Working Capital Solutions: Is Debt-Based Financing Necessary?

March 9, 2017 by CNH Finance, LP in category “Financing”

Businesses of all sizes need working capital solutions to thrive and grow. Even on a very basic level, working capital provides a means to cover financial obligations and get supplies. However, for many businesses, finding working capital solutions can be a challenge, and many resort to loans when cash flow is tight. Fortunately, there is a source for working capital that does not require bank loans or other debt structures.

Relying Solely On Loans

Relying on short-term loans for capital when cash flow is tight can lead to larger problems. First, loans provide a finite amount of capital. Second, once that capital is used, the debt and interest remain. Taking out another loan further impacts business credit ratings, while creating a larger financial liability. When all is said and done, a new or small business may be juggling multiple loans at different rates, with a compromised credit score and the inability to get further financing. This is not a comfortable situation.

Asset Based Lending

Asset based lending taps the value hidden in equipment, inventory, receivables, and more to create a revolving line of credit. Asset based lending does not place any debt on the balance sheets, and is treated like any other business line of credit. When the line of credit is accessed for working capital, it can be replenished and used continuously. Contrast this with the debt structure of traditional loans, and how they can negatively impact a business that relies on them solely for short-term working capital. Additionally, asset based lending works well in conjunction with traditional bank loans to lessen the required amount to reach critical goals.

Working Capital Solutions That Grow With Your Business

As your business grows, so does the spending limit on asset based lines of credit. As you acquire new equipment and make more sales, asset based lending can be refactored to show those improvements. By accessing asset based lines of credit, businesses can actually increase their credit ratings, which goes a long way when loans become necessary for completing large internal projects, or taking that great leap forward in a competitive marketplace.

Get The Working Capital Solutions You Need

If your business needs an extra source of working capital without the debt and restrictions of short-term loans, talk to the experts at CNH Finance. We will conduct an in-depth analysis to unlock the potential of your assets to create the best line of credit possible for your business, to ensure growth and success.

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