Debt financing, once the only way for businesses to get the capital they needed to maintain and grow operations, has fallen out of favor in recent years. Businesses are now looking for a viable solution that will allow them to build up capital, expand operations, and avoid placing additional debt on the balance.
The Cost of Debt Financing
Debt financing products, such as traditional loans, pose a number of challenges to businesses across all industries. Lenders are tightening their requirements, and in the current pandemic, businesses do not have the spotless credit records they had a year or two ago. Additionally, loans require collateral. While long-established businesses might have the assets required by banks and similar lenders, new and small businesses are marginalized by collateral requirements. The loan ratio is also a big hurdle for businesses. Lenders are offering lower amounts while interest rates are rising, making debt financing a cost prohibitive venture. Finally, one of the biggest reasons businesses are moving away from loans is that they cannot afford to take on additional debt.
Working Capital is the Key to Success
Every business, regardless of size or industry, needs access to working capital. While debt financing may provide a very temporary solution, the balance needs to be repaid, and the monthly loan installments can place a big strain on cash flow. Businesses need an ongoing source of working capital that does not restrict finances. Invoice factoring offers a debt-free solution that enhances cash flow for businesses across all industries. Unlike debt financing, which requires collateral and impacts credit ratings, invoice factoring is simple, fast, and transparent. Invoice factoring is an exchange of unpaid receivables for immediate cash without placing debt on the books or impacting credit rating. This gives businesses fast access to working capital without waiting 30 days or longer for customers to make payments. Invoice factoring allows businesses to boost cash flow, cover overhead, and build up capital to make plans for growth.
With all the advantages invoice factoring offers to businesses, it is easy to see why they are pivoting away from debt financing. Single Point Capital is a national leader in invoice factoring services. To learn more, contact our team today.