Inflation Pushes Businesses to Seek Funding Alternatives
The economy is booming, unemployment is low, and businesses are poised for growth. However, the Fed is adjusting for potential inflation threats by raising the interest rates on loans. Just this past month, interest rates were hiked for the third time this year, with analysts suggesting there are more on the way. With rising interest rates on debt, businesses are looking for an alternative to traditional loans.
Borrowing is Very Risky for Businesses
For all the high requirements lenders have in place to access loans, hardly anyone discusses the risks facing businesses when they use debt-based financing. First, the capital provided by a loan does not guarantee success after its use. Businesses may not receive approval for the full amount requests, which can result in under-funded projects. Second, loans provide finite financing. Once the capital is used, the debt remains. As we have seen throughout 2018, even the lingering debt is a risk because interest rate hikes can happen at any time, and there is very little which can be done to counter inflation measures from the Fed. For these reasons and more, businesses are moving away from bank loans and similar finance program to find more flexible and less-risky funding solutions.
Avoiding Inflation Pitfalls
Businesses need a solution that provides not only a renewable source of capital but also more flexibility. Most importantly, businesses do not want to leave themselves open to debt and seemingly arbitrary hikes to interest rates. Instead of the risks associated with loans, businesses use asset based financing. Asset based financing provides businesses with a revolving line of credit. The amount of financing available is structured around the inherent value of equipment, inventory, receivables, and other assets owned by a business. Businesses can draw upon the line of credit as much much or as little as they need, and the financing is replenished as the balance is repaid. Asset based financing is also debt-free, so interest rate hikes tied to the Fed are nonexistent. Additionally – and very much unlike traditional loans – the amount of capital available through asset based financing actually increases as your business grows.
CNH Finance provides asset based solutions to businesses to promote growth and success without the restrictions and risks involved with traditional loans. To get the financing you need while protecting yourself against inflation rate hikes, contact our offices today.