Renewable Capital: Is It More than A Business Myth?

March 8, 2018 by CNH Finance, LP in category “Financing”

Many business loans products are marketed to entrepreneurs as featuring “renewable capital.” However, renewable capital is not always what it is cracked up to be, and can often leave business owners in dire financial straits after they have entered into an agreement with lenders.

Renewable Capital

Renewable capital currently has a very broad definition. Revolving lines of credit, for instance, provide renewable capital in possibly its truest sense. Business owners access capital and then repay the balance. The amount of capital available is then replenished and made available for future use. The process can bee repeated as many times as is necessary, giving businesses a perpetual source of funding and increased purchasing power. Other forms of financing, such as merchant cash advances, advertise renewable capital, but it works differently when you look at the fine print. Business owners do have the ability to take out consecutive merchant cash advances, provided the balance has been repaid. But the high interest rates and hidden fees often make paying off the balance on or ahead of schedule an impossibility, leaving business owners with large balloon payment. If the terms of the agreement allow for successive merchant cash advances before the first one is fully repaid, then the amounts are usually lower, and the total payments can quickly cause a business to go in the red.

Using Assets For Renewable Capital

Asset based lending is one of the most financially sound methods of accessing renewable working capital without the red tape and negative impact of traditional credit providers or merchant cash advances. Asset based lending creates a revolving live of credit around the value of things our business owns, such as receivables, property, vehicles, inventory, equipment, and much more. The funding is not marked for any specific purpose, so it can be used for anything your business needs. As the balance is repaid, the amount of funding is renewed. The big difference that sets lines of credit through asset based lending apart from the rest comes with growth. As your business grows, makes more sales, acquired new equipment, or moves into larger facilities, the amount of credit available also increases. Merchant cash advances and traditional business lines of credit are static and finite by contrast.

Learn More About Asset Based Lending

CNH Finance is a nationwide leader in asset based lending, providing a reliable and growing source of renewable working capital to businesses across all industries. Contact our offices today to learn more.

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