Reasons for Alternative Working Capital Loans
As your business begins to grow, you are going to notice that its cash needs grow along with it. Even though you have a good amount of inventory or even large orders to fulfill, waiting to be paid will put a strain on your cash flow. An alternative working capital loan takes your assets and future income into consideration so that you may borrow the cash necessary to cover daily expenses.
Alternative working capital loans use your anticipated accounts receivable as leverage to secure funding. This is particularly helpful for a business that has large orders to fill, but is not going to receive payment until completed. The loan will help cover the expense of manufacturing and shipping your product, and carry the business over until the payment is received and processed.
Why Choose Alternative Working Capital Loans?
Since many alternative working capital loans are based on outstanding invoices or existing orders, you are not borrowing more then what you know you will be able to pay back fairly quickly. This eliminates the worry of having the additional monthly expense of a bank issued small business loan hanging over your head.
Your Credit Rating and Alternative Working Capital Loans
Your own credit history will have little to do with approval. Instead, the lender is more interested in your business structure and customer base. If you are able to show that you consistently meet demand and collect on your orders, that should be enough to qualify you for the working capital loan with an alternative lender.
A Continual Flow of Working Capital
One of the catch 22’s for a small business is that as they grow, the cash flow problems grow with it. Since success comes with more and more orders, you may find that you are always to trying to fulfill one, while still waiting for payment on the last. Revolving alternative working capital loans operate almost like a credit card, where the money is there when you need it, but you only pay interest on what you have borrowed from it. The major difference is that your rate will be significantly less. Even large enterprises will take advantage of this type of lending to assist them in fulfilling large orders when waiting on previous ones to be paid or to cover the costs of materials.
Why Choose the Alternative Lender Over the Bank?
A business owner who is in need of working capital does not have the luxury of waiting the weeks or even months that a bank will take to approve and then process the loan. They are going to want to examine every detail of your business finances, and yours, before moving forward. Meanwhile, you have daily expenses that need to be met.
An alternative working capital lender knows that the faster you get the loan, the quicker you will be able to fulfill those orders, take care of expenses and pay them back. Their interest is in helping you to grow your business, not in your personal debt to income ratio.
The other thing to consider is collateral. Banks will not take your customers promise of payment as security for a loan and may ask for other forms of collateral such as your inventory or even your home. With an alternative working capital lender your faith in the customer’s ability to pay you for your product is sufficient collateral. This is the major benefit with alternative working capital loans.
Over the course of the last ten years, the alternative lending industry has been growing exponentially, especially in the small business sector. This would not be occurring if they were not operating with integrity and with the best interest of small businesses in mind. If a working capital loan sounds like what you need to keep growing, look into an alternative lender to provide the solution to your cash flow problem.