Business Financing Types
Debt Financing
Debt Financing relies on your personal and company credit. This is a good option for variable income issues or high growth phases.
Debt Financing & Working Capital Loans
One type of debt financing is a working capital loan. Working capital loans are best used to fund short-term, operational needs. If your business is seasonal, if you find covering expenses when times are slow is threatening your ability to stay in business, a working capital loan is a good solution.
Examples of what a working capital loan can cover:
- Adding inventory
- Buying Supplies
- Hiring More Staff
- Paying A.P.
Who benefits from a working capital loan?
Companies in early startup and early growth phases often lack predictable revenue or the kind of historical data needed to get a bank loan or inspire VC or traditional PE investors. A working capital loan is a way to cover expenses, grow and take market share to prove out a concept or to ride out a lull in sales or revenue.
Does everyone qualify?
No. But we are not like the Private Equity investors of the past or the Banks of right now. We look at options to help you. If a straight loan isn’t right for you, we explore other ways to collateralize the cash you need. Our goal is to make your life better. Sometimes, that means taking a risk and trying something new and different.
Inventory Financing
Collateral is key to getting capital.
Using what you have to get what you need
Using your current stock of inventory as collateral to purchase more inventory makes sense if your business is experiencing cash-flow issues but business is still good. As your company takes on more orders or builds new partnerships, you may find you need to stock more inventory than you can afford just yet. This is where inventory financing comes from.
Different types of Inventory Financing include:
An Inventory Line of Credit
If your personal or corporate credit is not stellar, banks may be unwilling to grant you a business loan. we can help with an inventory-collateralized line of credit. The advantage to a line of credit over a loan is that you only pay interest on the money as you draw it from the line, not all at once from the moment of loan inception.
A.R. Financing
Accounts Receivable financing allows you to collateralize the debts other have to you. They’re good for it, they just haven’t paid yet. AR Financing helps with cash flow issues and takes away the worry of financing your own purchases of the next round of inventory.
The benefits of Inventory Financing:
Inventory Financing loans can be a lot cheaper than merchant cash advances, revenue-based financing or loans that are charged based on a percentage of your revenue, often costing more than 30%. IT’s a good option if your credit is not good enough for a working capital loan, if you have inventory to use as collateral, and if you’re looking to grow through offering more products.
Purchase Order Financing
When you need to pay your suppliers but have to allocate cash elsewhere.
Support where you need it
Purchase Order Financing is like Accounts Receivable Financing but it is based, you guessed it, on your Purchase Orders to ensure your ability to repay.
Here’s how it works:
Once you have received a P.O. from a buyer & place your order with your supplier we step in and pay the manufacturer directly. The advantage is that your supplier is paid on time and gets you your goods quickly. The disadvantage might be that they are receiving the funds from a 3rd party which may alert them to cash flow issues.
Once the manufacturer sends you the product you ordered you then invoice your client because you are ready to ship to them. Your client pays their invoice, part of which goes to us and your company’s operations remain smooth.
Who should use P.O. Financing?
If you need more than $250K and have profit margins of> 20%, P.O. Financing might be the right choice for you. If you want to pay specific suppliers but can handle the rest of your operational needs, P.O. Financing is a good choice. However, if you are waiting for payment for goods you’ve already shipped, A.R. Financing (it Invoice Factoring) is probably a better choice for you.
