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How to get financing with negative equity

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What happens when your small business goes through a difficult time? If you are short on cash and you have negative equity, not too many lenders are going to line up to help you out. So what can you do if this does occur? There are some companies out there that will work with you if you have negative equity. They must see potential in your business and it is also important to them that they create a contract with you in order to ensure they will get their money back. Typically you will have a loan that has a pretty high interest rate, but you will have a chance to get the money now.

The recession hit a lot of small businesses pretty hard and there are quite a few that have negative equity. If you are one of these businesses that has more liabilities than assets, you will need to focus on getting your business out of this situation and finding a lender that is actually focused on helping you. If you do not quickly handle the problem there is a very real chance that your business may fail. You will be facing bankruptcy or completely shutting down your business.

Companies that have negative equity always have some type of cash flow problem. You must focus on getting your cash flow under control again and the quickest way to do this is by turning to your customers and getting them to start paying their bills. You need to determine if you will start shortening your payment terms or raising the interest rate you are charging them for not making their payments on time. Start demanding that your customers pay within 30 days versus 60. Then talk to your vendors and see if you can extend your payment terms so you do have plenty of time to get the cash from your customers. It is also important that you take the time to look at invoice factoring and if it will be able to help save your business. If you do not have control over your customer's invoices, you will end up juggling too many bills on your end and it is going to be very challenging for you to keep your business afloat.

Banks will not offer you money when you have negative equity and if you do not have any collateral to secure a new loan. They want a low risk and you are coming to them with poor financial control and a lot of risk.

Debt consolidation loans are a good source of money to consider using if you have negative equity. With a debt consolidation loan you will take all of the money that you have and put it into a single loan with one monthly payment. The interest rate on this loan will likely be higher than what you may have on the other loans but the total amount of money you are paying out may be significantly less. This shows you that it is a pretty good idea if cash flow is your problem. As you are able to gain control over your cash flow again, you may then consider paying more money to the loan so you can quickly pay it off and save a lot of money on interest.

Having good relationships with vendors is important to getting the money that you need. If you have poor payment history with them and you are not on good terms, you have absolutely no room or power to negotiate with them and to acquire a loan to help you save your business from failing.

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