For many businesses in need of working capital, a merchant cash advance often looks like an attractive option. A merchant cash advance claims to offer flexibility, low costs, and zero…
For businesses trying to adhere to a budget, taking out large loans and cash advances can flip finances upside down. This can be especially true for new and small businesses, as well as for those in the healthcare industry. Single-use loans and debt-based financing do not help to ensure continued success. Instead, business owners and decision makers are using renewable and debt-free financing that scales with business growth.
Debt-Based Loans Can Ruin Your Budget
While debt-based loans were once the “go to” for working capital, business owners have learned from previous years. Traditional loans are prone to arbitrary rate hikes. Bank loans are also rather inflexible in the case of an economic downturn, which can place a higher strain on business finances. Additionally, getting out from under debt from loans can prevent growth because a good portion of revenue is going towards paying off major liabilities. What’s more, debt-based loans only provide capital for a single use. Once used, the only recourse is to secure another loan and take on more debt.
Cash Advances Create Big Problems
Next to debt-based loans, cash advances are often used for working capital. Since cash advances claim to not place debt on the books, they can seem very attractive on the surface. However, cash advances can have a boomerang effect that can decimate your budget when the terms of the agreement end. Unlike loans, cash advances do not have regular payments. Instead, a small percentage of credit card transactions are applied toward the balance owed. This should offer more flexibility than loans, but when you subtract high interest and fees, very little is applied to the principal. This leaves business owners with an overwhelming balance to repay, which can decimate a budget and place a huge strain on finances.
Budget Friendly Financing
Asset based financing offers working capital which is debt-free, renewable, and scalable to your business. Asset based financing is a revolving line of credit structured around the value of things like receivables, equipment, property, inventory, and more. Your business can draw upon the line of credit as needed, and the amount available is replenished as the balance is repaid. Additionally, as your business grows, the amount of capital available increases, which promotes growth without the need for debt-based loans.
CNH Finance is a leader in asset based solutions for all types of businesses. Contact our offices today to learn more.