Debt Financing: Is There a Better Way to Grow a Business?

August 23, 2018 by CNH Finance, LP in category “Financing”

Debt financing has long been the standard way to sustain and grow a business for centuries. Business owners borrow capital in exchange for debt and interest and pay off the balance over the following months and years. However, with payments on loans due regardless of high or low revenue cycles, are debt financing solutions really the best options to grow a business?

Debt Financing Can Lead to Bankruptcy

Every year, hundreds of businesses file for bankruptcy because of insurmountable debt. Because it has been ingrained in us over the decades, debt financing has become the “go to” method for entrepreneurs to sustain and grow their operations. Need to purchase materials and equipment? Take out a loan! Is cash flow tight yet bills are piling up? Take out a loan! Need to pay off existing debt? Take out a loan to pay off other loans! It may seem ridiculous, but the truth is that many traditional-thinking entrepreneurs attempt to build their empires on debt financing when all it really does is create a mountain of liabilities on the balance sheet. No matter how many sales your team makes, the outcome may not amount to much if the majority of your revenue is going towards paying down the balances on various loans, each with different terms and rates.

There is a Viable Alternative to Debt Financing

Fortunately, modern business owners have a funding option that is free of debt. Asset based financing offers a renewable source of working capital without the restrictions or burdens associated with traditional loans. Asset based financing is structured around those items a business already owns, such as equipment, property, receivables, and inventory. All of those items have an inherent value, and asset based financing uses said value to create a revolving line of credit. The line of credit can be drawn upon as needed and used for any purpose. Businesses can use the capital to hire employees, purchase materials, run marketing campaigns, and even pay down existing debt. As the balance is repaid, the amount of capital available is replenished. Additionally, as a business makes more sales, acquires new equipment, or expands inventory, the amount of financing available also increases.

CNH Finance is committed to providing a comprehensive and accessible alternative to debt financing. We offer asset based financing to all industries in order to keep businesses from folding under the burden of debt and to allow entrepreneurs to get a stronger foothold in today’s competitive economic landscape. Contact our offices today to learn more about how asset based financing can help your business.

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