Small- and medium-sized businesses across the country have a need for financing daily, but oftentimes these companies have loan applications denied by banks for any number of reasons, such as poor credit, limited available capital or lagging cash flow.
After a bank tells a business "No," owners of these companies might feel as though they have no other options, but that simply is not the case.
For example, if a small retailer is going through a seasonal lull during which cash flow isn't up to par, it can turn to a financing company that offers retail inventory financing. Using current product as collateral, retailers can obtain a revolving line of credit, which, in turn, can be utilized to cover operating expenses during down times of the year.
This type of asset-based lending can also be beneficial to companies who were turned down by a bank for a loan to purchase additional inventory. The same line of credit that was used to cover operating costs can help retailers buy more product to ensure their shelves aren't empty.
Retailers aren't the only ones that can turn to alternative forms of financing though, as manufacturers and wholesalers are able to use purchase order financing. Generally, when smaller companies receive an order larger than usual they need to use financing to fill it due to limited available capital. However, businesses of this size are often turned away by banks, which is where purchase order financing can come in handy.
This lending agreement allows small-and medium-sized manufacturers and wholesalers to obtain up to 100 percent of the funds needed to fill an order. One of the major benefits is that it prevents a business from having to sell any equity to receive funds to take advantage of the potential game-changing opportunities.