Category: Business Financing

How Banks Assess Credit Risk in 2024

How Banks Assess Credit Risk in 2024

When your business needs financing, you'll find that some of the best options require the most documentation. Why? It all comes down to credit risk. Banks and other financial institutions need to gauge the risk associated with lending to your small business.  Understand how lenders approach credit risk, and your business can improve its qualifications. What is Credit Risk? The term “credit risk” evaluates the risk of default; in other words, it tries to predict the possibility of losing money… Read More
EBITDA Margin: What is Means, How to Calculate and Why You Should Know This Term

EBITDA Margin: What is Means, How to Calculate and Why You Should Know This Term

Scroll financial headlines and you’ll likely see the term EBITDA mentioned more than once. Like this headline on Yahoo Finance: “Tap These 5 Bargain Stocks With Impressive EV-to-EBITDA Ratio”.  If you aren’t interested in financial analysis, you may wonder what that means to your small business. EBITDA doesn’t just measure the performance of a big business: small businesses can also benefit from knowing what this financial metric says about their business, too.  Why Small Businesses Should Know What EBITDA Means… Read More
Here’s What the Fed Rate Cut Means For Your Small Business

Here’s What the Fed Rate Cut Means For Your Small Business

After eleven rate hikes, the Fed has finally begun to lower interest rates. It has lowered the federal funds target rate by half point, bringing the new range down to 4.75% to 5%.  The federal funds rate is not a rate small business borrowers pay; rather it affects the rates banks pay each other for overnight loans. Still, other interest rates in the economy typically change when it changes. (More about how this works below.) “The U.S. economy is in… Read More
What is a Merchant Cash Advance?

What is a Merchant Cash Advance?

A merchant cash advance (MCA) is a type of business financing that offers small business owners an advance against future sales. Instead of collecting from customers as sales are made, the business gets a lump sum that will be paid back out of future sales. Typically, the MCA provider will take a fixed amount or a percentage of credit or debit card sales directly from the businesses’ merchant account, along with a fee called a “factor rate.”  MCA’s are often… Read More
How to Improve Your Business Credit Score

How to Improve Your Business Credit Score

Building business credit has paid off for Coleman's A/C Heating & Appliance Repair. “(Our) credit scores allowed us to secure a loan, which we used to expand our operations and add a company vehicle,” says April Coleman, vice president of the Jackson, MS-based business, which specializes in the repair, maintenance, and installation of air conditioning, heating systems, and household appliances. How did they do it?  “To improve our business credit scores, we first signed up for a credit monitoring app… Read More
How To Calculate Total Financing Costs and ROI

How To Calculate Total Financing Costs and ROI

Key takeaways: Financing costs refer to all the expenses related to borrowing money, including interest and any fees. ROI, or return on investment, is calculated by dividing net profit (or loss) by the cost of the investment. For small business owners with limited time and resources, calculating financing costs and ROI can be particularly challenging. Still, these metrics are essential for managing cash flow, evaluating investment opportunities, and deciding when to borrow. When is it worth it to borrow money… Read More