One of the most challenging times for any small business is the short-term cash crunch. A business can become cash challenged for many reasons – a volatile sales cycle, longer Account Receivable cycles, and feeding the needs of a fast growing business. Your business can still be profitable but have temporary low cash flow. The key is using a small business loan to survive the crunch. One way to do this is to take out a short-term small business loan through invoice factoring, a line of credit or other types of financing.
Invoice factoring is a fancy name for getting an advance on your outstanding invoices for a small fee. If your business has large outstanding invoices or receivables where customers pay slowly, factoring can speed up the collection cycle. With invoice factoring, you may be borrowing against them or selling then outright.
A business line of credit is similar to a personal line of credit, such as credit cards or home equity lines of credit. You have access to a specific amount of financing but don’t make payments or incur interest until you tap into the funds.
There are three small business financing apps that connect to QuickBooks Online that can make this process easier: Bluevine, Fundbox and Fundera. Once you download one of these apps and sync with QuickBooks Online, the app will use your QuickBooks data to tell you if you may qualify for financing and your credit limit. For apps that offer multiple funding options, they will tell you which of their funding products may be available to you – whether it is an advance on unpaid invoices, a new line of credit or a more traditional small loan. These apps can help demystify invoice financing, start up loans and business lines of credit.
Before you get started, your business needs to be in good financial standing and your QuickBooks Online data should be up to date. Make sure you understand the terms of any loan product before you commit (1).
BlueVine – This app offers small businesses two options: factoring and credit lines. BlueVine’s factoring offering means they pay you for an invoice that your client has not yet paid, minus their fee. Then they set up a bank account and P.O. box both in your business name where they will receive payment directly from your client. Your client doesn’t realize that they are paying a third party since their payments are made to your business name. Factoring from BlueVine can yield as much as $500,000 and there is no minimum or reserves. You can be paid as soon as 24 hours. BlueVine currently funds 85% of the invoice amount upfront and then the rest, minus fees, when your client pays. Their standard current rate is 1% per week with a minimum of 3 weeks.
BlueVine also offers credit lines up to $50,000 with fixed payments with interest over six month to pay it back. Even if you are not experiencing a cash crunch currently, you may want to establish a line of credit. This will be available for quick emergencies and in most cases you won’t be charged until you borrow. You may want to research just-in-case options before it becomes necessary.
Fundbox – Fundbox enables you to quickly get paid for your outstanding invoices and connects automatically to your QuickBooks Online once you download the app. The app will access your QuickBooks data and determine which of your invoices qualify for funding. Fundbox buys your invoice, but your customers still pay you as they normally would. You maintain your customer relationship and collect on behalf of Fundbox. A small clearing fee is displayed in full before you commit. Once you see the details and confirm, 100% of the invoice value will be sent to your bank account, as early as the next business day. You can pay back Fundbox over 12 weekly installments or choose to pay the full invoice amount early, at any time, without penalty and all remaining fees will be waived.
Fundera – Fundera is a loan facilitator, which means they match you with loan providers for a small fee. The Fundera app integrates with QuickBooks Online to help you quickly fill out one online loan application, which can be sent to multiple lenders who offer a variety of funding options. You learn which loan products you qualify for and from which lender. You can then determine which loan is the best match for your business. Fundera is paid by the funder that provides you with the loan – typically 1.5-3% of the total loan cost and this fee doesn’t impact the interest rate of the loan. They look for companies that have been in business for at least two years with minimum of $10,000 in monthly revenue.
Getting through a short-term cash crunch doesn’t have to be painful. With the right loan or line of credit, your business can bridge the gap and emerge stronger than before.
Bluevine, Fundbox and Fundera are not Intuit offerings, and said products and services are provided by third parties. Intuit is not affiliated with these third party products or services and does not endorse or recommend them, even if such products or services are marketed or distributed via our products, website or are otherwise associated with Intuit.