How Can B2B Small Businesses Get Working Capital?

All small businesses can benefit from additional working capital for operations. The more capital you have available, the easier it is to cover monthly expenses, purchase equipment and invest in advertising. For business-to-business industries such as manufacturing and wholesale, having a good source of financing is even more important. You need money to pay your employees, order new inventory, and expand your business into new markets. What options do you have for increasing your available working capital?

The Power of Asset-Based Lending

One popular and easy way to boost your available funds is with asset-based lending. ABL financing makes it easier for your company to qualify for loans. You can use the money for a variety of purposes, including inventory purchases, business emergencies, growth opportunities, and other needs.

Many small businesses like ABL funding because it lets them have more flexibility in purchasing inventory. It’s not a good idea to use up all the savings your company has in the bank every time you need to top up your inventory for customer orders. With an asset-based loan, you can get financing easily to cover the cost of inventory purchases of any size. This can often help you qualify for better pricing tiers.

Another way to use ABL financing is to take on new customers or adapt to seasonal changes smoothly. You may come across a new business client with ordering needs that your company has difficulty dealing with at first. Asset-based lending can give you the infusion of capital needed for that first order until you generate sufficient revenue to complete the purchases on your own.

Construction companies often use ABL loans to purchase materials before beginning a project. That way, they can balance out their cash flow and have plenty of money for paying subcontractors and employees from start to finish.

Working Capital Alternatives to ABL Financing

There are other ways to boost your cash flow as well. ABL financing is simply faster and easier than most of them. One option is to reduce the time your customers have for payment. Instead of giving clients 90 days to pay invoices, consider reducing the time to 30 or 60 days. That way, you get funds more quickly.

Another option is to reduce your monthly expenses. If you have old equipment, you may be able to use a sale-and-lease-back program to generate working capital and lower monthly payments.

ABL financing works well as short-term funding. You can use your inventory, equipment, or real estate to qualify for significant funds, and then pay off the loan with the profits you generate.