How to Free Up Cash For Your Business

As COVID-19 continues its spread throughout the country, many businesses are struggling to stay afloat. Even with lock-downs easing and states reopening, the path forward is uncertain. Unfortunately, most entrepreneurs cannot afford to wait much longer for business to resume as usual, which means they have to get a quick influx of cash.

Thankfully, you have options for freeing up funds for your business through alternative means. During this trying time, a traditional loan will likely be too slow and costly over the long term. Fortunately, there are plenty of other ways to tap into financial resources that can keep your business running smoothly.

Alternative Lending Resources for Freeing up Fast Cash

Equipment Lease Buyback

If you own equipment or machinery to run your operations, you can leverage their value for quick financing. A lease buyback is a relatively simple process that comes with multiple benefits, both in the short and long-term. Here’s how it works.

First, you need to contact a leasing company that will purchase the equipment from you. Company vehicles can also be used for this kind of transaction if you manage a fleet. Once the leasing agent takes ownership of the equipment and you get paid, set up a lease agreement. Since you are using the same machinery, you will not have to disrupt your operations to take advantage of a buyback.

Entering into a lease agreement is beneficial because it removes your responsibility for maintaining and repairing the equipment. If the equipment breaks down, the leasing company has to handle it, not you. Another advantage is that you can upgrade to a newer model once the lease expires. Since you will not have to pay for a whole new machine, you will be able to improve your operational efficiency without cumbersome expenses.

Invoice Factoring

You may not be able to wait for clients to pay outstanding invoices to help you manage your cash flow. This problem can be even worse if you offer extended payment terms, such as 60 or 90 days, or even longer.

Thankfully, you can get that cash much faster by working with a factoring company. The factoring process works by delivering a majority of the invoice payment upfront, with the remainder coming in after the client pays. In most cases, you can immediately access up to 80 percent, which can help smooth out any cash flow problems. The factoring company charges a fee from the remaining balance, and you will get the rest.

Another advantage of factoring is that your credit score or payment history does not matter. Instead, only your clients’ credit scores matter to the factoring company. So, if you have a new business or are worried about a credit check, this option is usually ideal.

Purchase Orders and Contract Financing

Typically, factoring is designed to access funds from outstanding invoices. However, you can also use it to get quick cash from purchase orders or long-term contracts. As soon as the order comes in, you can set up a factoring account. This process provides much-needed flexibility for your business, as you can get financing at any point during the life cycle of a contract.

Asset-Based Lending

If your company is suffering from a stagnant cash flow because your equity is tied into fixed assets, you can tap into that equity with asset-based loans. Here are a couple of examples of alternative lending options you can utilize.

Property Loans

Owning commercial real estate can be a sound investment, particularly if you own the buildings from which you operate your business. Property-based loans will deliver a portion of the equity tied to the property, even if you do not hold the deed yet. In most cases, you can get up to 70 percent of the capital, which can provide financial stability to help you stay afloat during uncertain times.

Inventory Loans

This pandemic has forced many retailers to shut down. So, they are sitting on inventory with reduced means to sell. While online shopping can be a viable placeholder, it might not replace all of your sales.

Another options is to borrow against the value of your inventory. These loans are set up to take a portion of future sales, making them less intrusive than other forms of business lending. If you go this route, you will have to provide a reopening strategy to illustrate how you plan to sell these items in the coming weeks and months.

Lines of Credit

During this uncertain time, taking out a traditional business loan may be a mistake because you could borrow too much and get locked into an extended repayment plan that no longer works for your business. Instead, opening a line of credit may be a better option.

Credit lines can be secured or unsecured, depending on the strength of your business. Secured lines require some form of collateral, but you can get a higher balance. Unsecured credit can get approved faster, but it can be challenging to qualify.

Another option is a working capital credit line, which works similarly to a credit card. This option provides ongoing flexibility for your business, as you borrow only what you need and pay it off as you go.

Contact Us Today

Getting your business back on track is going to take hard work and creativity. If you are interested in freeing up cash, contact us today. Working with a licensed commercial loan broker is the best way to find the right financing options for your brand. We have a vast network of lending partners, and we can negotiate favorable terms. See what we can do for you today.