Mid-sized companies with strong sales can still experience periods of cash shortages which can prevent them from acting on business opportunities. For many companies, when the need for a capital infusion arises, traditional lending sources are often not an option because they usually require a solid credit history or a lengthy operational track record. In these situations, where the need for capital is usually immediate and temporary, bank financing is not a good fit anyway because it can take months to secure a loan and the terms are inflexible. Companies responding to business opportunities or an unexpected cash crunch need to be nimble with the flexibility to match their financing solution to their changing needs. That’s where alternative financing solutions such as cash flow loans or inventory lines of credit come in. Both can be tailored to the specific needs of the company while offering just-in-time capital on a flexible basis.
Cash Flow Loans (“merchant cash advance“)
Many mid-sized companies are all too familiar with the problems caused by temporary cash flow shortages. Whether it’s the strain placed on daily operations or the inability to capitalize on new opportunities, cash flow shortages can be the biggest impediment to growth. Until recently, companies could only turn to traditional lending sources for their capital needs, only to be turned down for lack of credit standing or sufficient operational history. With the emergence of alternative lenders in recent years, companies now have access to short-term financing via cash flow loans.
A cash flow loan is an advance on the cash flow a company expects to receive in the future, which is then repaid from that future cash flow. Alternative lenders rely on many factors in determining whether to approve a loan, but will consider any business with at least a year of operations and $150,000 in annual revenue. Although these cash flow loans tend to more expensive than traditional loans, they provide companies with a quick solution
Mid-sized companies that rely on having the right amount and the right type of inventory at the right time sometimes find themselves in a challenging situation when cash flow problems arise. Uneven cash flow can often result in inventory purchase delays that could disrupt customer relationships and any lost business could result in future cash shortages. To avoid this predicament, companies should have access to an immediate and reliable source of capital. For companies that otherwise don’t have access to traditional lending sources due to their credit standing, an inventory line of credit offered through alternative lenders can provide the lifeline they need to keep their cash flowing.
An inventory line of credit of up to $500,000 can be established based on the strength of the company’s sales and can be used to purchase inventory as it is needed. Companies can control the amount they need to borrow and repay the line as inventory is sold. It is a more expensive form of financing, so companies should only borrow amounts they can expect to repay within a short period of time.