Just because a company's services are in demand or its products are selling like hot cakes, doesn't mean that the company doesn't need an infusion of cash. Many companies occasionally discover that most of their cash is tied up in assets like their accounts receivable balance. They can use that particular asset to acquire working capital finance services that could see those companies through a rough patch or help them buy inventory they need to meet customer needs. They can even use it to hire new staff to help them improve their sales or operating efficiency.
If getting corporate credit from a bank isn't a step the business wants to take-or if such credit has been denied-the business has many other working capital finance options available to it. Here are just a few of the more common ones: a line of credit from a vendor or a financing firm, a short-term loan, or factoring from a private investor. Factoring can be a particularly attractive option when the accounts receivable is a strong asset because it allows the company to take advantage now of money that will be collected in the future. The Small Business Administration is another resource of which the business can take advantage. The SBA can direct a small business owner to the appropriate lender for its needs and provide counseling along the way.
So what are some signs that a business is ready to take advantage of working capital finance? What would make it take that step? Perhaps the company's sales vary from season to season, being heavier in some than in others, making it difficult to create or maintain steady cash flow. Perhaps that very cash flow does not match sales; i.e. more of the company's product is going out than cash is coming in.
Another sign would be that the company is experiencing a major growth spurt, requiring more inventory that it doesn't have the funds to buy to support that growth. Perhaps its lack of cash causes it to miss an opportunity to take a major stride forward or to match the advertising efforts of competitors. Another sign that the business should consider this type of financing is that it has healthy sales but has almost missed making its payroll. Maybe the company's turnaround time on accounts receivable has slowed noticeably. Putting the company's capital to work for it can solve all of these problems fairly quickly.
So how does a business take advantage of working capital finance? As said above, going to a bank or other traditional lender might not be possible or even preferable. The business might not want to take on the liability of another rigid debt. For flexibility, private lending firms may be the answer. The internet can offer the names and contact information for many of these lenders. In many cases, they are just a phone call and a short application away.
Of course the company will have to provide much of the same information to the lender as it would to any other. A credit history is likely to be run and a risk rating is determined. But the flexibility of working capital lenders and the very nature of the security generally make the application and approval process quick and simple. It is definitely worth the time of a business owner to look into this type of financing before he needs it in an emergency.
Corporate Credit Concepts specializes in Working Capital Finance. For more information about Working Capital Finance and how it might benefit your business, please CLICK HERE for a free phone consultation.