More often than not, small business owners battle with the difficulty of fulfilling big orders for lack of adequate funds. Bagging a big contract appears less intimidating task than seeking capital to honour the same contract. Moreover, small businesses find it difficult to raise capital easily due to stringent standards set by conventional lenders.
Big retailers come to rescue
However, such roadblocks can be removed if the contract is being received by a big retailer or brand. A big brand or big business is capable of lending the required loan to suppliers so as to enable them to carry out the contract without hitches. For instance, Whole Foods Market in the U.S. runs its loan program that helps its small suppliers to fulfil orders. Such big retailers loan the sum at lower interest rates and flexible or short tenures.
A small business can systematically scale up its capabilities by accessing to such loans. Whole Foods alone has doled out close to $18 million to its small sized suppliers since 2006. Martha Stewart Living, Miller Lite, Chase, FedEx and Wells Fargo are some prominent big businesses that lend to small businesses.
More than cash
These big businesses could set their criteria while giving out loans, whereas the loan amount could range in between $1,000 and $100,000. The average interest rate charged on such loans is 5% while the repayment duration could vary between two and five years.
Seeking loan through big enterprises comes along with other accretive advantages. For instance, a small business does not receive just the cash, but it also gets the PR boost. Big brands extend support by mentoring the small businesses and provide networking opportunities, which could be a stepping stone for any business. Big business lenders often sent the loan receivers to summits, where they can enhance their knowledge to bolster and grow the business.
But it takes some effort to earn grants from big businesses. For instance, some brands may set out product specifications that should be delivered under the contract before awarding the loan while others would like to see a solid proof business plan. Strong social media presence and a compelling story could place a business right in front of the eyes of the lending judges, experts suggest.