As a business owner, you will probably find yourself facing issues with your cash flow or needing money to deal with the day-to-day dynamics of your operation. Finding a prompt solution to this problem is a challenge since dealing with banks has become troublesome, especially if you have a small business. Many banks tend to be very cautious about how they loan money these days, even if you have clean track record by paying your debts on time as well as a spotless personal credit history.
Many people choose to max out their credit cards or sell their personal assets to keep their operations afloat. While these measures sound a tad extreme, is fair to say they are pursued out of ignorance and fear.
There are quite a number of alternatives to finance your business if you are hurried and willing to work with financial alternatives different from banks like the reliable lender Discovery Credit. Over the curse of next lines, we’ll cover a few of them while we explain how they work. Read on, this information will help navigate through hard times:
Asset Financing
This financial instrument is also known as Asset-Based lending and it follows a pretty straightforward scheme to offer financing. The agency or financial company offering the product use the assets you need to buy as a collateral for the amount of money you need to borrow, transferring to them default ownership until you pay the last quote.
You can choose to work with a hired purchase or a leased one. With the first one the asset will be included in the company’s balances, by using the leasing, the assets financed will stay off the balance sheets until they are properly paid off.
Contracting a Credit Line
This financial instrument is usually worked out directly with the providers of working material and the suppliers of a business. A credit line is designed to cover short-term expenses such as covering the costs for additional equipment, restocking inventory and covering operational costs. They are not intended to be a long-term solution since they are supposed to work in the same way as credit cards are managed; periodical payments need to be made in order to keep them available and a fair amount of interest will be charged over the money you borrow. Since this is ready-to-use and available upon request, your provider will be able to charge as much interest as he deems plausible if you fall behind on your payments. Just make sure to have the terms of every line of credit in writing to avoid legal issues.
Invoice Factoring
This is one of the greatest tools used by companies offering their services to other business instead of the general public. Explaining the structure of this type of financing is bit complex but we can try to give a shot, it goes as it follows: a service provider generates an invoice to one of their clients and sends a copy of it to the lender company financing the main debtor.
After getting their hands on the invoice the lending company will issue a partial payment to the service provider based on the copy of the invoice received. When the payment is made by the lending company is up to the main debtor to cover the remaining of the invoice.
Merchant Advance
This financial instrument is a type of cash advanced offered after securing accurate information about the actual cash flow of a company. It’s classified by many as a secured loan since it covers the expenses managed by credit cards tied to the company’s expenses. While the inspection sounds like something a bank would do, the fact is that even after noticing a negative balance the lender would still offer the money by taking certain assets of your company as collateral.
Purchase Orders
These are one of the most flexible means of financing in the list, the work is very simple: a company offers a pre-sale of their products to targeted customers to get financing to produce them. This gives business operation room for maneuverability as they do their best to fulfill deadlines and crunch numbers to secure the supplies they will need to make good on their offering. The model is not exactly new and it has evolved in modern times, is one of the preferred means to gather funding for many start-ups related to ICO’s and token utilities.
Turnaround Finances
A tool specially designed to help out struggling businesses looking for a second air or to solve financial issues brought forward by factors out of their management capabilities. This measure can save a company, but it will take away a great deal of control out of the owner’s hands. The financing company will grant a third party decision power to manage the finances of the company to stabilize them. The money will be injected where it’s needed and sacrifices will be made to keep the company profitable at all costs.