Running a business is one of the toughest challenges you can professionally face. Every business owner deals with a constant flow of hurdles, but there are easy ways to overcome them. It just takes the right knowledge to successfully compete in the business world and overcome its daily challenges. There are a few tricks to every trade and there are several solutions that successful businesses share.
At the core of every business is a numbers game. It is all part of the challenge of operating a successful business. The numbers associated with profit and cost are at a constant battle. In order for profit to prevail, a business will have to take advantage ofits assets. Every business has assets; some business owners don’t even realize that they may have some very powerful assets. These assets could be used to help a business turn a profit. Assets can be physical items like: office furniture, computers, machinery, or a finished product and its components.
Not every business sells aproduct, but rather a service. These businesses may not have physical assets that they can take advantage of, but they still have very powerful assets in the form of open invoices.
Any business can leverage the power of these assets in order to help make a profit. At the end of the day however, there is a wide range of expenses that must be paid. A business that is not making a profit will not be able to handle these expenses and thus, stay alive.
Is a Loan the Right Solution?
Loans can be a great way for any business to get ahead, but getting approved for a business loan is often a difficult task. Banks will require every business to meet a specific set of requirements. If these requirements are not met, then the bank will deny the loan. The few businesses that are lucky enough to meet the strict requirements of a bank funded business loan will be facing higher interest rates, and most banks don’t fund 100% of the original loan amount.
Asset Based Lending May Be the Better Choice
This is a unique form of lending that allows a business to benefit fromits assets. These assets could be inventory or open invoices. In order for any business to take full advantage of this unique type of lending, they will need to find a company that specializes in this type of lending. This type of company is called a factoring company.
A growing business will face its own unique set of challenges. There are businesses all over the world that grow faster than their cash flow intake. That is where asset based lending comes in.
How Does It Work?
This type of lending allows a business to take advantage of its inventory or accounts receivables by using them as collateral. Accounts receivable financing allows a business to collect the funds from open invoices before they are due. It is not uncommon for a business to give its customers 60 or 90-day terms. This is great for the average customer, but for a business, it can be difficult to continue steady growth without access to the funds that are tied up in the invoices. This type of financing allows businesses to retrieve profits with open invoices.
Purchase order financing is another excellent option. This form of financing allows a business to finance the purchase of items that have already been sold to a credit-worthy customer. 1st Commercial Credit PO Financing is another solution for businesses that are growing faster than their cash flow.
What Are the Benefits?
This financing technique does not come with all of the same hassles that a traditional bank loan does. The interest rates or fees may be a bit higher than a traditional bank, but there are not as many pre-requisites. There are no audits, no financials, no minimums, no upfront fees and no hidden fees. Setting everything up can take as little as 3-5 days. Once everything is set up, the funds can be available in as little as 24 hours.
About the Author: Raul Esqueda is founder and CEO of 1st Commercial Credit, LLC out of Austin, Texas. Raul has experience in funding businesses of all industries and sizes within the United States, United Kingdom and Canada and has written many articles on purchase order finance, factoring and asset based lending.