When it comes to financing, a midsized business faces different challenges and may have different needs than a small or large business. The good news is that midsize business financing offers many different routes to obtaining funding. This article looks at some of those routes.
Cash Flow Financing
Cash flow financing—also known as factoring—is useful for businesses that sell goods or services to other businesses. It is common for there to be a gap between when a business issues an invoice and the customer actually pays the invoice off. Cashflow financing closes that gap by using sales invoices as security. Generally speaking, cashflow financing works this way: For a small fee, the lender will essentially purchase the outstanding invoices from the business and then collect on those invoices to pay itself back.
Grants are an attractive option for midsize business financing. That’s because many grants do not need to be repaid, and others have very favorable repayment conditions. However, grants can be difficult to obtain. Most grants require your business and/or project to meet strict requirements. To find out which grants your business may be eligible for, a good place to start is your state government’s economic development website.
Leasing can be a viable midsize business financing method, especially for companies that use specialized, expensive equipment. Essentially, the company rents the equipment it needs, making monthly payments in exchange for the equipment’s use. As Inc.com points out, leases can be a way for companies to obtain equipment without tying as much cash up in the exchange.
Traditional Bank Loans
A midsize business might turn to a traditional bank loan for a large, long-term purchase. These typically require monthly payments. Interest rates and collateral requirements will vary from lender to lender.
If you’d like to keep learning about financing in the business world, take a look at Monstera Lending Group’s other blog posts.