Which Type of Working Capital Financing Is Best for Your Business?
When you own a business, sometimes it’s difficult to always have the working capital you need to keep up with all the expenses and surprises that can happen daily. If you ever find yourself caught in a situation where you don’t have the necessary working capital to help your business run, you will need to consider various kinds of working capital financing. It can be useful to know your options before you need the financing.
Financing Against Your Assets
If your business needs to cover expenses like payroll and has some valuable assets it can borrow against, you might want to consider assets-based financing. This kind of financing allows you to borrow against any vehicles, machinery, or even accounts receivable your company may have. That means if there are any companies or individuals that owe your business money, you can sell that account to a financial institution to turn it into working capital for your business.
Trade Credit with Your Suppliers
If you need working capital financing for your inventory, there is always the option of trade credit with any of your suppliers. This way, you will get the inventory you need and pay for them later. Most suppliers will be open to this kind of credit because it sets up a lasting business relationship between the two of you.
Opening Up a Line of Credit
You may have noticed that it has been difficult for you to secure enough working capital for recurring expenses that you have had at regular intervals. In this case, you might want to consider a line of credit with a bank. In this case, a borrower can receive an amount of the money as needed, but they are not required to take the loan. This would be an ideal option for recurring expenses.
Use Inventory for Financing
In the event that you have plenty of inventory but need some working capital financing, you should consider inventory financing. This kind of loan would enable you to borrow against any inventory you have for the additional funds. The main concern with this kind of borrowing is that the lender has the right to the inventory until the loan has been repaid. Only utilize this option if you know you will not need to sell this inventory immediately. With all the options that are available to you and your business, there is sure to be a way that works best for your business’s needs.