It’s not easy to get a loan. It’s even more difficult borrowing the money you need for your business with middle market loans.
Your business is not big enough to receive large bank loans, yet on the other hand, it is too small to obtain small business loans.
And you probably feel like you are in loan purgatory.
All these prepayments, collateral, and financial covenants… it can all be challenging.
And now after completing this grueling process, you have to make the right decisions on how to use these loans effectively.
In this blog post, we will discuss in length the ways on how you could use your middle market loans effectively. Then, we’ll outline tips on how you can pick the best equipment financing companies!
Get a High ROI on Middle Market Loans
Middle market companies are those who have annual revenue of $100 million to $3 billion. Middle market companies benefit from acquiring funds from middle market loans. Usually, they use the loan for funding the growth of their businesses. Financing companies -- and even individual financiers -- offer more generous loan options for businesses that grow aggressively.
The best way to use your middle market loan is by acquiring profitable assets that will give you a high return on investment (ROI).
But just before you decide to apply for a middle market loan, you must first analyze how you would use the loan for your business.
How to Use Your Business Loan Through Middle Market Lending
When you apply for a middle market loan, the payment option is largely determined based on how you would use it. So, before getting a loan, think deeply about how you would use it and how you would pay it back.
With this in mind, it’s important that you create projections. Projections will help you determine how you would use your loan on the important aspects of your business.
Without a projections and/or a business plan, chances are you’re going to overspend the loan, or worse, use it unwisely. Overspending can be the most destructive thing to happen to your company after receiving the business loan.
If you need to spend something out of your business plan, it’s important that you monitor every money that goes out. Doing so will help you keep track of your loan and minimize the need for further borrowing.
Also, just because you’ve acquired a business loan it doesn’t mean you need to spend it all. Stick to your business plan and only spend what’s needed with middle market lending.
Getting a High ROI
This may seem obvious, but it’s worth saying: use your loan strategically by investing in profitable assets that will give you a high ROI.
Here are some ways you can use your loan to get high ROI:
Buying Stock or Inventory
Buying inventory is one of the best ways to get a high ROI. The inventory or products you invest in serve as the collateral itself.
Aside from that, purchasing stocks or products can help you in seasonal fluctuation. It will allow you to sell products even if there are limited stocks available.
Expanding Your Business Operations
Expanding your operations will increase your revenue. There are different ways to do it.
You can expand your business by:
- Adding new products,
- Acquiring additional facilities, or
- Moving to larger premises.
Expanding your operation into multiple areas will cost you significant capital. But if you want to grow you need to get new equipment, hire new employees, and lease new property.
But even though there is a significant cost, smart planning of your expenditures are likely to result in more customers, brand exposure, and ultimately more sales… giving you a positive ROI.
Acquiring New or Used Equipment with Middle Market Lending
Another way to increase your revenue is by getting new or even used equipment. Settling on old equipment may seem practical, but the truth is, it could slow down your quality and production.
Therefore, the biggest advantage of new equipment is an improvement in productivity.
And the cost of the new equipment…?
That’s where equipment leasing comes to the rescue.
Leasing equipment doesn’t require any large money upfront. Reliable equipment leasing companies like Trust Capital offers equipment leasing with flexible payment options.
3 Alternative Financing Sources for Middle Market Businesses
Since 2007, banks set higher standards for loan applications. Hence, qualifying for a loan has become more difficult for middle market companies.
On the other hand, when business owners need funds to expand their firms, they usually avoid using their capital… and for a good reason. They understand that using their capital for big expenses may cause a cash shortage in the future.
Many believe that banks are the best option to get loans. But then again, because of their tight requirements and grueling process, they might not be the best option after all.
The good news is, there are other financing sources where you can apply for loans:
To give you an idea about it, here are common alternative financing sources.
- Factoring - This is a traditional form of non-bank finance commonly used by retail companies. You simply transfer your accounts receivable to a third party, also known as a factor, in exchange for cash.
- Equity financing – This is the process of getting additional funds by selling shares. The funds that you’re going to get is from the interest you earn from selling the ownership.
- Privately Owned Finance companies - Finance companies is one of the most popular options for getting loans. Unlike banks, financing companies have lower requirements and a faster application process.
If you ever need funds for business expansion, we recommend acquiring them from privately owned financing companies. Financing companies offer middle market loans. That makes them the best alternative to local banks for loans.
Using Middle Market Loans
There are hundreds of financing companies out there. So many that choosing the best becomes difficult. Each company differs in interest rate, requirements, application process, policy, transparency, and payment options.
Read further to know how you can choose the best financing company.
Choosing the Best Financing Company for Middle Market Lending
Having a partnership with a reliable financing company will ensure you that you’re going to benefit from your loan.
Many financing companies out there just trying to pull a fast one over business owners. Some companies may trick you by not completely discussing the terms and conditions. They’re the ones who truly benefit from the loan instead of their client.
Trust Capital understands how important money, business, and success are. They help business owners achieve colossal business developments. And as one of the most reputable financing companies in the United States, you can be sure that your loan is secured with them.
Most middle market companies choose to go with a 60-month operating lease with a 1-2% fully amortized rate on the term of the loan and a FMV buyout. Also, Trust Capital offers very low rates to middle market customers with only one payment due upfront.
Final Thoughts on a Middle Market Loan
Companies with annual revenue between $100 million to $3 billion are qualified for middle market loans. It’s a great loan option for businesses that are not big enough to apply for large bank loans, and are too large to apply for small business loans.
Acquiring a loan can help improve your business. But if used unwisely, it could also deteriorate your business.
To avoid hurting your business, create a business plan and stick to it. Creating a business plan will help you use your loan wisely: on what’s important to the bottom line.
Acquire assets that will give you high ROI. If you ever need to spend something out of your business plan, make sure to keep track of it.
Applying for middle market loans from banks can be difficult. But you can always try alternative financing sources such as financing companies. Consider acquiring loans from a reputable lender such as Trust Capital, LLC
Get Middle Market Lending for Your Business Today
To know more about middle market loans, you can reach Trust Capital at (866) 458-4777 and speak with a middle market loan specialist that can offer you a no obligation approval, run payment scenarios for you subject to credit approval and go over your tax benefits.