Can your Business Benefit from Alternative Financing?
Businesses that need additional capital should consider evaluating alternative financing options as part of their due diligence to determine the best funding source. Non-bank loans give businesses access to money that may not be otherwise available. Businesses choose to borrow from non-traditional sources for many reasons.
Take Advantage of Opportunities
An important business opportunity could arise at any time, leading the business to need speedy funding. Alternative financiers regularly approve loans in as little as one day, with funding as quickly as two days after application. Traditional financing often takes weeks for approval, by which time the opportunity may no longer be available.
Certain types of funding offer flexible repayments that can make it easier for businesses to meet their obligations. For example, businesses using merchant cash advances normally set up payments as a percentage of debit or credit card receipts that vary based on daily sales. Certain lines of credit may also be set up to accommodate seasonal business fluctuations.
Turn Accounts Receivables Faster
One flexible alternative financing product is factoring. Businesses sell their accounts receivables to a factor who underwrites the credit based on the companies paying the invoices. The business gets payment for the majority of the invoice typically within a day, while the factor normally waits 30 to 45 days for payment. Factors also commonly handle collection activities for the business when accounts do not pay as expected.
Manage Cash Flow for Growth
Businesses in a high growth phase often find cash flow management to be one of their highest priorities. While the business doesn’t have the revenues or assets to qualify for a traditional loan, alternative financiers often have several types of funding options to meet their needs. Finding an alternative funding product that takes future cash flow projections into account can set the company up to succeed.
Prepare for Seasonal Fluctuations
Many businesses experience seasonal fluctuations that significantly impact cash reserves. They may need to stock up on inventory or raw materials during slow-selling months prior to the busy season. Having the cash to stock up and take advantage of the most profitable sales season can be critical for the success of the business and alternative lenders frequently have financing products to meet this type cyclical demand.
Know Your Options
Rather than assuming that traditional bank financing is the only source for funding, business owners should look at the wide variety of alternative financing options to determine their best course of action. Both loan and non-loan financing products are available to fund growth and support cash flow needs throughout the business lifecycle.