What are flexible financing options?

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    Chris Godfrey

    Page written by Chris Godfrey. Last reviewed on July 11, 2024. Next review due October 1, 2025.

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    Not so long ago, there was almost zero flexibility in commercial finance for small and medium-sized US businesses. Banks and credit unions set the rules and businesses were typically given fixed term loans with regular payment schedules and no leeway if the business landscape changed. However, that was then. Now, with online lenders driving the rapid expansion of alternative business funding, flexible financing has become commonplace and businesses that make the most of it can gain a valuable competitive advantage.

    In short, flexible financing can put organizations in better control of their money, giving them options if circumstances change and more avenues to grow without relying on hard-won working capital or rigid term loans. Use flexible funding to bridge gaps in cashflow, buy equipment and inventory, cover seasonal trade swings and reduce the interest changes and fees you pay all at the same time.

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      Why are flexible financing options beneficial?

      Unlike traditional bank loans, flexible finance is dynamic and it can evolve to match your business situation. You gain access to the finance you need when you need it and in many cases on your own terms. You can also decide how much funding you need, what you use as security, what the costs are and how you pay the funding back. Here’s an overview of the key benefits:

      • You set the loan schedule: Instead of being stuck with a rigid monthly or quarterly repayment plan, flexible financing can give you the option to change repayment dates, extend or shorten the schedule, even take a payment holiday. You set the loan schedule to work around the cycle of your business, not the other way round.
      • You decide how much and when to take financing: Whether it’s a revolving credit line or you’re borrowing against your past or future sales, you decide how much cash you want to borrow and when you want it. This can give you better control of financing costs and keep your debt-to-income ratio low. 
      • You keep your financing options open: Whereas traditional lenders may put a brake on your business borrowing, limiting how much and what type of other financing you can take, flexible financing can often be used alongside other funding options. This can give you the opportunity to employ a more productive and versatile mix of borrowing.
      • You can change the plan: Instead of a one-size-fits-all approach, flexible financing is tailored to suit your unique business circumstances, allowing you to change and adapt your financing mix as your business grows. Customization ensures your organization receives the funding that matches your plans, investment requirements, and risk tolerance at the right time, enabling you to make strategic financial decisions with confidence.

      What different flexible financing options are there?

      Flexible financing comes in many flavors. Key options include:

      Equipment financing

      Equipment loans are ‘self-collateralizing’ – they use the asset you’re financing as security, similar to a car loan or a residential mortgage. Use the equipment as you pay for it while the lender maintains a lien on the machinery. Once you pay the loan back, you own the equipment outright. Because equipment loans require no added collateral, they do not reduce your ability to seek other secured financing. They also take the weight off cashflow, giving you better control of your working capital.

      Accounts receivable financing

      Also known as invoice financing, this type of loan allows you to borrow against the value of your unpaid invoices. The lender will usually provide up to 95% of the invoice value within a few days or even hours of the bill being raised. You decide which invoices you sell or pledge. This gives you greater command over your borrowing and can limit the interest and fees you pay. Your invoices act as collateral, no added security is required. 

      Line of credit

      This type of business loan functions like a high-value credit card but comes with lower interest rates and fees. You can withdraw as much as they want when you want from a loan facility up to the limit of your borrowing. Only borrow what you need, only pay interest on what you borrow. You can repay the lending at any time or schedule repayments to match the fluctuations in your cashflow. Collateral may be required.

      Business cash advance

      There are two types of business cash advance: 

      The first, known as a merchant cash advance, is suitable for businesses that take credit and debit card payments from customers. You borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up allowing you to match borrowing to growth. You pay the loan back with a fixed percentage of your card sales on a daily, weekly or monthly basis. Your sales act as security for the loan, no added collateral is required.

      The second, known as revenue-based financing, functions the same as a merchant cash advance but comes with higher borrowing limits. Based on the size and regularity of your total revenues, (not just your credit card sales), you may receive a lump sum and pay it back over a short-term schedule, typically by small deductions from your daily sales. As before, your sales act as security for the loan and no added collateral is required.

      Both of these loan types can usually be secured quickly as qualification rules are less intensive and credit scores are not so critical.

      Which flexible funding option is right for me?

      The key benefit of flexible financing is that it can encompass a mix of funding options to help you make the most of your money and grasp every good business opportunity. This means employing finance options that can work together to build out your financial plan. Use accounts receivable financing to cover dips in cashflow. Take out an equipment loan to buy new machinery. Use a cash advance alongside a line of credit to give you greater spending power when you need it. In all cases, your financing plan should include some flexibility to account for sudden changes in your circumstances. 

      How Swoop can help

      Getting the right mix of flexible funding is crucial to the success of your organization and working with business finance experts can make all the difference when building out your financial plan. Contact Swoop to discuss your borrowing needs, get help with your applications and to compare high-quality flexible funding choices from a range of lenders. Give your organization the financial boost it deserves. Register with Swoop today.

      Written by

      Chris Godfrey

      Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.

      Swoop promise

      At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.

      Find out more about Swoop’s editorial principles by reading our editorial policy.

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