Negosentro | Flexible Financing and How It Fuels Critical Competitive Advantage | Flexible financing allows you to move more items, boost transaction size, and establish new income streams, allowing your firm to flourish even when the markets aren’t. It provides investors with alternative lending options when compared to traditional options.
Modern financing and leasing solutions optimise product and inventory turn by providing dynamic financial programs, such as subsidies and promotions, to manufacturers and their dealers, allowing them to move certain items in specified periods.
Why are Flexible Financing Options Important?
It isn’t necessarily reputation, skill, or entrepreneurial zeal that decides why one company survives while another fails. It may simply be that one firm has access to capital while the other does not. When a company needs funds to support development, fulfill orders, or cover the rising business costs, traditional bank financing is the first port of call.
On the other hand, a conventional lender may not always provide the flexibility or timeliness of decision that a contemporary firm demands. In today’s fast-paced corporate environment, there is no time to wait for the wheels of a bank’s decision-making process to turn.
A company that can make decisions without worrying about whether the funds can back them has a significant competitive edge.
Types of Alternative Financing Options
There are multiple financing options available over the traditional lending models. Identifying where most of a company’s value is locked up and then knowing how to best unlock it is critical to provide this advantage.
Front-end, working capital solutions, include the following:
- Purchase Order Finance
- Letters of Credit
- Stock Loans
- Supply Chain Finance
Back end working capital solutions include the following:
- Invoice Finance Facilities
- Asset Based Lending Facilities
- Asset Refinance Facilities
- Sale and HP Back
Given the variety of financing choices available, examining the vast array of lenders other than conventional banks is critical to get the most significant financial value in the form that best matches a business’s specific needs.
Advantage of Alternative Lending
Alternative lending provides an edge for small businesses. While the pandemic had a catastrophic effect on some SMEs, resulting in job losses and closures, many were resilient. Small company operators are again ready to expand and want access to credit with low COVID-19 numbers, growing employment, and historically low lending rates.
Small and medium-sized companies (SMBs) seldom qualify for typical bank loans due to tight standards, lengthy application processes, and lengthy response times. That’s where alternative lenders come in, with their quick and easy applications, flexible underwriting, and rapid turnaround times.
Typical Funding Sources for Alternative Lenders
There are various funding sources for alternative lenders. They are broadly classified into 3 categories and further segmented within each sub-classification.
– Venture Capital/Private Capital
– Initial Public Offering
– Bank Lending
– Corporate Debt
3. Forward Flow Sales
– Whole Loan Sales
Alternative lending models save the customer valuable time and money, and there are fewer headaches because there are no yearly reviews or continuous report covenants to monitor and administer.
These loans are also available for more extended periods, which gives additional flexibility, a practical aspect that has proven especially useful in recent years. Small businesses are the backbone of the economy but are more than often time-poor, so this model provides a vital service option.