Explore Alternative Financing: Industry Trends & Analysis

Among all the issues that require a business owner’s endless vigilance, proper financing stands out as among the most critically important. In the absence of a strategic financing plan, businesses can face multiple challenges with cash flow and the ability to access needed funds for operational and capital expenditures. While traditional bank financing is usually the preferred approach, alternative financing can play a vital role in addressing the needs of companies in a variety of scenarios.

What is alternative financing? This article will address various aspects of this approach and its favorable impact on business operations.

Alternative financing, by its very definition, is financing available through non-bank sources. In those instances where traditional bank financing is not available or is limited, alternative financing can fill the void as a surrogate, or can supplement bank financing. For instance, a business that needs an accelerated cash flow may consider invoice financing, which would allow a business owner to borrow against outstanding invoices. Other alternative financing options include equipment acquisition, leasing and sale-leaseback, asset-based loans, inventory loans, term loans and owner-occupied real estate loans.

As with other strategic business initiatives, business owners are well served by proactively assessing their financing needs in the context of their overall business plan. Issues to be addressed include analyzing current cash flow in light of operational requirements and capital expenditures for future growth (i.e., equipment, facilities etc.). All too often, seeking financing is deferred or delayed, and then attempted under duress. This can exacerbate a problem when timing is an issue and can affect the decision-making process when selecting the appropriate financing option.