Traditional Loans Are Not The Answer For Growing Businesses

August 10, 2017 by CNH Finance, LP in category “Financing”

For the longest time, when businesses wanted to get past their growing pains and hit the next milestone, they turned to traditional loans. Unfortunately, in today’s business landscape, traditional loans frequently deter businesses from reaching their full potential. In fact, traditional loans keep businesses from being able to thrive in a competitive economy. However, business owners do have an alternative to loans, but it will never be mentioned by banks and similar lending channels.

The Problem With Debt From Traditional Loans

Debt-based financing structures, such as loans, have been viewed as a necessary evil for businesses to get the working capital they need to grow, complete internal projects, or roll out new products and services. The problem with debt is that it severely slows down any momentum a business has. Instead of using revenue to reinvest in the company, business owners must now set aside a good portion to pay off any loans they have on their balance sheets. This delays growth. If the business needs another source of working capital, traditional loans will not be much help because credit ratings have already been impacted from previous debt-based financing. In short, loans are far from ideal when it comes to long-term success.

Cash Advances Are Not What They Seem

When looking outside the realm of traditional loans for adequate financing, it is hard to ignore cash advances. Cash advances are promoted as the answer to everything from financial strain to business growth. Advances are made even more alluring by claiming to be debt-free and not impacting credit scores. But that is where the positive points end. Cash advances provide a large sum or working capital, structured around future sales. Because there is no collateral involved, the interest rates are very high. Advances are repaid from a percentage of sales, which means that if sales are low, businesses will end up with a large balloon payment at the end of the terms of the agreement, saddling entrepreneurs with even greater liabilities.

There Is A Better Solution

Asset based lending allows businesses to create a source of working capital based on the value of their fixed assets. Asset based lending is not a loan, but a revolving line of credit. Businesses only draw on it as needed, and then repay the amount used, plus a low interest fee. There is no debt, no negatively impacted credit ratings, and as the business grows, so does the amount of financing available. To learn more, contact the experts at CNH Finance today.

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