When an opportunity to grow your company presents itself, and you need cash to jump on it, where do you turn? Typically, you can't rely on traditional funding sources, such as bank loans, to arrive in time. Let's take holiday preparation, for example.
In July, Kabbage, a company that describes itself as a "straight-forward, friendly source for funding," surveyed more than 200 of its small business customers. It found that 41 percent of respondents foresee a "much stronger" holiday season this year, while 39 percent are banking on a "stronger" period of gift-giving and, hence, gift-buying. All told, the vast majority of small businesses (80 percent) expect a stronger holiday season in 2013 than last year.
It's not just wishful thinking; they have momentum on their side. Thirty-seven percent of respondents reported that business is already up more than 20 percent so far this year; 39 percent said that they were up 5 to 20 percent. And according to Victoria Treyger, chief marketing officer for Kabbage, that means many of them will need financing to keep up with demand and to help them finish off a year solidly in the black.
Kabbage provides financing for small businesses in the form of cash advances of up to $50,000. "The entire process is 100 percent automated, 100 percent online, and it takes 10 minutes," says Treyger. And many online shops—and some offline ones, now that the company extends financing to brick-and-mortar companies—will be borrowing from the firm as the holidays approach.
"This is the time to invest in inventory, invest in marketing, invest in staff," says Treyger. The problem that small businesses face with a bank or similar institution: lining up funds to make those investments could take weeks to process a loan application.
The holidays aren't going to wait, and judging by the small businesses that Kabbage polled, it's an opportunity that no company will want to pass on this year.
Smart Financing Spurs Small Business Growth
A company called MDTekk, formerly Recycled Device LLC, leveraged Kabbage's access to capital. Headed by Justin Dunmyer, a 21-year-old college student from Muncie, Ind., the company refurbishes, repairs and resells in-demand devices, mostly iPhones, iPads and Samsung Galaxy handsets.
In an era of record-setting iPhone 5s sales and the tech industry's ongoing obsession with ever-faster and more powerful smartphones and tablets, why bother with repairs? It turns out that there is "crazy demand" for devices that are a generation or two behind the bleeding edge.
"Everybody wants a smartphone," says Dunmyer. It's sign of how successfully Android-based devices and iPhones have invaded the mainstream. But not everyone's budget can accommodate the latest and greatest.
Enter Dunmyer and his crew. They snap up used or broken smartphones and tablets in lots or bulk quantities. Sometimes they buy them outright from businesses that refresh their company-issued mobiles in one fell swoop. Unsurprisingly, those sellers don't want to wait for a buyer to line up financing. They want their money now and will sell to anyone who has it.
To get a jump on these opportunities, Dunmyer turns to Kabbage. The ability to instantly tap the line of credit provided by Kabbage—interest applies only to the amount outstanding—allows his company to lock down great deals, like a recent haul of 190 iPhone 4S smartphones.
Kabbage offers a measure of financial agility that allows the company to act quickly and decisively when opportunities present themselves. It's a growth strategy that has propelled Dunmyer's company from $5,000 to $10,000 in sales per month, to more than $35,000 and perhaps even more as MDTekk not only prepares for the holiday season, but also its first physical location.
Kabbage, says Dunmyer, has "helped launch our business."
Pedro Hernandez is a contributing editor at Small Business Computing. Follow him on Twitter @ecoINSITE.
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