Don’t let your current revenue hold you back from future earnings. No matter what your funding needs are, there are financing solutions that can help you take your business to the next level. Whether you just received your first major purchase order and aren’t sure you can front the costs of production, or you are gearing up for your seasonal order increase, Finance Service Providers will provide you with the right solution for your business.
We understand all this finance language can be confusing, so we broke down four of the most common financing options for your business in an easy to digest way.
1. Asset-based loans
Asset-based lending (ABL) is a flexible, fast way for businesses needing between $1M to $10M, and may not be able to obtain traditional bank financing to get necessary working capital. ABL is a secured loan based on the value of a company’s assets, including accounts receivable, inventory, machinery and equipment, and real estate.
Good for suppliers who: have been in business for more than two years, is unable to obtain traditional bank finance and needs a loan of one-million to ten-million dollars
If this sounds like your business then we suggest checking out our finance providers that offer asset-based loans. Remember, an ABL will need to be paid back so it is important to not take out too big of a loan for your business’ financial reality.
2. Invoice factoring
Invoice factoring is a more intricate form of invoice financing. Invoice factoring consists of upfront payments that are ideal for suppliers with outstanding invoices and accounts receivable. Invoice factoring service providers will pay the supplier a percentage upfront and then take on the responsibility of collecting the outstanding balance.
Good for suppliers who: have a business that sends out invoices with payment terms of up to 90 days and is unable to obtain traditional bank financing or to increase an existing line of credit.
3. Merchant cash advance
Unlike a loan, a merchant cash advance provides capital by purchasing a percentage of future receivables through credit or debit card sales (plus a fee). Daily remittances are an agreed upon percentage of your sales that are automatically deducted. Cash advances are popular amongst businesses with low credit scores or companies that need a cash advance quick without the hassle of collateral.
Good for suppliers who: have fluctuating revenue (think seasonal business), has been in business for more than six months, and has a credit score of 500 or more.
4. Purchase order financing
Purchase order financing provides access to funding for inventory purchases, services, and costs relating to a specific purchase order. A purchase order may be required if your business lacks the cash flow to purchase inventory to complete customer orders. When agreeing to purchase order financing, the finance service provider will pay your manufacturer to produce and ship your goods to customers. The customers will then pay the finance service provider who will deduct their fees before sending you the rest of your earnings.
Good for suppliers who: have just started their business and receives a bunch of orders at once (and cannot fulfill them due to lack of resources), the company is experiencing growth that outpaces working capital and bank lines, or you are experiencing rapid sudden sales growth.
It is important to note that each funding option has its pros and cons so it is essential to analyze each service based on your business’ needs and financial goals. We understand doing this on your own can be overwhelming, that is why we brought in finance experts to help you through the process. Explore our expert finance services providers who will be able to help you determine which funding option is right for your brand.