The average American utilizes a range of financing tools. Between mortgages, car loans, credit cards, etc. we know enough to understand that a single financing tool isn’t appropriate for every need. Guess what? It is no different for business. Different financing needs require different tools.
Just like individuals, businesses have both short- and long-term financial needs. Some of their financing priorities are more important than others. In order to keep things rolling along nicely, businesses need access to a wide variety of financing tools. What’s more, they need that access on an ongoing basis.
Here are the 5 key financing tools we believe every business should have regular access to:
1. Invoice Factoring
Let us start with invoice factoring. It is our specialty here at Thales Financial. Invoice factoring is a simple, easy way to quickly raise cash for short-term needs. You sell your invoices to a factoring company at face value. You get a certain amount of the cash up front and the remainder when the invoices are paid. The factoring company charges a fee for their service.
Invoice factoring is ideal for short-term financial needs. It is ideal for raising cash quickly. A lot of our clients rely on it to maintain positive cash flow during seasonal downturns.
2. Small Business Loans
Small business loans should always be in the tool box. They are useful for large capital expenditures, funding growth and expansion, research and development, and more. Businesses can apply for loans through most retail banks. Private lenders also make small business loans under the right conditions. The only caveat here is that a small business loan represents a long-term commitment. It is probably not the best choice for short-term needs.
Bootstrapping, which is essentially the practice of business owners funding their company’s financial needs through their own resources, is usually thought of in terms of startups. For example, an entrepreneur might leverage a home equity loan and all his credit cards to get a business off the ground.
The fact is that bootstrapping is not just a tool for startups. Even well-established small businesses can benefit from the practice. Like invoice factoring, bootstrapping is a way to raise cash quickly. More importantly, it is a way to raise cash without having to open another line of credit.
4. Equity Investment
Equity investment involves pitching investors to infuse cash into a business in exchange for a share of ownership or a percentage of company profits. Although equity investments are rarely used by most small businesses, they should still be on the table. An equity investment could mean the difference between being able to pursue an aggressive growth strategy and having to put off growth because a company doesn’t have the financial resources to move forward.
5. Asset Financing
Last but not least is asset financing. In an asset financing scenario, a company leverages existing assets to raise funds. It might lease equipment it is not currently using. It might lease empty warehouse space or sell older vehicles. Asset financing takes advantage of existing liquidity. It puts some of the company’s assets to work as a financing tool.
Having access to as many financing tools as possible is wise. Each scenario calls for something slightly different. So the more tools a company has, the more opportunities there are to reach established financial goals.
Here at Thales Financial, our specialty is invoice factoring. We invite you to learn more about what is arguably one of the oldest forms of business financing in the world. Companies still utilize it today because it works.