Uneven Revenue Cycles: How Businesses Create a Financial Buffer

February 28, 2019 by CNH Finance, LP in category “Financing”

Uneven revenue cycles are not unusual for businesses in all industries. From new and small businesses to large companies and even businesses going through growing pains, having the capital available to handle uneven revenue cycles and still maintain operations is essential to long-term success. Creating a financial buffer without taking on unnecessary debt or using advances allows businesses to thrive and grow.

The Impact of Uneven Revenue Cycles

Uneven revenue cycles can impact businesses to varying degrees. On the small scale, businesses may be stretched to purchase office supplies or need to put off paying utilities to a later date. In severe cases, businesses might not be able to make payroll, but materials for production, pay down existing debt, or they may be forced to pass up lucrative opportunities. The key to smoothing out uneven revenue cycles is to have access to a reliable and renewable source of working capital.

Of Loans and Cash Advances

Traditional loans do not help with uneven revenue cycles. Taking on debt for short-term capital may help businesses overcome immediate issues, but if a lack of revenue recurs, it is compounded by the extra debt with interest, and taking out yet another loan is simply digging a financial hole. Similarly, cash advances artificially boost the amount of capital available for a short period of time. The prohibitively high interest, fees, and balloon payments at the end of the terms can place a huge strain on finances. The key is to find a solution that is renewable, accessible, and debt-free.

Rethinking Capital Reserves

To create a buffer against uneven revenue cycles, businesses tap into the value of their assets. Receivables, equipment, property, inventory, and more can be used to create a revolving line of credit without needing to divest. The revolving line of credit provides a renewable and ample source of capital which can be used to smooth out uneven revenue cycles without falling back on debt-based loans or cost-ineffective cash advances. Additionally, as your business grows, so will the amount of financing available. Asset based lines of credit are not single-use solutions, and businesses keep them for the duration for everything from smoothing out revenue cycles to mergers and acquisitions, and everything in between.

CNH Finance specializes in asset based solutions for businesses of all types. Contact our offices today to get a debt-free renewable source of capital for your business.

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