The Post-COVID-19 Outlook for Business Financing

Businesses are making preparations to reopen, but many of them are in need of working capital. Since not all businesses qualified for or received PPP loans during the pandemic, people are looking for alternative solutions to get the capital they need. However, business financing takes many forms, but the outlook for the most popular programs varies greatly.

Traditional Loans

The outlook for loans does not favor small business owners. As lenders tighten their requirements, small businesses that need extra working capital may have to improve their credit ratings and put up more collateral to qualify for loans. Even if businesses do qualify for a loan, that does not guarantee they will get the amount they need. As the economy contracts, lenders tend to decrease the amount of business financing they offer. Additionally, debt can be an unnecessary burden for a business to take on when holding onto revenue is of the utmost importance.

Lines of Credit

Getting a new business line of credit might be challenging as the country reopens. Quite a few businesses have been drawing on their lines of credit throughout the pandemic to stay afloat. On a similar note, credit providers are more likely to increase their interest rates and raise the bar for qualification for small businesses to reduce perceived risk. In short, business financing that can directly impact credit ratings is not the most stable solution in the current landscape.

Cash Advances

Cash advances seem like a good alternative at first glance. The appeal of cash advances is base on the idea that they do not put debt on the books and do not impact credit ratings. There are no fixed payments, so businesses get an amount of flexibility that they can’t get with traditional loans. The devil is in the details, as they say. Cash advances have high interest rates and fees to offset the risk to the lender. Because there are no fixed payments, business owners can find themselves with a large balloon payment at the end of the agreement.

AR Factoring

AR factoring is not a loan. There are no fixed payments, and there is no debt. Unlike a cash advance, AR factoring is not structured around future sales. Instead, factoring allows businesses to leverage unpaid invoices for immediate access to working capital. There are no high requirements, no long processing times, and no arbitrary loan board decisions.

Get the Business Financing You Need

New Century Financial helps businesses get the working capital they need with our AR factoring services. If you want to improve cash flow, or if you simply need fast access to capital without the red tape and restrictions of loans, lines of credit, or cash advances, contact New Century Financial today.