Financing Alternatives: Avoid Being Turned Down By Banks

September 14, 2017 by CNH Finance, LP in category “Financing”

Financing alternatives come in many forms, but not all are beneficial to businesses. With banks becoming more prone to rejecting loan requests, business owners are seeking viable financing alternatives to help promote growth while reducing liabilities. We are going to go over the pros and cons of various financing alternatives, to help clear up come confusion.

Merchant Cash Advances

Merchant cash advances are promoted as an infusion of capital to help businesses grow or alleviate a financial strain. The positive points are that merchant cash advances do not involve payment schedules, nor do they place debt on the balance sheets. However, as far as financing alternatives go, merchant cash advances are extremely expensive. Because they offer an advance in capital without debt, the interest rates are extremely high. Payments on the balance are only drawn from customer transactions paid via credit card. Additionally, if a merchant cash advance is not fully repaid before the terms of the agreement expire, the remaining balloon payment, plus interest, could place business finances in very dire straits.

Equipment Leasing

Equipment leasing agreements are pushed as debt-free financing alternatives. Instead of paying up front for things like equipment and vehicles, the cost is spread out over monthly installments. While this overtly looks like a great way to save money and get access to equipment, it does nothing to improve the worth of the business. Leased equipment is not counted as fixed assets. That is to say, leased equipment cannot be leveraged in any way to get working capital, because it is owned by the leasing company. Of all the financing alternatives, equipment leasing is the one that gives nothing of monetary value to a business, yet creates a recurring financial obligation in the process.

Asset Based Lending

Asset based lending is perhaps the most versatile and affordable of all financing alternatives. Asset based lending provides a revolving line of credit structured around the value of fixed assets owned by your business. Equipment, receivables, inventory, and more can be leveraged to create a debt-free source of working capital. Businesses can access the line of credit as needed, instead of taking everything in one lump sum. Additionally, as the business grows, so does the amount of financing available through asset based lending.

Financing Alternatives Tailored To Your Business

At CNH Finance, we are committed to providing the best asset based lending to promote growth and success among small business owners. Contact our offices today to learn more.

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