Small Business Financing: What The Banks Don’t Tell You

December 21, 2017 by CNH Finance, LP in category “Financing”

Small business financing comes in many sizes and forms. With the number of entrepreneurs on the rise, finding affordable and flexible small business financing can be challenging. What entrepreneurs are starting to realize, however, is that financing from banks is quickly being pushed to the sidelines in favor of more creative and accessible solutions.

Traditional Small Business Financing

Traditional small business financing has been around for as long as there have been banks. Business owners take out loans, usually in exchange for debt, which is repaid with interest. On that level, bank loans are very straightforward and simple. But if you dig a little deeper, securing a simple business loan through banks and similar lending institutions becomes more prohibitive. Since the big economic crisis a decade ago, banks have started to protect themselves against what they view as risky ventures. Financing amounts for small businesses have decreased, while the requirements have risen. Entrepreneurs cannot access traditional small business financing unless they have high credit ratings and an established history of healthy earnings. This creates a Catch-22 of sorts, especially for small business owners, many of whom have not been up and running long enough to get the financing they need.

Traditional Small Business Financing Limits

To protect themselves further, banks have internal limits on the amounts they can offer small business owners. By placing these limits on small business financing, entrepreneurs are unable to achieve the growth they need to thrive in a competitive economy. While every institution deserves the right to protect their interests, in this case, limitations on small business financing actually hurts the economy at large. Limitations and other restrictions hinder entrepreneurial growth, competition, and innovation from internal projects that need funding to release new products and services to customers.

Alternatives To Traditional Small Business Financing

Instead of taking out loans with restrictions, low financing amounts, and finite sources of capital, entrepreneurs are using asset based financing. Asset based financing creates a renewable source of working capital based around the value of fixed assets such as equipment, receivables, vehicles, and more. Asset based small business financing acts as a revolving line of credit and businesses do not have to use the entire amount all at once, unlike loans. Also, as the number of fixed assets increase, so will the amount of capital available through asset based financing.

At CNH Finance, we specialize in asset based financing for small businesses to provide a flexible and renewable source of working capital to help entrepreneurs without prohibitive requirements. Contact our offices today to learn more.

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