Ready for Take-off: Smart Credit for SMB Growth

Nov 16, 2022

You’ve created a business. Congratulations!

Having survived start-up hiccups, you’ve proved your company’s viability. You sell what you create and, by all accounts, have developed a successful company. 

However, unless you can buy more, your growth is capped. Your business…stalled.

Let’s be honest, taking a business to the next level requires an influx of cash. Without outside investment, the amount a company can re-invest in growth is limited by its sales revenue.

This is a common conundrum for many companies. Importers are especially susceptible to this business rut - Inventory turns are directly related to investment in growth and you can only turn what you have in stock. 

A quick cash flow boost to increase inventory or buy deeper deals for better margins is an easy catalyst, if you can get it. 

Here are some options for SMBs to maintain their growth track:

Outside investors

Accepting an investment can give you a quick and sometimes very meaningful influx of cash. However, it almost always comes with sacrificing a portion of ownership - a big and potentially costly decision for small to medium-sized business owners.

Equity loan 

Equity loans can allow you to get cash at a cheaper rate than many alternatives - fixed, low rates with long payback timelines can be attractive. The most obvious downside is that these loans are attached to your personal assets (often the home) as collateral. The prospect of losing your home if you default on a loan destined for business growth is risky, even if these loans are otherwise secure.

Personal loan

With a personal loan, you don’t have to put your assets on the line, but they do tend to have smaller borrowing limits and higher interest. Expect rigorous credit checks. Some personal loans have interest as high as 35 percent. 

Credit Cards 

Using a credit card for large business expenses can be tempting. It’s easy and you can get points! However, unlike consumer purchases, in business the buyer often assumes credit card fees, which average around 2.8% of the purchase price. This can be off-set to a degree by a solid points program and a 50% tax write-off on the transaction fees. However, savings go to hell if you have a remaining balance after 30 days. Minimum payments on credit card balances are designed for you to pay the maximum interest, not for you to reduce debt. If you choose this option, be prepared to pay the full amount in 30 days or face the wrath of your APR.

Short Term Credit 

Also dubbed “smart credit,” credit lines like KoverlyPay come with light underwriting that does not hit your FICO and a defined, short-term repayment schedule (1-3 months). With low interest rates (1%/month) and finite repayment terms, it is intended to give businesses quick cash flow boosts without building debt. Used domestically in the U.S. and internationally, KoverlyPay is the first “smart credit” option to offer 30 days interest-free credit on foreign currency payments. 

Cash is king for business growth, but not all funds are created equal. Be judicious when choosing a re-investment strategy for your company to set your business up for success.

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