Borrowing for Small Businesses: Is it Worth the Risk?

October 4, 2018 by CNH Finance, LP in category “Financing”

Small business owners are inundated with the philosophy that they cannot thrive or grow without borrowing capital from traditional lending channels. Loans, merchant cash advances, and other forms of financing place a strain on cash flow and offer single-use sources of capital. Between debt, impacted credit ratings, and a strain on cash flow is borrowing worth the risk?

The Burdens of Borrowing

Borrowing from traditional lending channels places a number of burdens on small businesses. First, the requirements to access loans are prohibitively high. Small businesses may not have the credit ratings to get the capital they need, so they are stuck borrowing a lower amount complete with debt and high interest rates. Second, even a small loan impacts business credit ratings. If the need arises for loans in the future, the adjusted credit ratings and existing debt may make borrowing an impossibility. Third, loans are one-off financing. Once the capital is used, the debt remains, and the only recourse to get more money is to apply for yet another loan, which brings more debt.

Merchant Cash Advances

Merchant cash advances are offered under the umbrella of “alternative financing.” Merchant cash advances are pushed as zero-debt advances in capital to help businesses with cash flow issues or for growth. What business owners are rarely told upfront is that merchant cash advances are repaid only through sales paid for via credit card. If customers are using cash, checks, or even e-payments, that revenue doesn’t count toward repaying the balance. With cost-ineffective fees and interest rates, along with balloon payments, taking out a merchant cash advance can cause more long-term harm to finances than it claims to help.

Asset Based Credit

Instead of digging a hole with debt-based financing or merchant cash advances, small business owners are opting for asset based lines of credit. Asset based lines of credit provide a renewable source of working capital structured around assets owned by your business. The revolving line of credit can be drawn upon as needed without placing debt on the books. Additionally, the line of credit can be used for anything, from correcting cash flow issues to restocking inventory, marketing campaigns, paying down debt, or anything else. Best of all, as your business grows, the amount of financing available through asset based lines of credit will also increase.

CNH Finance specializes in asset based solutions for small businesses in every industry. Contact our offices today to get the financing you need without impacting credit ratings or taking on unnecessary debt.

Image for 'Medical Financing In Bethesda, MD With Asset Based Lending'
Medical Financing In Bethesda, MD With Asset Based Lending

Finding adequate medical financing in Bethesda, MD is a challenge for both large healthcare centers and independent practitioners. With traditional lending channels offering debt based…

Image for 'Equipment Upgrades: Getting More from Your Machines'
Equipment Upgrades: Getting More from Your Machines

Every business uses equipment. It can be said that the success of any business is partly due to having access to the right machines, technology, vehicles, and tools. Periodically,…

Image for 'Greenwich, CT Medical Distributors Reduce Need for Loans'
Greenwich, CT Medical Distributors Reduce Need for Loans

Greenwich, CT medical distributors are experiencing a rising demand from their clients. As the population grows and more people enter their senior years, the need for pharmaceuticals,…

Image for 'Construction Companies Are Using Equipment To Get Lines Of Credit'
Construction Companies Are Using Equipment To Get Lines Of Credit

Construction companies face a number of challenges when trying to secure financing. Traditional lending institutions, due to red tape, often take too long when processing loan requests,…

CNH Finance
24 East Ave #1285
New Canaan, CT 06840
Phone: (203) 266-3210

Business Development
Long Beach, CA 90803
Phone: (562) 833-7815

Business Development
3334 E. Coast Hwy, Suite 541
Newport Beach, CA 92625
Phone: (714) 520-1788

Melinda Ficek

Maryland Office
3 Bethesda Metro Center, Suite 723
Bethesda, MD 20814
Phone: (301) 529-9993

Steve Silver

Business Development
5050 Quorum Drive, Suite 700
Dallas, TX 75254
Phone: (972) 687-9157

Rossi Felix