Leveraging means raising or generating additional capital through various means. The goal is to access extra cash for important expenditures. The business may use the amount to make a significant acquisition or to invest in a cash-generating and self-sustaining asset. There can be no other way to pursue those objectives but to opt for financing.
Leveraged finance refers to the act of funding a business through taking debt or other money-generating endeavor. The size of the loan is usually bigger than how much is considered for normal transactions. Thus, the funding is logically riskier and possibly costlier than typical borrowing. Here are five ways to leverage your business cash flow.
1. Use accounts receivable financing.
You can consider using accounts receivable financing to access extra capital for your business. The secured loan requires the accounts receivables of your business as collateral for the credit facility. This loan has a short term specified period of maturity. It is most popular among businesses that are facing cash flow problems in the short term. Commercial finance firms are usually the major sources of accounts receivables financing products.
2. Consider factoring.
Accounts receivables may not only be used as collateral for loans. Those can simply be sold for cash. You may sell invoices to generate cash much sooner than the period when the money can possibly be collected. The factoring firm will assume responsibility and ownership of the invoices. It will then take the task of collecting the receivables when those are due. This is why this option is a popular way to leverage cash flow.
3. Take inventory financing.
In general, inventory financing is like receivables financing except that the current inventory of the business is used as a required collateral or security for the secured loan. The loan is usually short term and is taking an interest rate similar to that applied in accounts receivable lending.
4. Find a potential business partner/investor
Having an investor or business partner can be considered as the greatest form of leverage for the business. If you dislike the idea of splitting the venture into half, you can explore other options for partnership. How about equity or revenue sharing partnership? Finding a potential business partner/investor is an ideal option especially if you have new and lucrative business ideas but you currently do not have enough resources to make those happen. You can be sure you will have access to extra capital when you need it.
5. Sell an asset.
Your business surely has a sell-able asset that can be turned into cash. It may not have to be a property or equipment. Your venture may have a product or products that can be cashed out. That means the product may be sold to other businesses for a significant amount of cash. Many businesses now do that. They create new products with the intention of cashing out of those in the later years. Those can possibly be sold at much higher costs especially when the products are marketed well and are already commanding their own set of followers or customers.
Andrew is a keen blogger. He enjoys writing about business management and entrepreneurship. Andrew holds a BA in Business Administration and have been working for several years as a business loans specialist. When he is not writing, Andrew loves spending time with his family and friends.