News & Updates
Ironically, as the economy improves and contractors experience an upward spike in work, they can get caught in a pinch. Increased payroll, an expanded rental fleet, larger material purchases, etc. can put an initial strain on a business’ cash flow as receivables increase. Fortunately, there is an answer for such situations: an equipment equity loan.
Operating heavy equipment that has been well maintained can offer a contractor or Owner/Operator means to raise working capital quickly. While some small businesses may have an option at their local bank, the standard underwriting process there can often be tedious and time consuming, at times leading to the dreaded “slow no”.
An equipment equity loan is underwritten primarily on the current value of the equipment itself. The process involves a credit application and information on the equipment being refinanced. Answers on approval, terms, and amount can sometimes be provided the same day. Processing and closing is done in 72 hours or less. For companies interested in speed and convenience these loans offer a ready made solution.
If there is money owed on the equipment, depending on age and balance owed, sometimes a refinance can provide both cash out of the unit AND a lower monthly payment. This is accomplished by extending the term out further than the current loan.
If a business is experiencing cash flow trouble due to rapid expansion or a temporary slow down, an equipment equity loan can provide the necessary working capital to propel the business forward.
One of the most important aspects of financial management for any business is cash flow. Proper cash flow management insures that your business remains healthy and profitable. Cash flow mismanagement can spell doom, even if overall revenue is robust.
There are three alternative financing vehicles that can help any business effectively manage their cash flow. The first is Factoring. Unlike most finance programs, factoring does not involve borrowing money. You are selling an asset for cash. In this case receivables. The factoring company purchases your invoices as they are created, paying you up to 90% of the invoice amount immediately. The remaining balance is held until the factoring company gets paid by your customer, at which point they pay you the remaining balance after fees are deducted. This program is the most widely used amongst the three. Its purpose is to accelerate the speed that you collect money, allowing you to acquire cash more quickly to meet frequent obligations (payroll, payables, supplies, etc.).
Next, we have Purchase Order financing. Usually most effective for distribution companies that buy a finished product and then ship it to customers for a marked-up price. Rather than paying for the product, billing the customer with terms, and then waiting for payment, the P.O. finance company pays your supplier directly. You then repay the finance company once you’ve collected from your customer. This eliminates the cash flow deficit that can occur when payment for goods happens more quickly than collection from the sale of those goods.
Finally, Accounts Payable financing is a program that preserves your cash until your reserve adequately covers bills without the threat of drying up; you direct the finance company to pay certain bills and then determine when you want to pay them back (30-60-90). Not only does this preserve cash for ongoing operation, but it allows you to take advantage of early pay discounts – saving money on your purchases.
If you would like to learn more about any of these programs please contact us.
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Ironically, as the economy improves and contractors experience an upward spike in work, they can get caught in a pinch. Increased payroll, an expanded rental fleet, larger material purchases, etc. can put an initial strain on a business' cash flow as receivables...
One of the most important aspects of financial management for any business is cash flow. Proper cash flow management insures that your business remains healthy and profitable. Cash flow mismanagement can spell doom, even if overall revenue is robust. There are three...
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Yes, it has already been said thousands of times: in the year 2020 we are in an unprecedented time from a market, social, and political perspective. But what does that mean for me as a borrower seeking a loan?
The answer to the cash flow concerns of many organizations, especially asset-heavy organizations, is a type of alternative financing called asset-based lending (ABL).
When you’re trying to get a loan to grow your business, is it better to borrow from a bank or a private lender? Here are some pros and cons of each to consider.
I thought it useful for entrepreneurs to understand some of the reasons for lending institutions turning down requests for money, so that they can try to make their businesses attractive to lenders.