Accessing Non-Traditional Small Business Funding to Accelerate Post-COVID Growth

Published: Mar 25, 2021

Written by: Avi Levine, Vice President at Star Funding

If you’re a business owner, chances are you’ve spent the majority of your time over the last twelve months searching for innovative ways to keep your business alive during the pandemic. According to the most recent data collected by the U.S. Department of Commerce, over 70% of businesses in the U.S. had a moderate-to-large negative impact from the pandemic, and over 55% expect it to take at least 6 months to recover to pre pandemic levels. But in 2021, many businesses that survived the tumultuous economic uncertainty of the past year are now experiencing rapid growth. In the U.S. and around the world, stay-at-home orders are being lifted, the weather is changing for the summer months, and U.S. residents are beginning to receive stimulus funds from the government.

As a result of the growing economy, we can expect to see relatively larger purchase orders (POs) come out from major retailers and distributors in the next few months. However, if the vendors they are buying from had a financially-challenging year in 2020, their banks or lenders may deny them the loans needed to fulfill their new POs. For businesses planning for growth in 2021, traditional funding options may be off the table due to decreases in sales and troubled balance sheets coming out of 2020. If you’re a business owner looking for a crucial funding injection to survive and grow, the non-traditional business funding options offered by Star Funding may be a more realistic option in the short-term.

Two primary avenues of non-traditional funding for companies are Purchase Order Financing and Accounts Receivable Factoring. For these, rather than focusing on a company’s past financial performance by analyzing the last two (or more) years of balance sheets or P&Ls, Star Funding analyzes the opportunity that lies before the business through upcoming POs. Great news for recovering businesses in need of capital to get back on their feet in 2021.

Most of the businesses we work with are companies that have recently been presented with an opportunity for growth. If your business struggled in 2020 but has secured a $5M PO from Wal-Mart or Costco, you may have some working capital, but you are likely going to need some capital to fulfill your end of that PO in the coming months. Unfortunately, your bank or credit card company may not be able to lend you that capital due to low performance in 2020. In comparison, these new opportunities are ripe for non-traditional funding. At Star Funding, we have no problem helping growing companies that find traditional financing avenues limited, or outright unavailable. Instead, we look at the opportunity those businesses have in front of them and work with the business owner to figure out what they need in order to grow and succeed.

With the impact of COVID-19 still being felt across most industries, many business owners may not want to take out additional long-term and/or fixed-rate loans this year. The commitment is just too risky with so much uncertainty in the markets. Many business leaders are going to be managing their finances on a ‘PO-by-PO basis in 2021 to ensure they don’t take on any excess inventory or capital that they may not otherwise need. For these companies, the ideal avenue of financing POs moving forward would be done on a transactional basis, based on the specific opportunity they have before them. Non-traditional funding opportunities can help, as businesses look to smart financial planning to accelerate growth in a post-COVID world.

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To apply for non-traditional financing, you should have this key information available:

● Details of new business opportunity on the table including the sales contract or purchase order

● Proforma invoice or projection of costs and expenses related to procuring or manufacturing the required products

● Recent balance sheet and P&L

Coming from a manufacturing and consumer product background, Star Funding Vice President Avi Levine looks at financing differently than his peers, taking a real-world approach to Purchase Order Financing. His hands-on career experience has given Avi a thorough understanding of how wholesale and distribution companies work from the inside out.