Blog/News

Handling SBA Loan Lags

Sadie Keljikian, Express Trade Capital

The current government shutdown is the subject of nation-wide distress for myriad reasons. Sources are reporting that the shutdown, which is officially the longest in US history, has delayed public services like tax refunds, food, beverage and aviation product safety inspections, and millions of dollars in Small Business Association loans.

Generally, the SBA handles approximately $200 million in loans daily, but since the shutdown began, they’ve been unable to provide any financing aside from disaster assistance. As a result, hundreds of small businesses nationwide have waited a month for vital funds to help them grow and operate.

While many of the delayed loans are relatively small amounts, nearly 40% of them are known as 504 loans. These are meant to help business owners purchase real estate or costly equipment and can amount to $20 million or more. Regardless of quantity, many small business owners who rely on these loans are wondering how to bridge the gap until SBA loans are readily available again. The answer depends on where each business falls in the wide variety of industries the SBA serves.

Substituting these loans directly is tricky. If you or your business have very good credit, you may be able to replace your SBA loan with a regular bank loan, but it will likely take at least 60 days to reach you, which is decidedly unhelpful when speed is a priority.

We’ve discussed creative financing methods before, but not in terms of which methods are fastest. Depending on your budget, there are a few options that will give you access to quick funding for your business:

  • Factoring your receivables.

If you’re selling goods to creditworthy retailers, you can receive financing against your unpaid invoices. Provided you have all necessary materials and enough volume to qualify, you may receive funds within a day or two with this method.

  • Finance your purchase orders.

Purchase order financing (or PO financing) is a method designed precisely for wholesalers who need help covering production and shipping costs while they wait for their customers to pay. So, if you have purchase orders from creditworthy customers and need to bolster your business’s funds, PO financing is a great option.

  • Borrow against your unsold inventory.

If you have a stockpile of unsold inventory and a solid track record of consistent sales, you can borrow against your unsold inventory. This can take slightly longer than financing against your receivables or purchase orders since it requires a field examination (as do any lending arrangements involving goods, equipment, or real estate), but can be a highly useful tool if you find yourself in a slow season.

  • Enter a merchant cash advance agreement.

If your customers pay you with credit or debit cards regularly, you may want to consider merchant cash advance options. Merchant cash advance arrangements, or MCAs, aren’t technically considered loans, but operate in a very similar way. At the onset, you receive a lump sum in exchange for a percentage of your future credit/debit card sales. With an MCA, you will receive funds very quickly, but it is important to note that this is by far the most expensive option, as interest tends to run extremely high among MCAs and compounds over time.

There are numerous ways to handle an unexpected lag in your business’s operational funds, but be careful not to let an urgent situation lead you to poor lending choices that could hurt you down the road.

Click for details on our working capital solutions.

Contact us for more information.

Paving the Way for Entrepreneurs in Space

Joseph Stern, Express Trade Capital

In 1961, Ralph Cordiner, then chairman of General Electric, published a paper on the importance of private investment into space. Amid a cold war between the world’s super powers, Mr. Cordiner thought it prudent that the United States, as a proponent of capitalism, should beat the Russians in space not through government spending, but through private sector investment.

Since there was little economic incentive in space at the time, Mr. Cordiner’s vision did not play out. However, his words did not fall on deaf ears. With the rise of telecommunications came the first surge of investment into the fledgling space industry. Since getting to space was very expensive, the industry grew on the shoulders of telecommunications giants and the equally large corporations who supported them.

The idea that space is only accessible to governments and telecommunication elites changed drastically ten years ago with two developments: the private launcher and the cube satellite.

SpaceX

Space Exploration Technologies, now known as SpaceX, was a dream lead by PayPal founder Elon Musk. By 2008, SpaceX had run out of money and was on the brink of collapse. Then, without a feasible launch plan, NASA awarded SpaceX a $1.6 billion contract to resupply the International Space Station. Upon fulfilling the contract, SpaceX proved that it can launch cargo into space at a fraction of the cost of other government-funded launchers. Since then, other privately-funded launch companies have entered the space market though SpaceX remains the lowest cost launch provider, sending cargo into orbit for as little as $2,500 per kilogram.

CubeSat

The CubeSat was designed in 1999 by Jordi Puig-Suari and Bob Twiggs in an attempt to standardize satellite design. Within the CubeSat model, satellites are built to fit precisely into 10 cubic centimeter units: A 1U satellite would measure 10 x 10 x 10 cm, a 2U satellite would measure 10 x 10 x 20 cm, and so on.

The concept was relatively unutilized until 2013, when 88 CubeSats when up into orbit. Dropping launch costs, combined with ride sharing services which aggregate many satellites in on launch, drastically reduced the cost of launching satellites for people and institutions without much funding.  In the short period of a few years, even public high school science clubs are now able to build and launch their satellites into space.

Today, CubeSats are fitted with receivers, cameras, mirrors, and other sensors, which collect data and relay information to other satellites or back to earth. In the past few years, a growing number of governments and business have awarded contracts to smaller and mid-sized entrepreneurs to build and launch satellites for a variety of purposes including tracking endangered species, forecasting weather, valuing agricultural land, and aiding in archeological digs.  This marks a significant shift in the space industry landscape.  The space space has grown from being the exclusive domain of mega corporations and large publicly funded government entities with immense resources to include smaller governments and businesses.  The industry is wide open for participants and innovators of all sizes. 

Conclusion

Lowered launch costs and standardized satellite production have made space accessible to everyone from a telecommunications billionaire, to an entrepreneur who grew up dreaming of exploration, to a high school student who may very well realize their extraterrestrial aspirations while still in school.  Within a few short decades, Ralph Cordiner’s dream of a privately funded space industry is finally becoming a reality.

Click to learn more about financing aerospace equipment.

Contact us for more information!

Tackling Common Problems, Part 2

Sadie Keljikian, Express Trade Capital

There are numerous difficulties associated with starting a new business. Establishing sustainable practices that leave room for growth is complex, but crucial to building a successful company and brand. We’ve already talked a bit about smoothing out cashflow and creating a sensible production process, but now let’s talk about some of the vaguer aspects of building a business:

  • Problem: you’re in the early stages of building your business and while you know what products you want to design and sell, you aren’t sure how to establish a brand for your business. How can you differentiate yourself from your competitors and create your own space in the market?

Establishing a brand is one of the most complex and crucial steps to building a successful business. Without a clear voice and intention, you are likely to get lost in a sea of businesses that sell similar products. The first step is to identify your niche: who is most likely to buy your products? Do your products appeal to an underrepresented demographic, or will you have to work hard to stand out among a large, commercially popular group?

Once you’ve figured out who your target audience is, you can start thinking about ways to more effectively appeal to that demographic. You may want to think about what else is popular or important among the people who buy your products and take a multi-pronged approach. There are a few ways to approach this depending on your priorities and preferences.

Most businesses have an overarching goal or company philosophy that guides their practices. Some businesses even take a stance on sociopolitical issues, as Uber, Lyft, and several others famously did after the 2016 election. While this isn’t necessarily a bad idea, it’s important to consider the fact that you may lose as many customers as you gain in doing so, depending on the issue and stance you choose. Some less divisive tactics include supporting a charitable cause and advertising your involvement or arranging a licensing agreement with a public figure (social media influencer, celebrity, etc.) who is relevant to your target demographic.

Another potential way to build your brand is to partner with a company in a similar field. Associating your business with an already trusted brand is a great way to establish yourself as a legitimate competitor and begin to form valuable relationships across your industry.

  • Problem: you recently decided to start hiring a team and expanding your business, but you’re not sure where to look or how best to choose new employees, especially since you can only hire a small number of people within your current operational budget. How can you ensure that you’re building your business in the most efficient and practical way?

We’ve talked about the complexities of hiring a new team within a limited budget before, but the key factors to consider are universal. Before hiring anyone, identify your business’s needs and do some research to determine the most efficient solutions. There are almost certainly businesses just like yours who’ve already figured out the best approach through trial and error, so looking into their methods will often save you the trouble of learning the hard way.

Once you know what you need, boil it down to the essentials and act as quickly as you can without rushing the decision-making process. The benefits of hiring the right people dramatically outweigh the cost of additional salaries, especially when your existing team is massively overloaded with work. As long as you vet your potential employees carefully and hire the best people you can, you’ll have a solid foundation for your team as it continues to grow.

  • You’ve got a great team and your business is growing more quickly and dramatically all the time. You’re excited, but you start to realize what Peter Parker learned from his uncle: “with great power comes great responsibility.” Having a growing and thriving business is the goal, but before your business reaches its potential, you need to consider things like healthcare and human resources if you want to keep your employees happy. You value the employees you have and want to do right by them, but how do you start?

Employee resources and benefits are crucial to a growing business, but the vast array of options and variables can be difficult to sort out without prior experience. Obviously, you should work out your budget and do your research, but if you plan to secure health insurance first, it is wise to hire a trustworthy insurance broker. The broker will be able to walk you through the options available within your budget and explain any complicated jargon that may confuse you.

If you decide to establish your human resources department first, however, you may find that you’ll be better equipped to approach employee benefits without needing a broker. Many small businesses start out without a human resources department, leaving employment issues to the owner or individual department heads. This can work for a while, but as the business grows, those responsibilities can quickly become overwhelming, especially for those who aren’t HR professionals. Hiring an HR professional will free up other employees to take better care of their regular responsibilities, plus your HR person will be qualified to ensure that your business is operating within legal parameters and isn’t risking a lawsuit.

In both cases, guidance from an experienced professional is a massive advantage, especially since a wrong move could cost your company dearly.

Click to learn about our trade financing services.

Contact us for more information.