Many small businesses are no stranger to cash flow problems. If left unaddressed, this can lead to the inability to purchase inventory, pay staff, and even hinder the expansion of a company. Entrepreneurs who are in this situation often opt to take out invoice financing for small business ventures along with other loan options. This helps ensure they will have easy access to extra funding should the situation call for it. (Image Credits: William Iven)
It’s not uncommon for a business to take out more than one loan at a time. After all, the reality is, in most cases, one financing option cannot solve all of your cash flow problems. Although they face a degree of risk by taking out multiple loans at the same time, it doesn’t change the fact that it can give you more flexibility. It can even open the door to opportunities that grow your business.
Every business has its own set of unique financial needs. So, figuring out what financing combinations are best suited for your current business needs, can be tricky. Check out these 3 financing combinations and discover which one best suits you and your company:
1. Line of Credit + Invoice Financing
One of the most sought-after benefits of invoice financing is that it allows you to get cash in advance in exchange for your clients’ invoices. It’s not considered a loan, but more of a business transaction with the financing company. With a good record, the business can get up to 90% of the total value of its invoices upfront.
But it’s important to note that invoice financing companies can charge a 3% fee for every week (or depending on the agreed terms), that the business’ customers don’t remit payment.
A line of credit (LOC), on the other hand, is a business loan that business owners turn to when in need of easy cash. It works much like a credit card, but instead of using it to purchase items, it gives you access to cash you can use to look after the needs of your business.
Together, this financing option gives you breathing room, flexibility, and a steady flow of cash, using a financing option that lets you take out cash whenever needed. With this in hand, you have the chance to grab hold of growth opportunities without your unpaid customer invoices holding you back.
If you’re still short of cash even after obtaining financing from your invoices, then you can utilize your line of credit to obtain more cash and remain fluid.
2. Term Loans + Line of Credit
It’s common for businesses with a stellar credit score to apply for term loans at banks as well as other alternative lending institutions. Along with that financing option, they also typically apply for a line of credit to add flexibility.
With both financing options available, you can easily increase your working capital and your business spending limit. This, in turn, will open up a lot of growth opportunities for you and your company.
The downside associated with applying for term loans at banks is the fact that entrepreneurs often find the process tedious. Loan requirements at banks are generally restrictive, making it harder for some businesses to qualify. For this reason, many entrepreneurs turn to alternative lending institutions.
Fortunately, banks don’t usually mind businesses applying for other financing options from other lending companies. This allows entrepreneurs to expand their financing capabilities without sacrificing their relationship with the banks. As long as they can make payments on time, companies can apply for other financing plans of their choice.
3. Invoice Financing + Equipment Financing
Although both loan options serve a different purpose, combining these two can lead to increased cash flow for companies. When it’s all said and done, some companies need to purchase equipment for their day to day operations, while others experience late-paying customers which can create a gap in their cash flow.
Equipment financing is primarily used by businesses when they need to obtain critical business machinery or office supplies. This includes company vehicles, computers, or office supplies and furniture. Without equipment financing, companies would have to finance these out of the company’s cash reserves which in most cases would create a huge gap in their cash flow.
When a business gains access to both equipment and invoice financing, they don’t have to worry about experiencing cash flow gaps or financing issues on a moving forward basis. With a stabilized cash flow, your business can generate greater ROI and achieve the success it deserves.
Take Advantage of Invoice Financing for Small Business Ventures Along with Other Loan Options
If you have invoices left unpaid and you are in need of extra financing to cover your business expenses, consider invoice financing for small business ventures.
This type of financing has been around for years and has proven to be effective in solving short-term cash flow issues.
When combined with other financing options, this gives you an opportunity to solve gaps in your cash flow, as well as set your business up for success.