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Best Business Loans for Marketing and Media Companies

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The media, marketing, and advertising industry had a rough year in 2020. Hit by the pandemic, revenue declined 3.1% as clients cut back on marketing spending. This came after years of steady growth.

However, the industry is expected to rebound in 2021 and beyond. Experts predict that revenues will grow 3.0% to $59.2 billion by the end of 2021. Digital and social media marketing continues to be a hot area for expansion.

Worldwide, companies are seeing the benefits of mergers and acquisitions, which grew 15% in 2019. By combining talents and client lists, agencies can continue to grow.

If you own a marketing or advertising agency, or are thinking of launching a new business, there are still plenty of opportunities in the industry. Or, maybe it’s time to acquire or merge with a competitor to launch your business’ next lifecycle. To fund your next step, consider taking out a loan.

Borrowed capital allows small business owners to fund their business plans while using the business’ cash flows to cover existing expenses. It allows you to avoid dipping into cash reserves or investments. But, before you apply for a loan, ask yourself a few questions to determine the best small business loan for your marketing or media company.

Questions to Ask Before Borrowing

Are you already an owner or are you looking to open or acquire a new business?

It’s easier for existing businesses to get funding than start-ups. You have a proven track record to shower lenders, and can predict cash flows and possible cash flow gaps. Banks like to see several years of tax returns and financial statements, too. 

Existing business owners have the required financial history to qualify for a bank loan – assuming that revenue and cash flows have been solid. Even an unprofitable business, or one that struggled during 2020, can borrow if it has enough cash receipts and a business plan for recovery. But if you’ve struggled with cash flow and possibly missed a few payments, your best option is to find an alternative lender who understands your business. 

Small business owners who are just starting out have different funding needs. Lenders could ask you to pledge personal assets – such as investment or retirement accounts – to secure a loan. And some lenders refuse to work with borrowers who have less than two years of business history, so you’ll want to approach a lender you know is open to working with you.

The stage or your business life cycle often helps you decide which lenders to approach.

Why do you need the funds? 

Maybe you need access to funds for working capital needs – to make payroll or pay rent during a slow period. Or, you need a large sum to acquire another company. Each need would direct you towards a different loan – in the first instance, a working capital loan or a line of credit, in the second a large business loan. 

Lenders offer loans for varying amounts and with different repayment terms. The right loan for a short-term need is not the right choice for an acquisition. Knowing why you plan on borrowing can direct you to the right lender.

What can you afford to borrow? 

Regardless of your plans for the borrowed capital, and their success, you will have to make payments on the loan. Typically, those payments come due before your plan’s completion, and before it begins generating revenues. 

Before borrowing, ask yourself if your business’s cash flows are enough to make loan payments and still meet your other obligations. Add up your fixed expenses – like rent, utilities, and payroll – and determine how much free cash flow you have each month. If it’s not enough to cover the payment reconsider borrowing or borrow less. 

A loan payment consists of a portion of the amount borrowed plus interest and fees, spread over the repayment term. Therefore, borrowing less reduces your monthly payments since it would reduce the base on your loan payment, and the amount on which a lender charges interest.

Your ad agency’s cash flows must cover the loan payments – particularly if there is a delay between cash outflows and inflows. Make a budget before borrowing and include a plan to pay back the loan. 

How long do you need to borrow?

How long do you plan on using the loan’s funds? For large scale capital investments, the loan’s term should end close to when the project is complete. It’s important to know how long your project will take, or how long you’ll need to use the money, before you apply for a loan. 

The lender selects a loan repayment term, and traditional banks often have established periods of two to five years for small business loans. With alternative lenders, you can borrow for just a few months.  Since the repayment happens over a more concentrated timeframe, you’ll have a higher loan payment. 

It’s inadvisable to still be making payments on a loan when you’re no longer receiving the benefits of what it funded. After determining why you plan on borrowing, and how much you need to borrow, establish a project timeline and know how long you’ll need to use the loan’s capital. In some cases, a short-term loan is your best choice and you might want to approach an alternative lender.  

What is your business and credit history? 

Your credit score and business’ credit history are an important part of any loan application. Lenders view a credit score as a sign of your creditworthiness, and it will impact their willingness to lend to you and the loan’s terms. Small business owners with poor credit will find it harder to borrow because lenders view them as a bigger risk. 

Before applying for a loan, check your credit score. Knowing it will give you an idea of the interest rate you’ll pay to borrow and which lenders will lend to you. Since a lower credit score reflects higher risk to the lender, you’ll pay more to borrow. 

Best Business Loans for a Marketing Company

Once you know why you need to borrow, how much, and for how long, you can start looking at the best loans to meet your needs. Lenders offer different loan products designed to fit various circumstances, and one of these will be the best fit for your small business. 

Working Capital Loans

Working capital – calculated off the Balance Sheet as current assets less current liabilities – is the money you need for daily operating expenses. For businesses that bill half up front, or work on deposit, cash flow management can become difficult. 

Let’s say you under-billed or under-budgeted the labor hours on a client project and you owe freelancers and subcontractors for their work. You can’t bill the client the rest of the project’s costs until it’s complete, but need to pay them. A working capital loan is perfect for this, and similar, situations.

A Working capital loan has a short repayment period, funds quickly, and fewer underwriting requirements than a traditional bank loan. It’s designed to help small business owners who face temporary, or emergency, cash flow issues. A working capital lender reviews and approves your loan application in hours, and can release the funds in as little as a day. 

Working capital lenders offer loans in amounts between $10,000 to $1 million. To qualify for a working capital loan, small business owners need a credit score above 650 and your marketing or media company must have minimum monthly revenues of $10,000. 

Same Day Business Loan

A same day business loan could help fund an acquisition, expansion, or other large project that requires an immediate decision. A same day business loan lender funds loans in amounts between $10,000 to $2 million. This could be enough to purchase a smaller or larger company. These quick business loans have repayment periods of up to three years, which gives you time to complete the expansion, or integrate the acquisition, and realize its financial benefits.

Because the loan’s repayment is spread out over a longer term, these loans have lower payments. A lower payment makes it easier to manage cash flow during the project’s launch phase when you’re spending money but the project isn’t yet generating revenues. Interest rates range from 12% to 45%, depending on your credit score. Your marketing or ad agency qualifies for a large business loan with a credit score above 530 and minimum monthly revenues of $10,000. 

Short Term Business Loans

You can take between one to three years to repay a short term business loan, which falls between a working capital loan and a large business loan for repayment term. These loans work best to fund a smaller project – such as investing in new software or a website build – which will be completed within a year. 

To qualify for a short term loan you will need a minimum credit score of at least 650 and two years in business. Your business’ minimum monthly revenues must exceed $10,000. You can borrow as little as $15,000 and up to $750,000. 

Merchant Cash Advances

Do your ad agency clients primarily pay by credit card? If you collect payment on invoices through an online portal or via credit card, then you could be a good candidate for a merchant cash advance or MCA. With a MCA, lenders advance your business a sum of money based upon your past credit card sales.

To qualify, you’ll need minimum monthly revenues of $8,000 as proven by credit card statements, a credit score of at least 500, and two months in business.. Based on the credit card statements, the lender will estimate future sales. They advance an amount of money against that estimate. Because sales matter more to the lender than time in business or credit score, it’s a great loan product if you’re newer in business or have poor credit. 

Because a MCA is that it’s repaid through automatic deductions from your credit card sales repayments are easy and align with your cash flows. You don’t have to budget for a large, monthly payment or worry about saving enough money to make a loan payment one day a month. However, there is a cost to this convenience, as interest rates are between 24% to 49%. 

Merchant Cash Advances

Do your ad agency clients primarily pay by credit card? If you collect payment on invoices through an online portal or via credit card, then you could be a good candidate for a merchant cash advance or MCA. With a MCA, lenders advance your business a sum of money based upon your past credit card sales.

To qualify, you’ll need minimum monthly revenues of $8,000 as proven by credit card statements, a credit score of at least 500, and two months in business.. Based on the credit card statements, the lender will estimate future sales. They advance an amount of money against that estimate. Because sales matter more to the lender than time in business or credit score, it’s a great loan product if you’re newer in business or have poor credit. 

Because a MCA is that it’s repaid through automatic deductions from your credit card sales repayments are easy and align with your cash flows. You don’t have to budget for a large, monthly payment or worry about saving enough money to make a loan payment one day a month. However, there is a cost to this convenience, as interest rates are between 24% to 49%.