Using your assets to finance cash flow is a great way to make sure you’ve got money moving through your business regularly, even when your business cycle makes your income a little inconsistent. Between options that finance your merchant account to help you prepare for major demand surges to cash advance products designed to use the value in outstanding invoices, there are options for almost any business. It’s just a matter of understanding which asset-based lending tools were built for your business model.

Invoice Financing and Factoring

One of the most common forms of financing for cash flow is account receivable financing. Companies like it because the advance is on income owed, so it doesn’t create new long-term debt on a company’s credit report. When used consistently, its costs are easy to control, and factoring is also an option for companies seeking to simply divest themselves of their invoices to simplify business. The biggest difference between the two is that financing your accounts usually results in a remainder payment after the costs of financing are taken out, where factoring essentially sells off the invoices.

Financing Merchant Accounts

Retail businesses seldom work on an invoice model, and there are a lot of other industries that operate in whole or part on a cash and carry basis. Merchant cash advances are a form of asset-based lending designed for those businesses, but they only work if a significant portion of the company’s income is earned through electronic payments, because the advance is based on the income earned by the merchant account, not the whole business. Costs can be high annually, but most advances are set up to be paid off in a few months of average earnings, which can be significantly shortened if you’re taking advantage of an opportunity that really pays off.

Inventory Credit and Loans

Some businesses also choose to use the value of inventory on hand as the basis for credit through an asset-based lending program. This can come in the form of a single short-term loan or an ongoing credit arrangement that essentially functions as a secured credit line. The administrative obligations for credit lines based on inventory tend to be a bit higher than for other types, since the balance is based on the value of your inventory in stock and has to be adjusted as that value changes.

Financing Multiple Assets

Some lenders also put together asset-based lending options based on the total value of these business assets, allowing you to set up a cash flow management process that fits your business cycle as it changes from season to season. If you are interested in learning more, talk to an asset-based lender for details about options for your business.