it purchased $1.3 billion in receivables. It purchased $2.3 billing during the same period in the previous year.

One of the primary reasons is the increase in charge-offs. Per a disclosure from the company cited in the deBanked article, The increase in the charge-offs for the nine months ended September 30, 2023, compared to the same period of the prior year was due to the expansion of acceptable risk parameters in 2022, which resulted in a deterioration of the overall credit quality of loans outstanding.

So, their decision to scale back lending is largely due to an internal policy change on underwriting requirements, resulting in approving riskier loans. However, the increase in chargebacks could be a larger issue in the industry.

Chargebacks & Their Impact on Small Business

Credit card chargebacks occur when a customer disputes a charge on their credit card statement with their card issuer. This can happen for various reasons, such as unauthorized transactions, defective merchandise, or dissatisfaction with the product or service.

Chargebacks can be a significant source of frustration and financial loss for small business merchants. Not only do chargebacks result in the loss of the sale amount, but merchants may also incur additional fees and penalties.

Furthermore, excessive chargebacks can damage a merchant’s reputation and lead to higher processing fees or even the termination of their merchant account. Small business owners need to have clear policies and procedures in place to prevent chargebacks and to manage them when they do occur effectively.

Who qualifies for PayPal Business Loans?

Small businesses must have a PayPal Business or Premier account active for at least three months to qualify for PayPal business loans. They should have processed a minimum of $15,000 in annual PayPal sales if they have a Premier account and $20,000 if they hold a Business account.

PayPal evaluates the applicant’s PayPal sales history, credit score, and any previous borrowing and repayment activities with them. They also consider the business’s financial health and industry performance to assess its ability to repay the loan.

While there is no minimum credit score requirement specified by PayPal, having a good credit score significantly enhances the chances of approval. Moreover, meeting the revenue thresholds demonstrates the business’s stability and potential to handle loan repayments.

What are my available Small Business Loan options?

While PayPal might be scaling down its lending options, you can still access robust business loans from many lenders. Our lender network is unaffected by PayPal’s decision.

You may be interested in one of the following small business loans.

Bad Credit Business Loans

• Max Amount: $1 – $5 million.
• Factor Rates: Starting at 1-6% p/mo.
• Term: 3 months – 5 years.
• Funding Speed: 1 – 3 business days.

Bad credit business loans are a financing option for small businesses with poor credit scores. These loans are designed to provide access to capital for businesses that may not qualify for traditional bank loans.

Lenders who offer business loans to borrowers with bad credit typically consider other factors, such as business revenue and cash flow, in addition to credit history. While interest rates may be higher, these loans can be a valuable resource for small businesses needing funding.

Business Line of Credit

• Max Amount: $1 – $1 million.
• Factor Rates: Starting at 1% p/mo.
• Term: Up to 36 months.
• Funding Speed: 1 – 3 business days.

Business lines of credit are a flexible form of financing for small businesses. They provide access to a revolving credit line that can be used for various business expenses, such as inventory purchases, equipment upgrades, or cash flow management.

Small businesses can draw funds as needed, up to a predetermined credit limit, and only pay interest on the amount borrowed. This type of financing can help small businesses manage their cash flow and seize growth opportunities.

Business Loans for Women

• Max Amount: $1 – $10 million.
• Factor Rates: Starting at Prime + 2.75%.
• Term: 3 months – 25 years.
• Funding Speed: 1 business day to several weeks, depending on the loan.

Business loans for women are specialized financial products designed to support female entrepreneurs in starting or expanding their businesses. These loans often come with favorable terms and lower interest rates to help address the gender gap in access to capital.

They can be used for various purposes, such as purchasing equipment, hiring staff, or investing in marketing efforts. Many financial institutions and alternative lending options offer business loans specifically tailored to the needs of women-owned businesses.

Business Term Loans

• Max Amount: $10 – $5 million.
• Factor Rates: Starting at 1-4% p/mo.
• Term: 3 months – 5 years.
• Funding Speed: 1 – 3 business days.

Business term loans are a standard financing option for small businesses. These loans provide a lump sum of capital repaid over a fixed term, typically with a fixed interest rate.

Small businesses can use term loans to fund various needs such as expansion, equipment purchases, or working capital. The repayment terms and interest rates can vary depending on the lender and the business’s creditworthiness. Term loans allow small businesses to access the funds they need to grow and thrive, with the predictability of fixed payments over time.

Equipment Financing

• Max Amount: Up to $5 million per piece of equipment.
• Factor Rates: Starting at 3.5%.
• Term: 1 – 10 years.
• Funding Speed: 3 – 10 business days.

Equipment financing for small businesses involves obtaining funds to purchase or lease equipment necessary for operations. This can include machinery, vehicles, technology, or other essential tools.

Small businesses can secure equipment financing through traditional lenders, alternative lending, or specialized equipment financing companies. This type of financing allows small businesses to acquire the equipment they need without paying the total cost upfront, helping them manage cash flow and grow their operations.

Invoice Factoring

• Max Amount: $10k – $10 million.
• Factor Rates: Starting at 1% p/mo.
• Term: Up to 24 months.
• Funding Speed: 1 – 2 weeks.

Invoice factoring is a financing option for small businesses where they sell their accounts receivable to a third-party company at a discount. This provides immediate cash flow for the business, as they receive a percentage of the invoice amount upfront.

The factoring company then collects the full amount from the customer. This can benefit businesses with slow-paying customers or seasonal fluctuations in cash flow.

Merchant Cash Advance

• Max Amount: $5k – $1 million.
• Factor Rates: Starting at 1-6% p/mo.
• Term: 3 – 24 months.
• Funding Speed: 1 – 2 business days.

Merchant cash advances are a form of financing for small businesses where they receive a lump sum of capital upfront in exchange for a percentage of future credit card sales. The advance is repaid through a fixed percentage of daily credit card sales, making it a flexible option for businesses with fluctuating revenue. This alternative lending option can provide quick access to funds without extensive credit checks or collateral.

Revenue-Based Financing

• Max Amount: $5k – $5 million.
• Factor Rates: Starting at 1-6% p/mo.
• Term: 3 – 24 months.
• Funding Speed: 1 – 2 business days.

Revenue-based financing for small businesses is a type of funding where a company receives capital in exchange for a percentage of its future revenue. This alternative lending option allows small businesses to access funds without taking on additional debt or giving up ownership stakes. The repayment is tied to the company’s sales, making it a flexible and attractive option for businesses with fluctuating revenue streams.

SBA Loans

• Max Amount: $50 – $5.5 million.
• Interest Rates: Starting at Prime + 2.75%.
• Term: 10 – years.
• Funding Speed: Several weeks.

SBA loans provide low interest rates and flexible terms, making them an attractive option for small business owners. The Small Business Administration (SBA) partially guarantees the loans up to 85%.

SBA loans come in various forms, including general small business loans, microloans, and real estate and equipment loans. They are designed to support small businesses that may not qualify for traditional bank loans.

ERTC Advance

An ERTC advance is a financing option available to companies that qualify for the Employee Retention Tax Credit (ERTC), also called the Employee Retention Credit (ERC). This pandemic-era policy provided a tax incentive for businesses that retained employees between March 2020 and September 30, 2021, despite the pandemic’s impact.

Eligible businesses can retroactively claim the credit. However, the IRS has a backlog of requests and has issued a temporary moratorium.

Frequently Asked Questions

Here are the most common questions about the impact of PayPal reducing business loans on the business financing industry.

What are the current trends in Small Business Lending?

Although they are the backbone of many communities and industries, small firms suffer serious financial challenges. According to recent research, 59% of small businesses reported being in fair or poor financial condition (Federal Reserve Banks’ Small Business Credit Survey).

The percentage of small enterprises facing financial difficulties has increased significantly in the last few years, with 85% reporting difficulties in 2021 alone. This trend, which has increased by nearly 20 percentage points since 2019, emphasizes the continued difficulties small firms encounter.

Furthermore, only 42% of small businesses report that their funding needs are satisfied, indicating a significant deficiency in financial services for these companies. Most of them get their financial services from one of two banks: big or small.

Businesses are using traditional financing less, and the process has become more complicated. In 2021, only 31% of applicants got all the money they requested, down from 51% in 2019. In general, fewer candidates are now receiving all of the funding they submitted applications for.

The good news is that small business debt has dropped from 80% in 2020 to 74% in 2021, with most organizations having debt of $100,000 or less. Thus, companies are managing their debt and navigating finance despite obstacles.

Alternative Lending and Government-Backed Loans

One trend is the rise of online and alternative lenders, which offer faster and more flexible loan options than traditional banks. This has made it easier for small businesses to access the funding to grow and expand.

Additionally, there is a growing emphasis on data-driven lending decisions, with lenders leveraging technology and data analytics to make more accurate risk assessments and offer personalized loan products. Another trend is the increasing popularity of government-backed loan programs, such as the Small Business Administration (SBA) loans, which provide guarantees to lenders and make it less risky for them to extend credit to small businesses.

What does PayPal’s decision to Reduce Loans mean for the future of Business Lending?

PayPal, Square, and Shopify have all expanded their payment processing reach to assist small business owners with financing. This is part of the larger overall trend of alternative business funding.

PayPal business loans sought to offer financing to merchants and small business owners who couldn’t qualify for traditional bank loans. While pulling back on small business funding may impact customers seeking PayPal Business loans, it’s unlikely to affect other lenders or financing options.

However, the reason behind the pullback may concern merchants who rely on credit card payments. PayPal states its decision is based on an increase in chargebacks. Although it experienced that increase in large part due to changes in its credit policies, businesses should be aware of the increase in chargebacks overall.

According to one report, chargebacks and friendly fraud have increased by 19%. This trend is a continuation of what Aurora Payments called “The Great Chargeback Surge of 2022.” In that article, it’s theorized that the increase in chargebacks is a latency effect from the financial turmoil of the COVID-19 Pandemic.

Hopefully, chargeback rates will normalize as the economy continues to rebound. However, you should pay attention to this trend as it could impact your business. Higher chargeback rates could lead to increased payment processing fees and impact your overall revenue, which could affect your business loan options.

PayPal Business Loan Scale Back – Final Thoughts

The news of PayPal pulling back on business funding can be a concern about the overall state of alternative financing. While small business owners continue to struggle with traditional financing, alternative solutions have typically grown over the past 15 years.

Fortunately, the decision is specific to PayPal’s in-house financial stability and not reflective of more significant industry trends. You still have access to our network’s complete suite of lending products.

However, it would be best to keep an eye on the increase in chargeback rates. That could present an issue for any small business that processes a high volume of credit card transactions.

Contact us if you have more questions or to apply for a small business loan. Our alternative funding experts can help you find the best financing options for your business needs.

The post PayPal Business Loan Scale Back: What it Means for Your Financing Options appeared first on Profunding Options.

The Employee Retention Tax Credit (ERTC), also called an Employee Retention Credit (ERC), was a tax-savings incentive for businesses to retain employees during the pandemic. It helped companies reduce their payroll costs. The refundable payroll tax credit expired on October 31, 2021, but qualifying businesses can retroactively file to receive the credit for tax years 2020 and 2021.

Employee retention tax credits were first enacted under the CARES Act. The Consolidated Appropriations Act and the American Rescue Plan Act later amended the program.

Eligible employers include those that received state or federal government orders for a full or partial shutdown or experienced a decline in gross receipts by 50% or more compared to the same timeframe in 2019. Companies withhold payroll taxes to claim the employer retention tax credit.

Under the provision, eligible businesses could claim a payroll tax refund for qualified wages paid during the pandemic. The provision underwent several changes and adjustments since its initial implementation under the CARES Act. New legislation changed eligibility allowing businesses that received PPP loans to also qualify in certain situations

In 2020, the credit was equal to 50% of up to $10,000 in wages paid per employee for all qualifying quarters between March 13, 2020. A qualifying quarter is when there was a decline in gross receipts by 50% or greater during the same quarter in 2019. Total credits could not exceed $10,000 per employee annually.

The credit equaled 70% of up to $10,000 in qualifying wages per quarter in the first three quarters of 2021. Essentially, employers could claim up to $7,000 per employee per quarter, which equals a total of $21,000 per employee annually.

The IRS applied the credit to the employer portion of the employee’s social security tax, which was fully refundable. The credit served as an overpayment and was refunded after subtracting the employer’s share of those taxes.

Who is eligible to receive the Employee Retention Credit?

The qualifications for companies that can claim the employee retention tax credit depend on when they paid the wages. Businesses must meet the definition of “severely financially distressed employers.”

Qualifying Businesses March 13, 2020, to December 31, 2020

To qualify for the tax credit on qualified wages between March 13 and December 21, 2020, your business must have carried on trade or have been a tax-exempt organization that:

• Was ordered to partially or fully shut down by a government authority, or
• Experienced a decline of 50% or more in gross receipts for the corresponding quarter in 2019 due to Covid-19-related decline.

Qualifying Businesses January 1, 2021, to September 30, 2021

Businesses applying for the ERC for wages paid between January 1, 2021, and September 30, 2021, must meet the following conditions:

• An appropriate government authority ordered fully or partially shut down business operations, or
• Experience a decline of 80% in gross receipts for the corresponding quarter in 2019 due to Covid-related decline.

Qualifying Businesses October 1, 2021, to December 31, 2021

Most businesses do not qualify for the ERC on wages paid during Q4 2021. The sole exception applies to recovery startup businesses. The IIJA amended section 3134 of the Internal Revenue Code to exclude all businesses except recovery startups as defined in section 3134(c)(5).

If you reduced employment tax deposits for Q4 2021 wages on or before December 20, 2021, consult with your tax professional to see if you are exempt from the “failure to deposit” penalty.

What is the deadline to file for an ERTC?

Tax years 2020 and 2021 each have a different deadline to file.

Tax Year 2020 Deadline

The deadline to file for an ERTC for 2020 is April 15, 2024. You can file for Q2, Q3, and Q4. You cannot file for 2020 Q1 as the pandemic began at the end of the first quarter.

Tax Year 2020 Deadline

You must file your ERTC for 2021 by April 15, 2025. The deadline gives you time to gather your paperwork, but it would still be best if you filed sooner rather than later.

How long does it take to receive an ERTC after filing?

In most cases, receiving your funds takes an average of six months to one year. Processing errors or incorrect information on your return could delay the process further.

Is it possible to get my ERTC funds sooner?

Yes, several lenders and lending marketplaces (like PFO) currently offer ERTC advances. These unique financing options arose because many businesses need or would benefit from the advance sooner than the IRS can issue the funds.

The IRS has announced it currently has a backlog of reviewing ERC requests. Even after the filing goes through the government agency, it could take 6-12 months before the funds come in.

Financing companies offer ERTC advances so you can access and use the funds to support and grow your business. This process is essentially selling ownership of your ERTC in exchange for an advance.

When the IRS issues the ERC refund check, it goes to the lender to repay the advance. Some lenders will charge a small monthly interest rate until the check is received, while others might charge a one-time fee.

Ensure you fully understand the advance payment policy before signing over ownership of the credit.

ERTC Advance Pros & Cons

Here are the benefits and drawbacks of an ERC advance.

Pros:

• You get to access your refund sooner.
• You can use the funds to cover operational expenses.
• Potential tax deduction on interest.

Cons:

• You’ll have to pay interest on the advance.
• Must reconcile the advance ERC against the actual ERC at the end of the quarter.
• Requires extensive documentation.

How to Apply for an ERTC Advance:

Follow these steps to request advance payments for ERTC through Profunding Options

Step 1: File for your ERC with the IRS

If you haven’t already done so, the first step is to file for your ERC. You can file independently, or our dedicated ERTC experts can help you complete the filing process and get the maximum credit possible.

Step 2: Gather your documents.

You’ll need the following documents when you request an ERC advance payment:

• A completed application.
• IRS Form 8821 & 7216.
• IRS Form 941 (original) and 941x (amended) for each quarter filed.
• ERC calculations.
• Documentation for ERC qualification from the filer.
• 941s for the two most recent quarters.
• Government ID for all business owners with a 20% stake or greater.
• Most recent business tax return.
• Bank statements for the previous 3 months.
• An adjusted employment tax return (if required).

You will also need to provide the following after approval but before funding:

• W-9 by the authorized signer(s).
• Copy of your operating agreement.
• Voided check from your business bank account.

Step 3: Complete the application.

You can download the application form or visit the application page to complete the process.

Step 4: Consult with an ERC expert.

One of our funding experts will reach out to discuss your advance payment application. The call will cover the refund amount, the timeline for receiving your advance, and any associated costs.

Step 5: Accept and get your funds.

Once we finalize the application process, you can expect to receive your funds according to the discussed timeline. Repayment occurs when we receive the ERC refund check from the IRS.

Frequently Asked Questions

Here are the most common questions about filing for an ERTC before the deadline.

What are qualified wages for an ERTC?

Qualifying wages depend on the average number of employees in 2019.

Qualifying Wages 2020

If a business averaged under 100 employees during 2019, it could claim the ERC for all employees, whether they were working or not. Suppose a business averaged over 100 employees in 2019. In that case, it could only claim wages for employees who didn’t work or provide services (i.e., on furlough or some other form of suspension from work duties.)

Qualifying Wages 2021

Businesses that averaged 500 or more employees in 2019 could only claim the ERC for wages paid to employees who didn’t work during the qualifying period. If a business averaged fewer than 500 employees in 2019, it could claim the ERC for all employees, whether working or not.

How do I file for an ERTC?

Businesses can apply for credit on wages during the active period (March 13, and 2020-September 30, 2020, for most companies). You can consult your accountant or tax pro on completing forms 941 and 941x, or we can help you file for the ERTC with a free consultation.

What’s a recovery startup business?

Recover startup businesses are defined in the American Rescue Plan Act. It refers to any business that opened its doors during the pandemic and meets the following conditions:

• The company opened on or after February 15, 2020.
• The business’s gross receipts don’t exceed $1 million for the individual tax years of 2020 and 2021.
• The business has 1 or more W2 employees, not including owner-operators or family members.

If a business began during Q2 of 2021, it could not claim the credit for any portion of 2020 or the first two quarters of 2021. Depending on several factors, if you acquired an existing company on or after February 15, 2021, you may or may not qualify for the ERC.

Why should I file my ERC before the deadline?

The sooner you file, the sooner you can get the funds to help grow your business. The IRS is reporting a backlog of ERTC applications. Once it processes an application, receiving the funds could take up to one year. Filing sooner means not waiting as long to receive your refund.

ERTC Deadline – Final Thoughts

The ERTC credit provides qualified employers with up to $26,000 per employee in tax refunds for the tax years 2020 and 2021 if they were shut down by the government or experienced a significant decline. The deadlines to file for the tax credit are April 15, 2024, for 2020 and April 15, 2025, for 2021.

While those deadlines provide time to compile your paperwork and file, the sooner you can complete it, the better. The IRS has a backlog of requests, and it takes six months to a year to receive the refund after filing.

Consult your accountant or tax professional to ensure you’re eligible and complete the filing correctly.

You should consider an ERTC advance if you need the money sooner. While you will have to pay a fee for an advance, you can add the refund to your working capital sooner.

Contact us if you have more questions or want to request an ERTC advance. Our loan executives can help answer your questions.

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