Specialty Financing Options
Specialty finance exists just for this reason – to fund successful companies outside of a bank’s credit box. Modern alternative lenders evaluate businesses differently, focusing on receivables, growth potential, and operational realities.
Here are several financing solutions to consider:
1. Accounts Receivable (AR) Financing aka Factoring
What it is: Advance against your outstanding invoices, turning sales on credit into immediate cash.
Pros: Fast access to funds, aligns borrowing to cash flow, approval based on customer creditworthiness as much as your own.
Cons: Costs can be higher than traditional loans; careful contract review recommended.
2. Asset-Based Lending (ABL)
What it is: Loans secured by your company’s assets (receivables, inventory, equipment).
Pros: Larger borrowing capacity than unsecured loans; more flexibility than banks.
Cons: Still requires significant assets; more monitoring and reporting.
3. Merchant Cash Advances
What it is: Lump sum upfront, repaid via a percentage of future receivables or credit card sales.
Pros: Quick access, minimal collateral requirements.
Cons: Can be very expensive; not ideal for companies with thin margins or unpredictable sales cycles.
4. Revenue-Based Financing
What it is: Investors provide capital in exchange for a fixed percentage of ongoing gross revenues.
Pros: Repayments adjust with cash flow; no loss of equity.
Cons: Can become costly if growth outperforms expectations; less common for B2B receivables models.