In a perfect world, businesses would never have to borrow money. The money that they make selling products or services would be able to cover the cost of any expenditures they may have to make. However, this isn’t always the case, and in these situations, businesses may look to lenders to get the necessary capital to grow and expand their business.
Concerns Over Conventional Financing
The main issue that many businesses face, especially small to medium-size businesses, is the unknowns that can often derail a plan to borrow money for expanding. Many times, the state of a business’ credit score can be a major hindrance. In other cases, businesses may be worried that a lender will look at the amount of revenue a company receives and turn down the loan because profit levels aren’t high enough.
Fortunately, there are lenders that may not be so preoccupied with the amount of business a company is receiving or their creditworthiness. These things may be factored into a decision, but many times, businesses may have a great deal equity tied up in the equipment that they use on a regular basis. In these cases, equity funding will look more at the amount of money a business has in equipment and resources rather than strictly the amount of sales they produce or their credit score.
Who this Type of Lending Helps
This can be extremely beneficial for businesses that initially invested a great deal of money into equipment and resources in order to provide the products and services that they offer. In some cases, the level of profit generated by selling these products and services can be hindered because of not having more equipment to fill future orders. While this could be a negative to lenders that look at the amount of profit a business receives, these particular factors can actually benefit a business when working with an equity lender.
There is more than one way for a business to get the financing that they need to expand. For companies that have a great deal of equipment and resources, equity financing may be the best option. If your business would like to know more about this type of financing, you may want to click here.