Cash Flow: Alleviating The Strain While Preparing For Growth

May 18, 2017 by CNH Finance, LP in category “Financing”

Maintaining a steady cash flow is always a balancing act for small businesses. Strains on cash flow usually become even more prevalent when businesses are going through growing pains. In order to alleviate the strain on cash flow during these periods of growth, business owners are finding solutions outside of traditional bank loans.

The Cause Of Cash Flow Issues

The most common cause of cash flow strains is a lack of customer payments. This may seem simple, but payments are not always indicative of sales. Many businesses issues invoices with aging periods of 30 days or longer. Not only is the aging period a standard business practice, but it creates a staggered payment schedule, which, in theory, is supposed to translate to a steady stream of revenue. However, staggered payments also keep businesses from accumulating the growth capital they need to make larger improvements.

Loans And Cash Flow

Short term loans seem to be the conventional solutions for cash flow problems. There are many lenders who are more than willing to offer businesses short term loans as a means of rectifying issues with cash flow. Loans are a temporary solution, and when the money is gone and the same issues arise, taking out more loans means taking on more debt. Loans are not the answer, and the additional debt does not promote growth.

Cash Advances

While cash advances are frequently advertised as the alternative to loans, they frequently do more harm than good. The infusion of short term capital can alleviate financial strains for a short period of time, but the high interest rates and fees inhibit growth, and leave businesses paying off the balance for a long time.

Asset Based Lending

Asset based lending is a debt-free solution which provides working capital which can be used for growth. Asset based lending creates a line of credit which can be used as needed, rather than forcing business owners to take a large lump sum. Additionally, any improvements to a business are reflected in the asset based line of credit through an increase in available financing. This renewable source of working capital can get rid of cash flow issues, and allow businesses to grow for long term success.

Get Rid Of Cash Flow Woes

If your business could use a debt-free working capital solution to reduce or eliminate financial strains, contract the experts at CNH Finance. We specialize in asset based lending for businesses across all industries.

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