If you want to gain access to a larger world, here are the benefits of using crypto to pay and accept invoices, as weIt seems that every passing week we are hearing more about cryptocurrency and its many benefits. With so many companies accepting cryptocurrency as a payment method, we’ve got to delve deeper into this and look at it in a holistic manner.
When it comes to B2B companies, they need to rely on a service where invoices are paid promptly and in full. For any company that is contemplating cryptocurrency as a payment method, how can they benefit?
How Do You Pay Invoices by Crypto?
Whether you are looking to pay clients by crypto or accept crypto payments, the essential item to get started is a crypto wallet. The wallet has a unique deposit address that you can share with clients. Depending on the cryptocurrency, you can start by using an exchange wallet such as Coinbase which lets you generate deposits and addresses for any widespread cryptocurrency.
If you want to send a crypto invoice, the process is very similar to sending a standard invoice. When you have a deposit address on a crypto wallet or an exchange, you can invoice the client with the wallet address listed, which would be in place of the bank details on a standard invoice.
Why Is Paying by Crypto Important?
From a business perspective, having a wider client base is crucial. Cryptocurrency is an important step in the evolution of any business because companies are now more interested in the global platform as a means to trade and acquire clients.
As any B2B company needs to work with a broader client base, it is essential to pay closer attention to cryptocurrency because it is a more universal payment method.
Cryptocurrency is classed as a “decentralised” currency, meaning it’s not bound by bank rules and regulations, making it easier to transfer funds between two parties without a third party. This makes for a quicker and more effective means of payment for both sides.
For companies who are looking to keep clients all around the world, cryptocurrency might be the most important tool in their arsenal.
The Benefits of Paying by Crypto
Cheap and Instant Transactions
Because the transaction costs of cryptocurrencies are low, and the payments take place immediately throughout the world, this makes short work of any payment process. Without needing to rely on a third party to provide the transaction that charges for the privilege, it makes payment much easier.
A Transaction With Integrity
Companies that work with clients all across the world may find themselves frustrated with certain banking institutions that have more red tape than is necessary. The whole practice of cryptocurrency transactions is to elicit trust from both parties.
Because cryptocurrency is reliant on the blockchain (a digital ledger) there is greater integrity throughout the process. The more people use the blockchain, the more security is built into the code by means of encryption.
Ownership Over the Currency
When we rely on a third party like a bank, we become a creditor of the bank and the bank manages the money on our behalf. Cryptocurrency is our own property, and transactions that we carry out with our money means that we can do business with others without this third party intervention.
From the perspective of a B2B company, this can make for greater transparency in peer-to-peer transactions.
A Greater Level of Privacy
To get a bank account you need to provide personal information, but with crypto payment, it becomes an anonymous practice. While the degree of anonymity will vary depending on the cryptocurrency, without the need to provide personal data, this can provide extra peace of mind for some organisations.
Because transactions within the blockchain are verified by a decentralised network of devices known as nodes, the transactions are completely transparent and traceable. Because it is impossible to have a third party manipulate the payment or even for the sender to reverse the payment, this allows greater transparency on a global scale.
Everybody can verify if the transaction has taken place or not, and each transaction can be followed anonymously by everyone on the Block Explorer, which can greatly reduce the potential for fraud.
You Can Have As Many Crypto Bank Accounts As Possible
Having one crypto wallet means you can create as many account numbers as you want. Rather than opening up numerous bank accounts, which can be a lengthy process, you can create as many account numbers in your wallet, which is beneficial if you want to spread out your cryptocurrency over a number of addresses. This makes it useful for businesses that need to segregate certain parts of their finances for greater efficiency.
For example, if a company needs to separate certain types of clients into one account, and utilise funds for petty cash or expenses in another, these can go on two different crypto accounts within the same wallet. Using cryptocurrencies means you are the one in charge of your money.
Guarantees Secure, Fast, and Transparent Handling of Smart Contracts
Blockchain technology makes it possible to digitalise almost any service. From property to shares; everything can be placed in the blockchain and traded via smart contracts.
For B2B services that are looking to start operating exclusively online or in the metaverse, smart contracts and blockchain technology can be an amazing way to start providing more transparency. With companies like Monneo becoming one of many organisations offering this service, it is helping to stimulate a wider discussion about cryptocurrency.
As you can see, cryptocurrency is not just another type of currency in which to pay for services but blockchain technology and cryptocurrency ensures that companies have an ability to gain access to a wider market, one that they would have been penalised for by excessive fees if they went through traditional payment methods.
Accepting cryptocurrency as a means to pay invoices doesn’t just make life easier for B2B companies, but as it yields a number of benefits, from preventing fraud and helping a company operate in a far more secure and efficient manner, accepting cryptocurrency is the next big step for many businesses.
How to Get a Loan to Buy a Business
Not everyone wants to take on the challenge of building a business from the ground up. An attractive alternative can be to step into a business that’s already up and running by purchasing it from the current owner. Some advantages of buying a business may include easier financing, an established customer base and an existing cash flow.
Buying a business is different from buying a franchise. Franchises have a set business model that’s proven to work. However, when you buy an independently operated business, it’s important to show the lender that you, your previous business experience and the business you want to buy are a winning combination.
What lenders look at when you want to buy a business
Because lenders can view the performance record of an existing business, it’s typically easier to get a loan to purchase an existing business compared with startup funding. However, your personal credit history, experience and details about the acquisition business still matter.
Your personal credit and experience
Through credit reports and credit scores, lenders are able to assess how you’ve managed debt in the past and potentially gain insights into how you will handle it in the future. Your education and experience will also be evaluated.
Solid credit history: Lenders look to see if you have a history of paying your debts. Foreclosures, bankruptcies, repossessions, charge-offs and other situations where you haven’t paid off the full amount will be noted.
Business experience: Having worked in the same industry as the business you want to purchase is helpful. Related education can also be viewed as a positive.
Other businesses you’ve owned
Having a track record of operating other successful businesses can have a positive influence on lenders when it comes to buying a new operation.
Record of generating revenue: Business financial statements can help a lender document that your current or past businesses were well-managed and turned a profit.
Positive credit record: Lenders review business credit scores and reports to verify creditworthiness and to identify liens, foreclosures, bankruptcies and late payments associated with your other businesses.
The business you want to buy
Just because a business is operating doesn’t mean it’s a good investment. Lenders will ask for documentation, often provided by the current owner, to assess the health of the operation.
Value of the business: Like you, your lender will want to ensure that you’re buying a business that has value and that you’re paying a fair price.
Past-due debts: Lenders will be interested in the business’s past-due debts, which may include liens, various types of taxes, utility bills and collection accounts.
Most lenders will let you know what they want included in the loan application package, but there are some personal documents that are typically requested, as well as ones related to the business you want to purchase.
The following documents are used to evaluate your personal finances, business history and plans for operating the business after its purchase:
Personal tax returns.
Personal bank statements.
Financial statements for any of your other businesses.
Letter of intent.
Documents from the current business owner will also be evaluated. Some common ones requested by lenders include:
Business tax returns.
Profit and loss, or P&L, statements.
Business balance sheet.
Proposed bill of sale.
Asking price for inventory, machinery, equipment, furniture and other items included in the sale.
Where to get a loan to buy a business
Compared with finding a loan to start a business, getting funding to buy an existing business may be easier. Here are three popular funding options to check into for a business loan:
Banks generally offer the lowest interest rates and best terms for business loans. To qualify for this type of loan, you’ll typically need a strong credit history, plus the existing business will need to be in operation for a certain minimum of years and generate a minimum annual revenue amount set by the lender.
If borrowers don’t qualify for a traditional bank loan, then SBA loans, ones partially guaranteed by the Small Business Administration, may be the next option to explore. Because there is less risk to the lender, these loans can be easier to qualify for. Banks and credit unions frequently offer SBA loans in addition to traditional bank loans.
Online business loans
Another option to consider is online business loans. Online business loans may offer more flexibility when it comes to qualification, compared with bank and SBA loans. Minimum credit score requirements can be as low as 600, and in a few cases lower. Generally, interest rates are higher than what’s available with a traditional bank loan.
Accounts Receivable Financing: Best Options, How It Works
Accounts receivable financing, also known as invoice financing, allows businesses to borrow capital against the value of their accounts receivable — in other words, their unpaid invoices. A lender advances a portion of the business’s outstanding invoices, in the form of a loan or line of credit, and the invoices serve as collateral on the financing.
Accounts receivable, or AR, financing can be a good option if you need funding fast for situations such as covering cash flow gaps or paying for short-term expenses. Because AR financing is self-securing, it can also be a good choice if you can’t qualify for other small-business loans.
Here’s what you need to know about how accounts receivable financing works and some of the best options for small businesses.
How Much Do You Need?
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How does accounts receivable financing work?
With accounts receivable financing, a lender advances you a percentage of the value of your receivables, potentially as much as 90%. When a customer pays their invoice, you receive the remaining percentage, minus the lender’s fees.
Accounts receivable financing fees are typically charged as a flat percentage of the invoice value, and generally range from 1% to 5%. The amount you pay in fees is based on how long it takes your customer to pay their invoice.
Here’s a breakdown of how the process works:
You apply for and receive financing. Say you decide to finance a $50,000 invoice with 60-day repayment terms. You apply for accounts receivable financing and the lender approves you for an advance of 80% ($40,000).
You use the funds and the lender charges fees. After receiving the financing, you use it to pay for business expenses. During this time, the lender charges a 3% fee for each week it takes your customer to pay the invoice.
You collect payment from your customer. Your customer pays their invoice after three weeks. You owe the lender a $4,500 fee: 3% of the total invoice amount of $50,000 ($1,500) for each week.
You repay the lender. Now that your customer has paid you, you’ll keep $5,500 and repay the lender the original advance amount, plus fees, $44,500. You paid a total of $4,500 in fees, which calculates to an approximate annual percentage rate of 65.7%.
Because accounts receivable financing companies don’t charge traditional interest, it’s important to calculate your fees into an APR to understand the true cost of borrowing. APRs on accounts receivable financing can reach as high as 79%.
Accounts receivable financing vs. factoring
Accounts receivable financing is often confused with accounts receivable factoring, which is also referred to as invoice factoring. Although AR financing and factoring are similar, there are differences.
With invoice factoring, you sell your outstanding receivables to a factoring company at a discount. The factoring company pays you a percentage of the invoice’s value, then collects payment directly from your customer. When your customer pays, the factoring company gives you the rest of the money you’re owed, minus its fees.
With accounts receivable financing, on the other hand, your invoices serve as collateral on your financing. You retain control of your receivables at all times and collect repayment from your customers. After your customer has paid their invoice, you repay what you borrowed from the lender, plus the agreed-upon fees.
Invoice factoring can be a good financing option if you don’t mind giving up control of your invoices and you can trust a factoring company to professionally collect customer payments. If you’d rather maintain control of your invoices and work directly with your customers, AR financing is likely a better option.
Best accounts receivable financing options
Accounts receivable financing is usually offered by online lenders and fintech companies, many of which specialize in this type of business funding. Certain banks offer AR financing as well.
If you’re looking for a place to start your search, here are a few of the best accounts receivable financing companies to consider.
A division of the Southern Bank Company, altLINE is a lender that specializes in AR financing. AltLINE offers both accounts receivable financing and invoice factoring, working with small businesses in a variety of industries, including startups and those that can’t qualify for traditional loans.
AltLINE offers advances of up to 90% of the value of your invoices with fees starting at 0.50%. To get a free quote from altLINE, call a representative or fill out a brief application on the lender’s website. If you apply online, a representative will contact you within 24 hours.
AltLINE’s website also contains a range of articles for small-business owners, covering AR and invoice financing, payroll funding, cash flow management and more. AltLINE is accredited by the Better Business Bureau and is rated 4.7 out of 5 stars on Trustpilot.
1st Commercial Credit
1st Commercial Credit offers accounts receivable financing in addition to other forms of asset-based lending, such as invoice factoring, equipment financing and purchase order financing. The company works with small and medium-sized businesses, including startups and businesses with bad credit.
With 1st Commercial Credit, you can finance $10,000 to $10 million in receivables with fees ranging from 0.69% to 1.59%. You can start the application process by calling a sales representative or filling out a free quote form on the company’s website. After your application is approved, it typically takes three to five business days to set up your account, then you can receive funds within 24 hours.
1st Commercial Credit is accredited by the Better Business Bureau and has an A+ rating.
Porter Capital is an alternative lender specializing in invoice factoring and accounts receivable financing. The company also has a special division, Porter Freight Funding, which is dedicated to working with businesses in the transportation industry.
With Porter Capital, you can receive an advance of 70% to 90% of your receivables and work with an account manager to customize a financing agreement that’s unique to your business. Porter funds startups and established businesses, offering fees as low as 0.75% monthly.
You can provide basic information about your business to get a free quote and receive funding in as little as 24 hours. Although Porter Capital isn’t accredited by the Better Business Bureau, it does have an A+ rating; the company also has 3.7 out of 5 stars on Trustpilot.
Although AR financing and factoring are distinct, many companies blur the lines between the two. As you compare options, make sure you understand the type of financing a lender offers.
If you decide that invoice factoring may be a fit for your business, you might consider companies like FundThrough, Triumph Business Capital or RTS Financial.
Find and compare small-business loans
If accounts receivable financing isn’t right for you, check out NerdWallet’s list of the best small-business loans for business owners.
Our recommendations are based on the market scope and track record of lenders, the needs of business owners, and an analysis of rates and other factors, so you can make the right financing decision.
SBA Loan Collateral vs. Guarantee: What’s the Difference?
Personal guarantees and collateral are both ways of promising a lender that you’ll make good on your debt. You may have to offer both to get an SBA loan.
Collateral ties a loan to a specific asset, like your business’s inventory or your home, which the lender can seize if your business can’t repay the loan. A personal guarantee promises the lender that you will repay the debt using your personal assets, but may not specify how.
In general, SBA lenders require anyone who owns 20% or more of a business to provide a personal guarantee. SBA loans larger than $25,000 usually require collateral, too.
Do SBA loans require a personal guarantee?
SBA loans usually require unlimited personal guarantees from anyone who owns more than 20% of a business. Lenders may ask for limited or unlimited personal guarantees from other business owners, too.
Unlimited personal guarantee: This is a promise that the guarantor (the business owner) will pay back the loan in full if the business is unable to. The lender doesn’t have to seize collateral or seek payment from any other source before going straight to the loan applicant for loan repayment.
Limited personal guarantee: If you own less than 20% of a business, you may have the option to sign a limited personal guarantee instead. The limited personal guarantee caps the amount you’ll have to pay the lender, either as a dollar limit or a percentage of the debt.
Limited personal guarantees can be secured by collateral, which means the lender will seize those assets when they recoup payment instead of asking you to pay back a certain dollar amount.
Who has to personally guarantee an SBA loan?
The SBA requires personal guarantees from:
Individuals who own more than 20% of a business.
Spouses who own 5% more of the business, if their combined ownership interest is 20% or more.
Trusts, if the trust owns 20% or more of the business.
Trustors, if a revocable trust owns 20% or more of the business.
SBA lenders may require additional personal guarantees.
Do SBA loans require collateral?
For SBA 7(a) loans of between $25,000 and $350,000, SBA lenders have to follow collateral policies that are similar to the procedures they’ve established for non-SBA loans. Banks and credit unions are usually the intermediary lenders for SBA 7(a) loans.
If you use an SBA loan to finance specific assets, like an equipment purchase, the lender will take a lien on those assets as collateral. The lender may also use your business’s other fixed assets as collateral, and you may have to offer personal assets, too.
For SBA 7(a) loans larger than $350,000, SBA lenders need collateral worth as much as the loan. The lender will start with your business assets. If they need more collateral, the SBA requires them to turn to the real estate you own personally, as long as you have at least 25% equity in the property.
Live Oak Bank is the largest SBA 7(a) lender in the U.S. by volume. Its loans may require collateral in the form of:
Commercial real estate.
What if I can’t provide collateral or a personal guarantee?
If you’re seeking any type of SBA loan, there’s a good chance you’ll have to provide both collateral and a personal guarantee. Even SBA microloans usually require collateral and a personal guarantee. Without them, you’ll have trouble getting an SBA loan.
Some online lenders offer unsecured business loans, which don’t require collateral. But you may still have to sign a personal guarantee.
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