About Us

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About BSA Funding

BSA Funding is an Independently-Owned Business Lending Brokerage Firm dedicated to providing flexible financing options to small- and medium-sized businesses all across the U.S.

Over the years, it has become increasingly clear that banks are making it more difficult for small, privately-owned companies to borrow money – which is where we come in.

At BSA Funding we firmly believe that small businesses are the backbone of the American economy and it’s now more important than ever to ensure they have adequate funding to thrive. With expertise in equipment financing and SBA lending, and a variety of alternative loan options, we pride ourselves in our ability to understand the unique solutions required for each individual business – regardless of which industry you’re in.  

 
Our renowned loan programs will allow you to:
 
Find Quick Financing
Grow Your Business
Pay Monthly at Affordable Interest Rates
Focus on your Business

BSA Funding is an Affiliate of Business Service Associates
 
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Small Business Financing Basics

What Is Business Financing?

Unless your business has the balance sheet of Apple, eventually you will probably need access to capital through business financing. In fact, even many large-cap companies routinely seek capital infusions to meet short-term obligations. For small businesses, finding the right funding model is vitally important. Take money from the wrong source and you may lose part of your company or find yourself locked into repayment terms that impair your growth for many years into the future.

KEY Points
  • There are a number of ways to find financing for a small business.
  • Debt financing is usually offered by a financial institution and is similar to taking out a mortgage or an automobile loan, requiring regular monthly payments until the debt is paid off.
  • In equity financing, either a firm or an individual makes an investment in your business, meaning you don’t have to pay the money back, but the investor now owns a percentage of your business, perhaps even a controlling one.
  • Mezzanine capital combines elements of debt and equity financing, with the lender usually having an option to convert unpaid debt into ownership in the company.
What Is Debt Financing?
Debt financing for your business is something you likely understand better than you think. Do you have a mortgage or an automobile loan? Both of these are forms of debt financing. It works the same way for your business. Debt financing comes from a bank or some other lending institution. Although it is possible for private investors to offer it to you, this is not the norm.
Here is how it works. When you decide you need a loan, you head to the bank and complete an application. If your business is in the earliest stages of development, the bank will check your personal credit.
For businesses that have a more complicated corporate structure or have been in existence for an extended period time, banks will check other sources. One of the most important is the Dun & Bradstreet (D&B) file. D&B is the best-known company for compiling a credit history on businesses. Along with your business credit history, the bank will want to examine your books and likely complete other due diligence.
Before applying, make sure all business records are complete and organized. If the bank approves your loan request, it will set up payment terms, including interest. If the process sounds a lot like the process you have gone through numerous times to receive a bank loan, you are right.
Advantages of Debt Financing
There are several advantages to financing your business through debt:
  • The lending institution has no control over how you run your company, and it has no ownership.
  • Once you pay back the loan, your relationship with the lender ends. That is especially important as your business becomes more valuable.
  • The interest you pay on debt financing is tax deductible as a business expense.
  • The monthly payment, as well as the breakdown of the payments, is a known expense that can be accurately included in your forecasting models.

Equity Financing
uses an investor, not a lender; if you end up in bankruptcy, you do not owe anything to the investor, who, as a part owner of the business, simply loses their investment.
Advantages of Equity Financing
Funding your business through investors has several advantages:
  • The biggest advantage is that you do not have to pay back the money. If your business enters bankruptcy, your investor or investors are not creditors. They are partial owners in your company and, because of that, their money is lost along with your company.
  • You do not have to make monthly payments, so there is often more liquid cash on hand for operating expenses.
  • Investors understand that it takes time to build a business. You will get the money you need without the pressure of having to see your product or business thriving within a short amount of time.
What Is Mezzanine Capital?
Put yourself in the position of the lender for a moment. The lender is looking for the best value for its money relative to the least amount of risk. The problem with debt financing is that the lender does not get to share in the success of the business. All it gets is its money back with interest while taking on the risk of default. That interest rate is not going to provide an impressive return by investment standards. It will probably offer single-digit returns.
Mezzanine capital often combines the best features of equity and debt financing. Although there is no set structure for this type of business financing, debt capital often gives the lending institution the right to convert the loan to an equity interest in the company if you do not repay the loan on time or in full.
Advantages of Mezzanine Capital
Choosing to use mezzanine capital comes with several advantages:
  • This type of loan is appropriate for a new company that is already showing growth. Banks are reluctant to lend to a company that does not have financial data. According to Dr. Ajay Tyagi’s 2017 book Capital Investment and Financing for Beginners, Forbes has reported that bank lenders are often looking for at least three years of financial data.1 However, a newer business may not have that much data to supply. By adding an option to take an ownership stake in the company, the bank has more of a safety net, making it easier to get the loan.
  • Mezzanine capital is treated as equity on the company’s balance sheet. Showing equity rather than a debt obligation makes the company look more attractive to future lenders.
  • Mezzanine capital is often provided very quickly with little due diligence.
Please note that mezzanine capital is not as standard as debt or equity financing. The deal, as well as the risk/reward profile, will be specific to each party.
 

 
Credit: Innvestopedia
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Your ROI

What is ROI
(Return on Investment)


 
Return on investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment's cost.
 
Credit: Innvestopedia
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Working Capital


What Is Working Capital?

Working capital refers to the difference between a company’s current assets and liabilities. Current assets are the things a business owns that can be turned into cash within the next 12 months, while current liabilities are the costs and expenses the business incurs within the same period. Common current assets include checking and savings accounts; marketable securities, such as stocks and bonds; inventory; and accounts receivable. Current liabilities include the cost of materials and supplies that need to be purchased to produce goods for sale, payments on short-term debt, rent, utilities, interest, and tax payments.
A company’s working capital is a reflection of its operational efficiency and budget management. If a business has more current liabilities than assets, its working capital is negative, meaning it may have difficulty meeting its financial obligations. A company with a very high working capital figure, conversely, is easily able to pay all its expenses with ample funding left over. Whether a given business requires high working capital is determined by three key factors: business type, operating cycle, and management goals.

Seasonal businesses require different amounts of working capital at different times of the year.
Business Type
Certain types of businesses require higher working capital than others. Businesses that have physical inventory, for example, often need considerable amounts of working capital to run smoothly. This can include both retail and wholesale businesses, as well as manufacturers. Manufacturers must continuously purchase raw materials to produce inventory in house, while retailers and wholesalers must purchase premade inventory for sale to distributors or consumers.
In addition, many businesses are seasonal, meaning they require extremely high working capital during certain parts of the year as they ramp up for the busy season. Leading up to the winter holidays, for example, retail businesses such as department stores and grocery stores must increase inventory and staffing to accommodate the expected influx of customers.
Businesses that provide intangible products or services, such as consultants or online software providers, generally require much lower working capital. Businesses that have matured and are no longer looking to grow rapidly also have reduced need for working capital.
Operating Cycle
Ideally, a business is able to pay its short-term debts with revenue from sales. However, the length of a company’s operating cycle can make this impossible. Companies that take a long time to create and sell a product need more working capital to ensure financial obligations incurred in the interim can be met. Similarly, companies that bill customers for goods or services already rendered rather than requiring payment up front need higher working capital in case collection on accounts receivable cannot be made in a timely manner.
Management Goals
The specific goals of the business owners is another important factor that determines the amount of working capital required by a small business. If the small business is relatively new and looking to expand, a higher level of working capital is needed relative to that required by a small business intending to stay small. This is particularly true for businesses planning to expand product lines to venture into new markets, as the costs of research and development, design, and market research can be considerable.
 
Credit:  Investopedia
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Merchant Cash Advances

What is a Merchant Cash Advance?

A merchant cash advance is a form of financing that isn't truly a loan. Instead, it is a financing option that provides immediate cash in exchange for a business's future credit card sales receipts. In essence, when a business accepts a merchant cash advance, it sells the revenue of its future credit card sales for immediate payment.
Merchant cash advances are often used by seasonal businesses or those with cyclical sales to keep up cash flow during slow times of the year. Business owners can pay operating expenses and wages when sales are slow, then repay the merchant cash advance when their sales volume picks up and generate a profit. Since merchant cash advances are backed by projected sales, businesses with subpar credit scores also often rely on them for an injection of short-term working capital.
Besides operating expenses and wages, businesses use merchant cash advances for financing equipment, running marketing campaigns, hiring new employees, expanding inventory, buying materials or acquiring property.
How do merchant cash advances work?
A merchant cash advance traditionally offers an influx of capital based on a business's expected credit card transactions over the course of a specified term. For example, if your business receives a $100,000 merchant cash advance with a 52-week term and a factor rate of 1.25, you would have to pay back $125,000 in credit card sales over the course of the next year.
Merchant cash advance repayment generally breaks down into weekly payments, said Randall Richards, director of business development at RFR Capital. According to Richards, cash advance companies often draw the payment directly from a business's bank account rather than its merchant account associated with credit card transactions.
"Weekly payments would be based on sales and a multitude of factors," Richards told business.com. "Someone who is only doing $20,000 per month in sales won't qualify for a $100,000 [advance]. The sales have to support the payment, or else the lender is at risk of losing money."
Since merchant cash advances are based on sales, borrowers with poor credit can usually access them even when they can't obtain a traditional loan. Of course, this flexibility means that merchant cash advances are more expensive than bank loans.
"Merchant cash advances are one of the alternatives today for people as they move down and become less and less creditworthy," said James Cassel, co-founder and chairman of Cassel Salpeter & Co. "Merchant cash advances could carry the equivalent of 40% interest rates."
Cassel clarified that merchant cash advances don't carry an interest rate of their own, but the cost of a cash advance can be measured against the interest rates associated with a traditional loan. For example, in Richards' hypothetical of a $100,000 merchant cash advance that costs a business $125,000 over a 52-week term, the interest rate equivalent would be 25%. That is much higher than the interest rates on many bank loans, which might cost a business with great credit 2% to 5% of the loan's principal value, Cassel said. Understanding your factor rate and whether you can negotiate it is useful in reducing the cost of a merchant cash advance.
How do you qualify for a merchant cash advance?
The first requirement for most merchant cash advance lenders is that you accept credit card payments, since these transactions will be used to repay the loan. Not only do you need to accept credit card payments, you need to show that you garner enough credit card sales to pay back the loan in a timely manner.
This is some other information you should have readily available:
  • Your Social Security number
  • Your business tax ID
  • A couple months' worth of credit card processing and bank statements
Your proof of citizenship and a copy of your business's lease will also help you to qualify.
Lenders will look at how long you have been in business, you monthly revenue and your credit score. Their goal is to assess whether you have a healthy, thriving business that will be able to pay them back. The approval depends on these documents showing that your company is profitable and capable of repaying its debt.
"You can qualify for a merchant cash advance by first applying through a reputable company," said Xavier Epps, financial expert and CEO of XNE Financial Advising LLC. "Do your research first. Each company will have different requirements, but overall, these companies require less paperwork than traditional banks. The important thing is to make sure you can provide documentation for your business."
What are the pros and cons of a merchant cash advance?
Merchant cash advances can be useful tools for many businesses. Whether you are a seasonal business weathering the slow season or a business with cyclical sales, such as a manufacturer that makes most of its sales in Q4, merchant cash advances can offer support. However, for struggling businesses, relying on a merchant cash advance to stay afloat could be the beginning of a death spiral.
"Sometimes it's a business that's so excited and thinks it can't lose but does," Cassel said. "Other times, it's a business that's in deep trouble and just trying to stay afloat, waiting for the one more sale … just trying to survive, because then they believe they will thrive. Sometimes you have to question the viability of the business."
Like all forms of financing, merchant cash advances have both pros and cons. If you plan accordingly, they could be an effective tool for maintaining healthy cash flow and operating your business profitably. When used improperly, they can expedite the demise of a failing business. Managing a merchant cash advance to the benefit of your business means understanding the pros and cons and how to navigate them.
Pros
  • Immediate lump-sum payment: Merchant cash advances are useful because they deliver a lump-sum payment to a business immediately. That means when cash flow is low, you can bolster it with a quick influx of capital.
     
  • Based on sales, not credit score: Merchant cash advances are based on sales instead of credit score, meaning even borrowers with poor credit or no credit can use them.
     
  • Easy to qualify: Qualifying for a merchant cash advance is relatively easy. It requires a few months of bank statements, a one-page application and some basic information about the business, such as its tax identification number, website and address.
     
  • Fast approval process: Merchant cash advances can generally be approved more quickly than bank loans, which often take several months for approval. In some cases, merchant cash advances deliver funding within a few days of approval.

Credit:  investopdedia
 
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Factoring

What is a Factor?
 
A factor is an intermediary agent that provides cash or financing to companies by purchasing their accounts receivables. A factor is essentially a funding source that agrees to pay the company the value of an invoice less a discount for commission and fees. Factoring can help companies improve their short-term cash needs by selling their receivables in return for an injection of cash from the factoring company. The practice is also known as factoring, factoring finance, and accounts receivable financing.

KEY Points
  • A factor is essentially a funding source that agrees to pay a company the value of an invoice less a discount for commission and fees.
  • The terms and conditions set by a factor may vary depending on its internal practices.
  • The factor is more concerned with the creditworthiness of the invoiced party than the company from which it has purchased the receivable.
How a Factor Works
Factoring allows a business to obtain immediate capital or money based on the future income attributed to a particular amount due on an account receivable or a business invoice. Accounts receivables represent money owed to the company from its customers for sales made on credit. For accounting purposes, receivables are recorded on the balance sheet as current assets since the money is usually collected in less than one year.
Sometimes companies can experience cash flow shortfalls when their short-term debts or bills exceed their revenue being generated from sales. If a company has a significant portion of its sales done via accounts receivables, the money collected from the receivables might not be paid in time for the company to meet its short term payables. As a result, companies can sell their receivables to a financial provider (called a factor) and receive cash.
There are three parties directly involved in a transaction involving a factor: the company selling its accounts receivables; the factor that purchases the receivables; and the company's customer, who must now pay the receivable amount to the factor instead of paying the company that was originally owed the money.
Requirements for a Factor
Although the terms and conditions set by a factor can vary depending on its internal practices, the funds are often released to the seller of the receivables within 24 hours. In return for paying the company cash for its accounts receivables, the factor earns a fee.
Typically, a percentage of the receivable amount is kept by the factor. However, that percentage can vary, depending on the creditworthiness of the customers paying the receivables. If the financial company acting as the factor believes there's increased risk of taking a loss due to the customers not being able to pay the receivable amounts, they'll charge a higher fee to the company selling the receivables. If there's a low risk of taking a loss from collecting the receivables, the factor fee charged to the company will be lower.
Essentially, the company selling the receivables is transferring the risk of default (or nonpayment) by its customers to the factor. As a result, the factor must charge a fee to help compensate for that risk. Also, how long the receivables have been outstanding or uncollected can impact the factor fee. The factoring agreement can vary between financial institutions. For example, a factor may want the company to pay additional money in the event one of the company's customers defaults on a receivable.
Benefits of a Factor
The company selling its receivables gets an immediate cash injection, which can help fund its business operations or improve its working capital. Working capital is vital to companies since it represents the difference between the short-term cash inflows (such as revenue) versus the short-term bills or financial obligations (such as debt payments). Selling, all or a portion, of its accounts receivables to a factor can help prevent a company, that's cash strapped, from defaulting on its loan payments with a creditor, such as a bank.
Although factoring is a relatively expensive form of financing, it can help a company improve its cash flow. Factors provide a valuable service to companies that operate in industries where it takes a long time to convert receivables to cash—and to companies that are growing rapidly and need cash to take advantage of new business opportunities.
The factoring company also benefits since the factor can purchase uncollected receivables or assets at a discounted price in exchange for providing cash upfront.

Factoring is not considered a loan, as the parties neither issue nor acquire debt as part of the transaction. The funds provided to the company in exchange for the accounts receivable are also not subject to any restrictions regarding use.
Example of a Factor
Assume a factor has agreed to purchase an invoice of $1 million from Clothing Manufacturers Inc., representing outstanding receivables from Behemoth Co. The factor negotiates to discount the invoice by 4% and will advance $720,000 to Clothing Manufacturers Inc. The balance of $240,000 will be forwarded by the factor to Clothing Manufacturers Inc. upon receipt of the $1 million accounts receivable invoice for Behemoth Co. The factor’s fees and commissions from this factoring deal amount to $40,000. The factor is more concerned with the creditworthiness of the invoiced party, Behemoth Co., than the company from which it has purchased the receivables.

Frequently Asked Questions
 

How do you differ from the other funding companies?

Unlike other lending firms, we can provide funding using our own money AND we have access to dozens of different lenders, offering a wide variety of loan options.
 

Are your rates more expensive than others?

Because we have access to a large number of lenders and loan options, we are typically less expensive than other companies.
 

What kind of qualifications do I need for approval?

We understand that every business is unique and therefore do not require a standard set of qualifications. We recommend applying or contacting us so we can learn more about your individual needs.
 

How long does it take to get funds?

Once approved, we can deposit funds into your bank account as quickly as one business day. In some cases, it can take a few days before you can access funds.
 

Does my credit score matter?

While your credit score is important, it's not the only factor we consider. We are generally much more lenient than other lending firms in terms of acceptable credit scores.

Learn More About Your Financing Options

Contact us today to speak to a business loan consultant.
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