Has your flower shop repeatedly applied for funding only to be denied? You’re not alone. Many small business owners—including florists—are reporting limited access to capital, making it difficult for them to aggressively pursue growth opportunities. But why? Isn’t the Recession over? Isn’t the economy beginning to pick itself up?
Yes and no.
While the financial crisis of 2008-09 affected businesses nationwide and caused many to shut their doors, the economy has shown to be improving. Small business optimism is on the rise, and it hasn’t been this good for business owners since the Pre-Recession days. However, while things appear to be looking up, most businesses keep coming back to a singular problem: financing.
Access to funding has always been essential to the growth of a small business because operating an independent enterprise can be costly and requires a significant amount of capital to run a daily basis. But why is financing still an issue in light of an improved economy and increased small business optimism?
The main reason is that the Recession caused a sea change in the small business lending industry. Government regulators began mandating that banks tighten their lending requirements, and as a result many business owners—especially those in good standing—have been shut out from getting the financing they need. But even for established businesses that are turning a profit, a successful track record isn’t always enough to open up new lines of credit these days.
Three reasons stand above all as to why businesses are having issues with financing:
Imperfect credit: Your personal credit score will usually be what makes or break your case for a bank loan. A bank will often want to see a long and solid credit history with a score in the 700 area, which is an exceptional rating. You may be thinking that anything above 650 should be fine, but it isn’t anymore. Banks only want to those have a near perfect track record with their bills and previous loans. Obviously, this can be significantly detrimental to flower shop owners looking for financing who, despite having a strong business, don’t have the requisite credit score. These incidents are often isolated and one-time-only type things, but they matter to banks nonetheless. Is it fair? No, but unfortunately, that’s the way it is.
Collateral: A common issue facing florists is the lack of viable collateral. Often, banks will want something in exchange for the loan they’re giving you, i.e. real estate, mortgage, etc. But not all business owners have attractive collateral that is valuable enough to be put up with a loan, limiting those who can be eligible for a loan.
Cash flow: Obviously, a bank wants to see that you’re making money, or else how would you pay back the loan? All businesses have their good and bad months with many months falling in between. But a bank will want to see that you’re having consistent cash flow flowing through your business, month after month.
This all may sounds dreary and, as a florist who’s been denied financing, you may feel a sense of defeat. But don’t! Since the Recession, a new form of financing—alternative lending—has a created a new market for small business funding. But what is alternative lending? How can it help your flower shop?
Alternative lending has one aim: Get small business owners money as soon as possible. To do this, alternative lenders utilize online applications that can be completed in minutes. Once completed, approvals can happen in seconds and the applicant can receive the money in just days. The entire process is light speed compared to the notoriously snail-like pace of a bank. But how else can alternative lending benefit flower shop owners?
Credit score doesn’t matter: Well, almost. Most alternative lenders ask that you have at least a credit score of 500; chump change compared to the requirements of a bank.
Collateral: The majority of alternative lenders do not require you to put up collateral to receive financing.
Cash flow: Alternative lenders understand that small businesses have their strong and weak months, why is why they look at your entire business history to gauge the strength of your business.
Money can be used for anything: As a flower shop, you have a lot of needs that need to be taken care of with capital. With alternative lending, you can use the money for purchasing inventory, expansion, hiring additional employees, payroll, and more.
Don’t quit on small business financing just because you’ve had trouble and been denied in the past. Consult with AmeriMerchant and get the financing you need to fulfill your basic flower shop needs and more.
Call us today at 1-800-267-3790 to learn more about financing for florists.