Normally private lenders cover urgent expenses for business owners when conventional banks can't (or won't) cover their needs. Those situations have become far more common the last year because of a combination of lock-downs, supply chain disruption and raging price increases that have taken their toll on normal business procedures.
For private lenders, pricing working capital properly means weighing the opportunity to put our capital to work against the risks of failure which have increased significantly. Even for businesses who can withstand the marketplace disruptions there are many government bureaucrats who can seemingly shut any business down without warning.
Here are some of the cases I've seen recently on the front lines of Private lending:
Suppliers demanding orders be pre-paid -
Recently, several companies who wouldn't normally use the type of funding I provide have nevertheless taken funding to cover up front purchase costs. These costs used to be paid AFTER the products were received allowing companies to maximize their cash flow. In these situations I'm offering longer terms to help make the carry cost affordable with aggressive pre-pay discounts which allow the merchant to save if they pay earlier than the full term.
Supply shock causing the need to inventory more raw materials -
An increasing number of companies are "inventory rich" because of uncertainties in getting timely delivery of critical supplies. Tying up a lot of capital in inventory makes sense now that prices are increasing but it dries up capital reserves. I've been covering the gaps with infusions of capital at fixed rates & payments. This gives the flexibility to hold more inventory which is appreciating and still have capital to pay other vendors until products are sold.
Unexpected opportunities that require up front capital -
It seems as if many of the requests from business owners I'm seeing lately have use of proceeds listed as "buyout partner" or "Purchase upstairs space". The changing landscapes have shaken loose many situations which may have been dormant for a while. Here is where longer term is needed so that the carry cost of the capital is lower while a new property or ownership scheme is assimilated into normal operations.
Sudden demand spikes -
Many deals have funded in the last two months where the merchants experienced a spike in demand that required immediate capital to respond effectively. Every business owner I speak with is seeing demand growing but they're also struggling to stay fully supplied and staffed.
The situation for many small businesses right now is one where demand is strong, workers scarce, supplies are erratic and the cost every everything is going up fast.
Right now is where capital can make the difference between doing well and doing great. Call me about your business funding, I'll give you a quote.