I recently met an entrepreneur who started a franchise in his mid-50s with funds from his 401k but was now in a tough spot. His first payroll check had just bounced and he was shaken up about it, as his franchise employed 30 people and he dreaded the thought of having to shutdown.
Like many others, this entrepreneur experienced sporadic cash-flow droughts in his first years of business. To rebound quickly, he took out cash advances that quickly led him into a cycle of renewals. Now, cash advance merchants claimed 30 percent of his monthly revenue.
As the founder of a small-business loan advisory, my firm often receives calls from entrepreneurs who are stuck in a debt cycle. I see many cases where the entrepreneur realizes the risks of cash advances or short term business loans too late and they’re left repaying with huge percentages of their revenue, plus the expensive fees and interest rates.
Before exploring the types of financing available for small business, ask yourself these questions. Read more…