A steady flow of working capital is a cornerstone for every successful venture. However, securing a dependable funding source can be a tough task. Different working capital solutions come with varied constraints, which can sometimes do more harm than good over time.

Traditional Working Capital Loans

Working capital loans are a standard route for businesses in need of funding. Business owners provide collateral and accumulate debt to receive the required capital. The catch is that this capital is finite. If a business requires more funds, they need to apply for another loan, leading to a further accumulation of debt and a diminished business credit rating. If a business is using a loan to cover costs, the resulting debt can add to their financial strain. On the flip side, if a loan is being used for growth, the resulting debt can impede progress and stifle the business’s potential. These and other factors are prompting entrepreneurs to explore other funding options.

The Trend of Alternative Financing

In recent years, alternative financing has emerged as a popular option for business owners. This form of funding is promoted as flexible, affordable and debt-free. However, results do not always match the promise. Alternative solutions like merchant cash advances offer working capital infusion without impacting debt or credit ratings. They say their payments are flexible because they aren’t fixed. A small part of every sale contributes to paying off the balance. But with high interest rates and additional charges, balances are seldom fully paid within the agreement’s terms. This leaves businesses grappling with sizable final payments and added penalties.

The Value of Asset-Based Working Capital Solutions

Asset-based financing presents a unique solution that deviates from both traditional loans and alternate financing tactics. This method uses the value of your fixed assets, like receivables and equipment, to create a revolving line of credit. This renewable capital source can be increased as your business grows.

Here at Magis Funding Solutions, we pride ourselves in our expertise in asset-based solutions. If your business needs working capital and you prefer to avoid the debt associated with conventional loans or the hefty fees and interest rates of alternative funding methods, get in touch with our team.