Securing financing for businesses has been a major challenge since the end of 2019. The pandemic naturally placed a major strain on businesses, as well as the economy. Once 2021 hit and businesses were starting to get back on their feet, banks and other lenders were trying to make up lost ground by increasing interest rates, while simultaneously raising borrowing requirements to mitigate risk. Now there are supply line and inflation concerns, and the Federal Reserve is raising interest rates on loans at a time when businesses need accessible financing. The current situation is leading businesses to seek out financing that does not negatively impact credit ratings and does not place debt on the balance sheet. Does such a solution exist?
Business Financing without Collateral
Traditional loans require collateral, typically in the form of hard assets such as real estate, equipment, or similar items. Equity loans exist, and while they do not require collateral per se, it does require giving the lender some form of control via stock shares, decision-making, a long-term cut of the sales, and more. Cash advances do not require collateral, but the prohibitively high interest rates do not make them viable financing solutions.
Debt-Free Business Financing
Finding financing that does not place debt on the books in one form or another is nearly impossible. Financing that offers an advance of capital still has a balance to repay, with interest. At the same time, businesses are very hesitant to take on debt for any reason. Debt places a strain on finances and could cause more long-term harm than good. For example, a business needs extra capital, so it secures a loan. From the point of closing on the loan, the business then needs to portion out an amount of revenue to pay down the balance in addition to regular expenses, such as overhead, marketing, payroll, etc. If the loan is used to correct cash flow issues, then taking on more debt will only exacerbate those issues, leading to more loans, and potentially a recurring cycle of cash flow problems and loans, leading closer and closer to bankruptcy.
The Collateral-Free, Debt-Free Business Financing Solution
When traditional lenders only offer headaches, businesses can get the financing they need through factoring services. Unlike traditional loans that rely on credit, debt, and ongoing payments, factoring is structured around unpaid customer invoices. At its heart, factoring is a form of asset-based lending whereby unpaid receivables are leveraged for capital. There are no fixed, ongoing payments, no debt is placed on the balance sheet, and credit ratings are preserved. Businesses submit their unpaid invoices for factoring, and instead of waiting 30, 60, or even 90 days to receive payments from customers, the invoices are converted to cash, and funds are made available quickly. Factoring is simple, transparent, and it has been around for almost as long as businesses have been issuing invoices to customers.
How to Use Invoice Factoring Services
Invoice factoring is an extremely versatile business financing solution. Typically, factoring is used to correct cash flow issues. Since most cash flow issues are directly related to unpaid receivables, factoring helps to free up that revenue by making it available quickly and efficiently. Second, factoring is used to build capital reserves. By maximizing cash flow, businesses can cover their expenses and use the excess revenue to build up reserves that can be used for anything from marketing campaigns to plans for growth, upgrading equipment, or simply a financial cushion in case of an uncertain economy. And since invoice factoring allows businesses to use financing however they want – as opposed to single-purpose loans – businesses can gain a competitive edge without any of the restrictions.
Get the Financing You Need
Single Point Capital is a national leader specializing in factoring services for businesses. We offer turnaround on invoices to deliver funds to your business within a single day. We also offer a suite of tools to help you track payments, and a personal account manager who will be there to answer your questions and provide options to help your reach your goals. To finance your business without impacting your credit ratings, sacrificing collateral, or taking on debt, contact the team at Single Point Capital and ask about our invoice factoring services.