Financing without Debt? Viable Options for Businesses
Finding accessible financing is a challenge for businesses of all shapes and sizes. Up until the Great Recession, the conventional method for everything from startup capital to growth financing was to take out a loan, and suffer through the debt and impacted credit ratings.
New Thinking Ten Years Later
The Great Recession was only a decade ago, and the country has made a strong recovery since. However, the landscape has changed dramatically in that time. Traditional lending channels, wanting to protect their own interests, have raised the requirements on loans to prohibitive levels for new and small businesses. On the other side of the coin are business owners who have learned lessons from the recession period and its recovery. Even though we are currently in a growing economy, debt-based financing is still avoided by businesses wherever possible. If the economy takes a downturn, businesses do not want unnecessary debt on the books, because banks will come calling, regardless of revenue. Fortunately, there are viable financing options for businesses which do not place any debt on the balance sheet.
Accounts Receivable Financing
Accounts receivable financing eliminates staggered payment schedules while simultaneously giving businesses access to revenue that is tied up in unpaid invoices. Businesses need access to working capital, and unpaid invoices frequently place a strain on cash flow, forcing businesses to take out loans. Accounts receivable financing quickly converts unpaid invoices into cash – usually within 24 hours – so businesses can maintain a healthy cash flow and build up working capital reserves, all without debt.
Purchase Order Financing
Purchase order financing is an ideal solution for businesses that want to position themselves for growth without taking on debt. Purchase order financing is an advance in working capital to cover the cost of large or unexpected customer orders that would otherwise place a strain on regular operations and finances. Once the order is completed and the customer pays the invoice, the financing is deducted and the rest is delivered to the business as revenue. This allows businesses to take on larger clients without losing out to the competition.
Just Scratching the Surface
We have just mentioned two debt-free financing options for businesses. There are also merchant cash advances, unsecured lines of credit for new and small businesses, and consumer finance options to provide reusable sources of working capital without needing to take out bank loans. Contact Approved Business Lending today to learn more about debt-free financing options for your business.