Working capital is the lifeblood of small businesses.  As the credit gap remains a reality for SMBs in America, the market for capital is still robust.  Business owners are increasingly active in evaluating various capital products from advances to invoice factoring to loans.  But sometimes taking on new capital comes with unexpected challenges.

What happens if your business has trouble making payments?

Business owners are no strangers to the unexpected.  Even the best-run companies encounter surprises – the loss of a key customer, changes in the market, or even a temporary closure.  So what are your options when you have payments due to your capital provider, but not enough current cash?

The company or institution that provided the funding does not want your business to close.  Depending on the structure of your agreement, you should be able to work with your provider to make payments more manageable if business circumstances have changed.  

How can you protect your business?

Above all, make sure you communicate with your advance company or capital provider.  At Wellen, we encourage our customers to talk with us frequently.  Customers who cut off communication make it impossible for us to provide any assistance.  The last thing anyone wants is to find themselves in a default situation.  Some capital providers will refer a business to a third-party collections agency, send a demand of payment letter, or even sue for missed payments.  

What to look out for when choosing a funding partner:

The best advice is to review the agreement with a cash advance provider or lender before agreeing on a transaction.  Look for language that allows for flexibility in payments that is tied to a targeted percentage of current business revenue. The right to request adjustments to payments is something responsible capital providers should include in their agreements.

At Wellen, our capital advance agreements allow for periodic requests to modify payments, if our customer’s business experiences a change.  We believe that’s a more principled approach to providing capital.  For more information, give us a call.