Cash flow and working capital are critical components of any business. To stay afloat and remain profitable, companies need to manage their cash flow effectively. But it can be difficult for small businesses in particular to come up with the necessary funds for everything from day-to-day operations to long-term investments. Thankfully, several financing solutions are available that can help your business manage its cash flow and working capital.
Invoice Factoring
Invoice factoring is a form of asset-based lending that enables businesses to sell their unpaid invoices at a discount in exchange for immediate payment. It’s ideal for businesses that are waiting a long time for their customers to pay them, as it allows them to access the funds they need right away without having to wait. The amount you receive will depend on the amount of your invoice and its terms (e.g., due date), but generally speaking, most invoice factoring companies will offer around 80% of the total invoice amount upfront. The remaining 20% is withheld until the customer pays in full or until other agreed-upon conditions have been met.
Business Line Of Credit
A business line of credit is a loan product offered by banks or alternative lenders that provides businesses with access to working capital when needed. A line of credit works like a credit card – you can draw from it as needed up to an approved limit – but it usually has lower interest rates than other forms of borrowing and more flexible repayment terms. It’s ideal for businesses that need quick access to cash but don’t want to take out a large loan or commit to regular payments over an extended period.
Merchant Cash Advance
A merchant cash advance is another financing option explicitly designed for small businesses that need an influx of cash quickly. With this type of loan, you receive a lump sum from the lender in exchange for a portion of your future sales revenue or credit card transactions (usually between 10% and 60%). This means that instead of making regular payments on a fixed schedule, you repay the loan through automatic deductions from your daily sales or credit card transactions over an agreed-upon repayment period (usually 6 months). Merchant cash advances are perfect for businesses with unpredictable income streams since they allow you to adjust your repayment amounts depending on how much money you make each month.
Invoice factoring, business lines of credit, and merchant cash advances all provide invaluable assistance when it comes to managing your cash flow and working capital. Each one offers different benefits depending on your individual needs, so research before deciding which one best suits your business’s specific needs and goals. With these three financing solutions at your disposal, managing cash flow and working capital doesn’t have to be such a daunting task!
Work with the financing professionals at Kenbry Capital to find a loan for your business. Our professionals can help tailor a solution that will allow you to continue to meet your business needs with minimal disruption. We have a large portfolio of business loans for all your needs.