Small Business Financing: Is Debt Really Necessary?

Small businesses need funding ranging from working capital to equipment, and everything in between. Whether our small business has just launched, if you are trying to maintain operations, or position your business for growth, having access to the financing is essential. However, many entrepreneurs are under the impression that the only way to get small business financing is to take on debt.

Debt is not always an ideal trade-off

The traditional model for small business financing involves loans, which place debt on the balance sheet. Small business owners then spend the next few months making regular payments to reduce the debt until the balance is zeroed out. Loans impact credit ratings and offer very little in the way of flexibility. For small businesses, loans can be an issue. First, not all small businesses have the credit ratings, collateral, or established revenue to get approved for a loan. Second, because revenue cycles for small businesses are often uneven, loan payments can place a huge strain on cash flow and capital reserves. Third, if a small business is aiming for growth, the debt from loans can limit the extent to which businesses can expand without over-extending their financial means.

Debt-free alternatives to traditional small business financing

A little over a decade ago, the business finance landscape started to shift. Businesses started to realize there had to be alternatives to traditional loans. Professionals who were successful business owners started to pivot to the world of finance because they understood the needs of entrepreneurs, and could offer viable, flexible, and affordable alternatives – without placing debt on the books. These lenders started offering factoring to improve cash flow and help small businesses build up their capital reserves. They also provided cash advances, which are debt-free, do not impact credit ratings, and have flexible repayment methods so small businesses can avoid financial strains. Those two alone greatly helped small businesses thrive and grow after the Great Recession, and emerging business owners use those solutions to this day.

Get The Small Business Financing You Need

Growth Lending Group provides the funding solutions small businesses need. Whether they want to improve cash flow or need an infusion of working capital without taking on debt, our team can help. Contact our offices today to learn more about our factoring and cash advance programs for small businesses.

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