Optimize Cashflow During This Pandemic

In this difficult time, normal Bank lending criteria has tightened up.  Banks, always risk-averse, have become even more so during the pandemic. If a Bank is lending at all to businesses, they are only doing so to their existing business customers, and those customers must have demonstrated ridiculously healthy financials before the pandemic and more so now.

In other words: for businesses that are booming during the pandemic paradigm, in need of working capital to keep up with demand, the purse-strings at traditional Banks are pulled super tight.

Let’s discuss the fortunate scenario that your products are flying out the door or your services are in high demand right now due to the new pandemic paradigm. However, you find yourself in need of working capital, here’s a unique solution for your business:

Convert your Accounts Receivables to instant cash.

If your Customers have a good history of on-time payments within 40-60 days of Invoice issuance, and you’re selling B2B products or services, then you’re positioned to take advantage of this quick, affordable, working capital solution.  Lean into your Receivables and get the cash you need today to better service the orders for your Products and Services with Accounts Receivables Factor Financing.

Criteria:

  • You must sell your Product/Service B2B
  • Your Customers must pass muster for basic creditworthiness on their ability to pay Invoices
  • Non-Progressive Billing
  • Startups Acceptable
  • Consistent Accounts Receivable practice

Contact us to learn more about how Factor Financing could be an incredibly efficient and cost-effective way for you to have capital flowing to your business. Email us at Curious@AuroraConsulting.biz.

Short-Term Solutions for Long-Term Goals

There are two scenarios that some business owners take when starting and maintaining their business.

First, no debt.  These businesses were started with savings and/or investments from the business owners.  These businesses fund daily and annual operations costs with money generated from the profits of the business.  These business owners most often do not like the concept of credit debt, or, worse, have a severe anxiety about the idea of borrowing money to run their business.

Second, belief in debt.  Using debt in the form of credit financing is a reliable source of capital for starting and running a business when the concept is applied with smart planning. These business owners understand that obtaining capital to start or grow a business from a bank loan or other financing source can be a great way to preserve existing profits and working capital, and also a viable option to find the money needed on a larger scale.

Pandemic Panic financing such as disaster relief loans, SBA economic injury disaster loans (EIDL) and paycheck protection program (PPP) loans due to the COVID-19 crisis is a type of credit financing that, in most all cases, could be a band-aid on a gaping wound.

Longer term financial considerations, as your business strives to come through the crisis and survive on the other side, it’s important to consider other types of credit financing to help you obtain the working capital you need.  We’re exploring many different options for our clients.  One of those options is Asset-Based Lending, specifically, .

This is an excellent option for a business with valuable and well-performing Accounts Receivable to obtain quick sources of working capital to assist through this crisis.  The Factor Financing Lender works hand in hand with you and your business team to create a system where your customers invoices are assigned to the Lender.

For a very reasonable cost, you can obtain immediate access to the cash value of that invoice practically as soon as you send it out to your customer.  This quick access to capital dramatically improves your Cash Flow situation, helping to make you stronger on a daily basis to survive and thrive through this crisis.

Factor Financing Lenders vary in their criteria for the types of businesses and types of receivables they prefer.  We’ve assembled a healthy matrix of different types of Factor Financing Lenders to provide you with an array of financing options for your business to help you through the COVID-19 pandemic.

Curious? We are here to answer your questions about this type of financing. Email us at Curious@AuroraConsulting.biz.

Who’s Not Afraid to Say “I Don’t Know”?

Who else is an avid fan of Warren Buffett? The “Oracle of Utah” presided this weekend over the annual—virtual—Shareholders meeting for Berkshire Hathaway. Mr. Buffett was a stout, granite-like, believer in the recovery of the American economy after the crash of 2008. This time, not so much.

Much of his ideas, though overall optimistic, were tempered with uncertainty for the future of the American economy in particular and the Global economy as a whole. “Nothing can basically stop America” and “You can bet on America” are two optimistic quotes in an article about the Berkshire Hathaway meeting and Mr. Buffett in today’s NYTimes.com. But he tempered much of his positivity with more than a few “I don’t knows” when queried by the audience and journalists on the uncertain future of a continuing COVID-19 world.

Not that he was necessarily espousing “doom and gloom” as much as he was following a traditional line of thinking for himself and his company: Cautious optimism. Warren Buffett would rather lose out on an opportunity for an investment than to have acted to quickly, without the due consideration such a decision deserves. You can clearly see this as a bedrock concept of his success as a stock investor. He’s not sure which way the economy is headed, but he’s hoping for the best.

Warren Buffett is a student of economic history, and he presented his analysis at the meeting of the American economy from 1789, up to and past The Great Depression. He pointed out that the stock market took 22 years to recover to its highs between 1929 and 1951. His realistic assessments are important for us at Aurora Consulting as we determine ways to continue our Brokerage and find working capital for businesses.

We’ve spent the past six weeks working feverishly—including more than a few all-nighters—to help our clients obtain SBA Disaster Relief financing, in particular the EIDL program and PPP loans. We’re happy to report we’ve been quite successful with that project. But now we find ourselves casting about to see what our horizon looks like, and how to continue helping our clients.

To take two of Mr. Buffett’s phrases into our context seems appropriate today. “I don’t know” is the first. We have some good ideas and you will see those concepts unfolding in the coming days and weeks. Already this week we’ve scheduled conferences with different types of Lenders as part of our deep-dive into lending availability for our clients. We’ve also created basic strategies for Aurora Consulting on the best ways to move forward and help Small Business during the ongoing pandemic and its attendant economic challenges.

The second of Mr. Buffett’s quotes, and the inspiration for this blog, seems most appropriate to what we do here at Aurora Consulting, we find working capital from Banks and Lenders for our Small Business clients. Warren Buffett, as quoted in today’s NYTimes.com: “This is a very good time to borrow money, which means it may not be such a great time to lend money.” Realistic words, a realistic assessment from The Oracle of Utah.

Here at Aurora Consulting, we’re going to embed the Oracle’s words into our strategic thinking so as to best serve our Small Business Clients. If you want to know more about how we help business owners, please email Curious@AuroraConsulting.biz.

 

Cobble-Together Business Loan Strategies

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When Linda Rey was building her Independent Insurance Agency, she had a mantra that goes back 20 years ago. We think it still applies: “There’s no immediate gratification in a long term Strategy.“

Different Solutions Cobbled Together.

When confronted with challenging circumstances for our clients to find a business loan, one of the creative solutions we lean towards is to bring together different financing solutions. What do we mean?

We cobble together financing solutions to come up with a higher number. 

Maybe that number meets their original request, or maybe it only comes close, but maybe it gives the client sufficient capital to get started on a short term, “cobbled together” solution for our longer term financing strategy. 

Our thinking is that it is better to start somewhere. Follow the yellow brick road.

What it is about us that allows us to cobble financing solutions together? No, we’re not talking about shoe repair! We’re Brokers and we work for the client, not the bank. That’s first and foremost.

Secondly, as a Broker, we have access to multiple products with different lenders.

An important consideration we’re mindful of when cobbling together the financing is to be mindful of the client’s longer term horizon. Depending on what’s on that horizon, there may be risks and challenges with certain types of short term solutions today, especially with something like seasoning.

When we talk about seasoning with cobbled-together-financing, we mean if you have a short term solution today that gets you over the hump and gets you started with your financing strategy, that short term solution may have to be seasoned for at least a year and showing on tax returns and other financial documents if you want to come in with a certain type of financing product on the other end of it. 

So this is an important consideration because what solution we find today could affect your ability to access other finance products tomorrow.

We’ve discussed previously about how you should be preparing your financials with the thinking ahead of time that you may be securing financing. We think of ourselves as brokers but with a very long-term focus for our clients because we love business success stories.

Sometimes you have think short-term to achieve long-term goals. ~ Linda Rey

For example, we have a client who just purchased a commercial property recently with our assistance and our advice based upon cobbling together a short term solution on a long-term strategy. 

This client did not have sufficient down payment to qualify for a commercial mortgage to purchase the commercial property. We referred that client to a colleague of ours who does residential mortgages. That colleague refinanced the client’s house and the client paid cash for the commercial property. Now we’re working on a smaller financing package to provide some working capital to decorate the new office space and do some much needed improvements and renovations on the property including a new roof. This is a good example of a successful cobble-together-financing solution.

In the longer-term, we’re going to to find a way to finance their commercial property to take out the short-term financing, and return the client’s primary residence back to a zero mortgage replacing everything with financing on the commercial property because tax wise, it’s a smarter move for the client’s business.

When you think something isn’t possible, call us or email us and make sure because you don’t want to wait too long for something that can be done RIGHT NOW.

Email us at Solutions@AuroraConsulting.biz.

5 Mistakes Business Owners Make

Let’s get it out of the way right now. We say 5 mistakes, but there are more. Don’t shoot the messenger. Part of the reason we post our blogs & vlogs is to raise awareness that financing doesn’t have to be as difficult. Don’t get us wrong, it can be a long process, but you have more control than you think.

These are the top 5 mistakes we’ve experienced with business owners when they are seeking financing.

1. Thinking the Bank knows everything about you.  You have all, or most, of your accounts with your local bank, including your operating account, savings, personal account, maybe even merchant services & payroll. It’s easier to bank in one place.  You think the bank maintains a detailed file on your financials, that they know how much revenue passes through your accounts every month.  This would be an incorrect assumption. The bank will still ask you for your full set of financial statements and much, much more.

2. Old Financials.  A business plan that’s five years old won’t fly. If you’re updating your Accounts Receivable aging report or your Profit and Loss statement on an infrequent basis, you will have some work to do and this most certainly will delay the process. You control the timeline when you apply for credit financing. Having updated documents at the ready lets you submit them with all speed and alacrity to move your financing request along.

3. Incomplete Financials.  No business plan? Many businesses don’t have one whether it’s a new business or an existing business. There are many, MANY financial forms that a lender will require. It will be your responsibility to provide complete, comprehensive information that many businesses, unfortunately, do not have easily accessible. Lender’s will have a debt schedule form and if this is inaccurate, it will slow down the process and delay your approval.

4. Too Busy, Too Rushed, Too Overwhelmed…Too Late. Bad decision-making often arises from lack of time and a local preparation. However, it happens that then you’re faced with a sudden, unexpected need for working capital. This sounds like opportunity, but if you’ve not been minding the store in the meantime, you will be faced with a high probability that you could be without options or very few options if any at all.

Bad decision-making begets more bad decisions by way of choosing financing options that is super expensive and over priced such as Merchant Account Financing (Merchant Cash Advance – MCA), hard money, equity investors, refinancing a personal residence and/or hitting the credit cards. This leaves you vulnerable to a lack of income & profit taking away any joy in running your business. We bet that you didn’t get into business to be broke and stressed out.

5. Failure to Fight.  Your Banker wants to make the loan work for you, because they truly value your relationship with the Bank.  When you get bad news, don’t take it lying down.  Dig in with your Banker—in person whenever possible—and get to the solution-seeking.  What do you need to do to flip this decision from a negative to a positive?

We have seen good people who own good businesses make bad decisions. We are truly fortunate and grateful that we have forged many valuable relationships with Bankers & Lenders. They know that sometimes they can’t do the deal, but they value the relationship with their client. If the Bank doesn’t make a decision favorable to your business, that doesn’t mean you should make a subsequent bad decision.

The more proactive and prepared you are, the more options you will have.

The Deal Closes When It Closes

Trevor worked many years ago with a top producing loan officer at a mortgage Bank. This top-producer brought in a lot of business and Trevor was the new kid on the block climbing the ladder, building his business. In his travels, Trevor met a local real estate attorney who could potentially refer business. Trevor had been working with that attorney on a home purchase transaction. The attorney said, “Oh, no, that’s where you work? I’ll never do business with your company because so-and-so is a nightmare and your company is a nightmare.” That other top-producing loan officer had a terrible reputation. This loan officer had a bad habit of not responding to anybody’s phone calls inquiring asking, “What’s going on with the deal? When is it closing?”  He simply did not answer phone calls. This was in the days before email, the days of beepers and telephones and he simply did not respond to anyone. The attorney told Trevor, “I beep this guy all the time, he never calls me back. I guess your company is just slow to get things done that’s why he doesn’t respond. Why should I expect you’d be any different?” So when Trevor confronted his fellow loan officer about this complaint, his response was very laid back.  He said, “I have one philosophy. The deal closes when it closes.” WOW. He made Trevor and the entire company look bad. On the positive side of the story, he kind of wasn’t wrong because there is a process to getting a loan approved and closed. The fact that he was a terrible communicator is a different issue entirely; he never spent any time communicating to manage expectations. We did a video on managing expectations, emphasizing follow up. Sometimes the timeline to close can really be a bit much, and especially with how many people are involved in the loan process. We’re working now on a business acquisition deal, and the sellers were involved. They just could not get their head around what was needed, even after the loan was approved, and they knew the Lender was going to do this deal. Their responses to requests for documents through the entire process were, “Why this? Why that?”  Week after week, all they did was push back. The Seller’s  attitude was constantly to fight the process.  Then, when they’d actually submit a document at 10 a.m. in the morning, they’d follow up by sending an email at 1:30 in the afternoon, “So when are we closing?” This is not really understanding the loan process either. So, to take that “top-producer-bad-communicator’s” phrase and reconfigure it,  “The deal closes when it closes.” There is a real process to achieving the loan approval and getting to the closing. As  long as all parties are communicating and cooperating, it will close in a reasonable time, but it doesn’t mean it’s closing in 10 minutes.  Communication and cooperation, those are key elements. For our part, we maintain clear communications. As often as this particular seller was impatient, we still kept a clear head and kept our communications positive, responded accordingly.  Ultimately, we got what we wanted from the seller in the way of documents we needed. We did another video describing how the lender reviews everything. If you spend so much time asking, “Why?” And spending so much energy fighting the process when you could have gotten what was needed to expedite the process. With this particular seller it was constantly “When are we closing?” and, “Where’s my money?” We understand how financial professionals can get jaded. Someone like the former colleague in the industry can say to themselves, “Okay, I’m kind of exhausted with these calls.”  And they shut down because they know the deal will close when it closes. People can get upset about the process, but when all is said and done, if there’s clear communication, you have to understand the process and you have to be patient.

It’s Not Your Bankers Fault

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If your credit score is low and your financing request isn’t approved,  it’s not the Banker’s fault when she delivers the bad news of a loan denial to you.

Your Banker wants to be your friend, your “go-to” financial resource to help you build your business.  But there are are areas out of the Banker’s control, not the least of which is your credit history and subsequent credit scores.

Certainly you should be aware of your credit score…with the caution that, as a consumer, you cannot access the true credit scores used in financial services-related decisions.  This score is otherwise known as the “FICO CLASSIC” and all the credit monitoring services in the world cannot provide you with access to this score.  Thus there can be wide variances between the scores you find online and the “true” score your Banker will pull when you apply for credit financing.  In our experience at Aurora Consulting, we’ve seen variances in either direction, positive and negative, as much as 100 points in the scores.

But if you have very low scores, chances are very good that you are aware of your credit history circumstances.  That is, scores less than 620, and certainly any scores that are in the 500’s.  Many consumers with scores at 620 and above, where they’re not hitting the high-700’s or even the 800’s, tend to believe they have “bad” credit. This is not always the case, and often that kind of score range, down to 620, will qualify for business credit financing.

But if you are fairly certain, even with the incorrect consumer-access scores, that you have credit circumstances that are pushing your scores down below 620, you need to be aware and to disclose that to your Banker.

And you should be specific with your Banker about those circumstances.  For example, “I’m currently delinquent on the mortgage on my other house,” or, “I have several small collection accounts from three years ago that I have not yet paid off.”  If you’re clear and honest with your Banker about your potential credit history, it helps to manage those expectations, both yours and hers, when presenting a financing request application.

At Aurora Consulting, our process with each client includes a credit report that we run at the very outset of our relationship with the client. Because we’re working on behalf of the client, we have a different perspective on the credit review process.  And we actually have successfully placed loans with credit scores in the 500’s.   The options in that range can be limited. But there are options.  And, like with your Banker, we find it very helpful when the client is clear with us upfront about concerns for their credit history and scores.

Finally, being aware of your credit status is important for you personally and professionally to be aware of how you are managing your money and your bill-paying as you grow your business. When the Banker denies a loan request due to low credit scores, the issue is the lack of awareness of this money-management, not the Bank’s lending protocols.

You can find out more about the “Myths Of Credit Repair” by downloading our free white paper.

WATCH OUR VIDEO HERE.

Bankers and Artists

background abstract art with gold dollar sign in center“When bankers get together for dinner, they discuss Art.
When artists get together for dinner, they discuss Money.”
~ Oscar Wilde

Bankers have the money, control the money, determine where the money will go and who will get it.  In the vernacular, those decisions are called “loan approvals.”  Do Banks skew to the conservative when making lending decisions?  Depends on the Bank, but overall, the answer is probably “YES.”  Sure, riskier credit scenarios can find a home, along with commensurate difficult terms including higher interest rate and other factors.

That leaves the Artists, or, you, the Business Owner, out in the cold and wondering about how to obtain the capital you need to grow your business.

At Aurora Consulting, we believe the path to success for your business credit financing request lies in three factors.

The first factor is the choice of Lender.  Different Lenders have different tolerances for risk.  And, different Banks have different perspectives to find a profitable return for their Depositors’ money. Any given Bank may create lending opportunities due to a strategic decision to lend more in certain credit profile areas.  In both these types of Banks/Lenders, though the credit risk may scare away a more conservative Bank, the terms of the loan don’t have to be onerous.

We believe the second, and maybe the most important factor in credit financing success is in presentation.  We recently watched the Will Smith movie “Hitch” where he plays a coach of sorts to lovelorn men seeking to get out of their own way to find success in love.  Much of the advice “Hitch” gives has to do with presentation, the manner in which a man listens to a woman, the way he honors her presence, and more.

We think that the Loan Application and the manner in which it is presented to a Lender is the fundamental key to success, combined with the other two success factors.  That’s why we strive to ask all the same zillion questions an Underwriter may ask, why we collect so much documentation up front from our clients, and why we carefully package our loan requests to present to Lenders.

The final factor for success in credit financing is the positivity of “The Close.”   Obstacles pop up along the way in every financing transaction.  Our aim is to overcome obstacles with positive attitudes and a sharp focus on getting to the closing.  We use positive language, we seek out positive solutions; we refuse to be waylaid by negative emotions, words, challenges.  This is our Closing Attitude at Aurora Consulting.

Bringing these three success factors together is what we do at Aurora Consulting.  It’s no secret to any experienced financial professional, but it certainly feels like it’s our own secret recipe for credit financing success.

Pages from a Salvador Dali notebook including doodles and calculations of income and expenses, the artist thinking about Money.  
Pages from a Salvador Dali notebook including doodles and calculations of income and expenses, the artist thinking about Money.

Whether you are an entrepreneurial “Artist” seeking to bring your vision for success to life with business credit financing, or a Business Owner searching for the best solution for your working capital needs, let us at Aurora Consulting be your concierge to guide your financing needs to the right conclusion, the one where the Bankers embrace your “art” and release the money to fund your continuing business success story.

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The Scorsese Way

Martin Scorsese has had a long and storied career in cinema.  The legend he has created is that of the Director using his extensive knowledge of film to enhance his cinematic creations. As a Director, he pushed the boundaries of macabre crime drama.

Along the way, according to this latest biographical feature in the New York Times, Mr. Scorsese developed his own way of working within, or rather, without, the “Hollywood machine.”  In particular, Mr. Scorsese created a separate path for financing his films using independent financiers and eschewing the financial support from the studios.

Frustrated with the unrealistic pressures of working within the confines of the studio system, he came to believe that Hollywood studios had become his “mortal enemies.”

As he says in the NYTimes piece, “It’s like being in a bunker and you’re firing out in all directions…you begin to realize you’re not speaking the same language anymore, so you can’t make pictures anymore.”

The latest development in the “Scorsese Way” of making his movies is his partnership with Netflix, the streaming service that is about as far from the Hollywood studio system as you can get in the early 21st Century.

We think the key element of this aspect of Martin Scorsese’s story is the financing component.  In short, those folks with the money–Hollywood Studios–brought unrealistic expectations, exerted extraordinary pressures, and ultimately hampered one of the greatest cinematic talents of the past 100 years from achieving his true potential.

We see this time and again with Small and Middle Market Businesses too.

If your business marches in the “big leagues” that is, with gross revenues exceeding $3Billion annually, then Bankers are the friendliest bunch of people on the planet. But if your business is in the Middle–$10 Million up to $3 Billion in revenue—or worse, a Small Business (below the $10M mark), you’ll find Bankers are not so friendly.  

To define friendly, let’s refer to our description above of the Hollywood Studio system’s treatment of the incredibly talented and successful Martin Scorsese.  In the NYTimes piece he discusses the unrealistic pressures from studio executives (the folks with the money) to shorten movie running times, and other extraordinary requirements for his films, “The last two weeks of editing…‘The Aviator’…I said if this is the way you have to make films then I’m not going to do it anymore.”

Imagine that.  Imagine the cultural and entertainment loss sustained when a talent as large and ambitious as Mr. Scorsese decides he’s had enough because the people with the money keep telling him what to do.

We blogged recently about “Don’t Tell Me How To Make My Pizza” about a similar story about an ambitious and creative young business owner.  He’s created a unique new type of sourdough pizza.  As he grows his business, he needs capital.  But he chose to bring in equity investors instead of engaging with us at Aurora Consulting to find quality credit financing.  You can be sure that sometime in the near future his equity “partners” seeking higher returns on their investments, will insist on changes to that unique pizza recipe.  Martin Scorsese all over again.

It’s the New Year and we’re committed here at Aurora Consulting to financing solutions for your business success story.  We believe in access to credit.  We’ll work diligently and enthusiastically to find the best credit financing solutions for your business.  

Take a page out of the Martin Scorsese playbook (except the part where they dump the bodies!), and find your own “Scorsese Way” to finance your working capital needs while preserving your vision of how your business should run and grow.

Download our DOCUMENTS CHECKLIST here.