Business Loans: Going Beyond Conventional Thinking

November 30, 2017 by CNH Finance, LP in category “Financing”

Business loans have long been the mainstay for entrepreneurs, however, a new school of thinking has taken over. More business owners across all industries are thinking outside of the box to find financing alternatives to business loans which do not place debt on the books. Not all of the alternative solutions are the same, however, and we will be looking at the pros and cons of financing without business loans.

Using Cash Advances Instead Of Business Loans

Cash advances are often sold as the hassle-free alternative to business loans. This advance in capital does not come with any debt, and it has no set payment schedules. However, there are big drawbacks to using a cash advance. First, the balance is repaid from a small percentage of the total sales a business makes. While this may seem flexible at first, unless a business has an inordinately high number of sales for the terms of the cash advance, it is impossible to pay off the balance without ending up with a large balloon payment after all is said and done. Cash advances also have high fees and interest rates, which is how they are able to advertise as a debt-free alternative to business loans.

Traditional Lines Of Credit

More credit providers are trying to make business lines of credit available to entrepreneurs. Usually, these lines of credit have seemingly great benefits, such as zero percent interest, or other incentives to get businesses locked into an agreement. What isn’t stated upfront is that interest rates jump up after a set period of time. Additionally, most introductory business lines of credit are much smaller than most businesses can make use of without maxing out their accounts. Introductory lines of credit may seem enticing, but the interest rates and fees will often negatively impact credit ratings, making it even more challenging to qualify for business loans.

Asset Based Business Loans

Asset based business loans do not work like traditional debt structures. Despite the name, asset based lending is actually a line of credit based around the value of assets such as equipment, inventory, receivables, and more. The revolving line of credit does not place debt on the books, nor are there hidden fees, balloon payments, or secret, arbitrary spikes in interest rates. Asset based lending goes beyond conventional lending programs so businesses can access an affordable and renewable source of working capital.

Contact CNH Finance today to learn more about asset based lending, and say farewell to traditional business loans.

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