Understanding Financial Alternatives
There are a number of options available to small and mid-sized businesses to finance their business including factoring, bank financing, and asset-based lending. Regardless which option you choose, it's important to evaluate and choose a solution that will enable your business to grow. Consider the following five criteria to help you determine which financing options will best match your needs.
|Affordability||Banks, asset-based lenders and factors can tack on fees, hidden charges and penalties above and beyond the initial cost. Make sure you fully understand the total cost of financing.|
|Control||Customer notification, monthly minimums, restrictive pricing, rigid terms are often required – giving you very little control over the process. When your company assets are used for cash you should have some say in the matter.|
|Risk||Avoid options that require personal guarantees, all-asset liens and restrictive covenants. Determine what level of risk you are willing to take.|
|Flexibility||Rigid borrowing terms, fixed credit and concentration limits, and long-term contracts make traditional financing sources inflexible. A financing option should be one that grows with your business.|
|Timing||Many traditional financing options require long lead times before you're approved and cash is disbursed. A 30-90-day wait for funds could mean the difference between success and failure. If you need cash quickly you should not have to pay more or take on more risk.|
Financing options are not a one size fits all. What may be good for one business, may not be a fit for another. Understanding the options available to you is only the first step.
Contact us to learn more about how The Receivables Exchange can help finance your business.