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BFS Capital Blog

5 Myths of Business Financing Debunked!

June 21, 2013

Whether or not you’ve actually gone through the process of getting financing yet for your business, you probably have some beliefs about it nonetheless—some true and some, not so much. Business financing has a lot of myths surrounding it, which could be keeping some businesses from pursuing the capital they need. So we’d like to set the record straight by taking on some of the most common business financing misconceptions, one myth at a time.

Myth #1: Businesses usually should—and do—start with a bank when they need financing.

Not so! Banks were once the primary (or only) ones offering financing to businesses. But much has changed with the business financing landscape over the course of the last decade. There are numerous alternative sources of financing for businesses, as well as choices in the type of financing you get.

At BFS Capital, we offer small and medium-size businesses the best of all worlds. We are unique in that we offer business loans up to $2 million! We also offer merchant cash advances—cash upfront in return for a fee based on a percentage of the business’s future credit card receipts. Depending on your business and capital needs, we’ll recommend the type of financing best suited to your situation.

Myth #2: Only businesses with poor credit and weak cash flow get financing from “alternative” sources.

This is a myth that has some basis in reality. It is true that many non-bank financing companies consider—and approve—financing for companies that do not qualify for a bank loan or line of credit due to credit problems or weaknesses in their balance sheets, for example.

At BFS Capital, we are proud to say that we’ve helped hundreds of these businesses stay in business and even turn their financial situation around. Had we not been willing to provide working capital to them, many of these businesses that would have disappeared otherwise are thriving today.

Beyond that, though, what we’re seeing in our business is a tremendous upward trend in customers whose businesses are financially solid—sound balance sheets, good cash flow, good credit. More and more we see businesses poised to grow to the next level; all they need is a substantial infusion of working capital. 

Despite their solid financials, many of these growing businesses still can’t get the kind of financing they need from their bank. And more often than not, to take advantage of growth opportunities, they need capital very quickly—long before the several weeks (or even months) it takes banks to fund a loan. We, on the other hand, assure these business owners they’ll have their funding within five business days. Customers tell us that overall, we’re achieving our goal of providing a financing process—and customer service at all the touch points of that process—that exceeds their expectations and sets a new standard in the financial services industry.

Myth #3: “Alternative” types of financing are always outrageously expensive—costs that are difficult to recoup.

Without question, there are costs involved in any type of financing from any source. And while bank charges are based on interest rates (and possibly some additional fees), other kinds of financing companies often charge differently.

At BFS Capital, we hear from customers time and time again that for their businesses, this has been more of an opportunity cost—more than made up when the capital they’ve received from us has enabled them to take advantage of opportunities that would propel their growth. Others say they’ve avoided the cost of lost business by replacing a critical piece of equipment or being able to respond to an emergency.

Myth #4:  The terms of non-bank financing are difficult and inconvenient.

Terms vary from one financing source to another. But we can certainly speak for ourselves.

Flexibility and responsiveness to business owners’ needs are ways we believe BFS Capital outshines other providers of business financing, banks included.  First, we take a hard look at your business plan, operating model and prospects for future growth. We recommend what we see as the best financing solution—and if we don’t think financing is in your best interest at the moment, we’ll tell you that, too.

We also make sure that the way we structure repayment for our customers works well for them—and especially, doesn’t disrupt their cash flow and weaken their financial position. For some, this can mean repayment of a percentage of future credit card receipts until the amount is paid in full. For others, it can mean repayment of a set amount from a bank account. In either case, payments are deducted automatically, making it very easy for the business owner.

Myth #5: There are all kinds of restrictions on non-bank financing.

Actually, the reverse is true. Banks may restrict how business owners use the capital they lend, and more specifically, there are several types of SBA loans with very specific restrictions for their use.

In contrast, BFS Capital puts no restrictions on how business owners use the working capital we provide, whether that is a loan or merchant cash advance. Business owners can use the funding for any legitimate business use and may even decide to spread the funds over several different business uses.

Image courtesy of Vichaya Kiatying-Angsulee /