1) Borrowing for Equipment
- The owner of a pizza parlor has a broken oven. She needs funds fast!
- Or a construction company with the opportunity to lease a backhoe instead of higher-cost rentals and delays waiting for equipment delivery.
Equipment loans are a solution for businesses that need to make an upfront purchase of a computer or other piece of equipment but lack sufficient funding to get what they need to operate. Short-term financing helps businesses ramp up production to meet demand or increase efficiency – both of which support increased profitability and staying in business when things go wrong.
2) Business Expansion
- The age-old dilemma…you can’t add too much staff before the orders show up, but you can’t service orders without staff.
Short-term financing bridges the gap. Growth in customers and sales means increased demand on your staff, space and resources. When you need to hire extra workers, add additional products or services, or expand your footprint, short term financing can be a great solution.
3) Sufficient Inventory and Seasonal Fluctuations
- A retailer buys bulk discount shoes from China. He uses short-term capital to purchase stock in bulk, allowing him to take advantage of deals to increase his margins and have plenty on hand so his customers stay happy with his service delivery.
Having the right amount of inventory on hand to meet demand is challenging – overstocking means tying up scarce resources; understocking means missed sales opportunities or backorders that send unhappy customers to Amazon. Using a short-term loan or advance for inventory also allows businesses to purchase the supplies they need to prepare for a busy season, even if they don’t have the cash on hand during the slow seasons.
4) Working Capital
Often, working capital is a financial metric to determine the financial health of a business. A sufficient level of funds to support everyday operations is critical. Working capital loans or advances can help cover gaps in revenue, whether from delays in collecting receivables, or an unexpected expense that disrupts the normal level of working capital. A working capital loan is versatile and can be used for various purposes, including payroll, purchasing supplies, or repairing equipment. This “all purpose” option fits most businesses, in many situations.
If you are business in need of funds, you have two options: secure investors or obtain a business loan or advance. Business loans are the preferred option for business owners that want to maintain control and flexibility. Banks are a first choice for longer-term needs. If you have a short-term funding needs, advances and working capital loans may be the right choice!