Since the Great Recession, small businesses have been reluctant to grow their brand with fears of cutbacks in consumer spending, a double-dip recession or a lack of business cash on hand. This could be why business investments were down in the fourth quarter of last year, according to a recent Department of Commerce report.
Despite the United States economy recovering over the last few years, some small businesses aren't reflecting that, though studies have continually shown that confidence levels are returning to pre-recession norms.
Future Receivables: Then and Now
One of the biggest trends in the private sector has been to take advantage of future receivables — a means of revenues that will be purchased over time. This alternative funding tool is utilized in order to obtain an advance of business cash that can then be used to help the company grow.
For years, securing future receivables has been a common financial tool in emerging markets, though it was first seen in the U.S. during the 1970s. Public and private sector entities in developing countries presently use these future receivables as a way to gain higher credit ratings. From South America to Asia, organizations have used future receivables to then tap into low-cost financing options.
Why Future Receivables?
Meanwhile, small- and medium-sized businesses in the U.S., especially those involved in the retail sector, can have a difficult time securing credit and loans from traditional financial institutions and lenders. However, there is a wide variety of financial services firms that offer working capital through the sale of anticipated future receivables.
Future receivables are allocated through credit and debit card sale transactions. It's a very simple process: if a small business borrows a lump sum of $10,000 then the merchant cash advance provider takes a percentage from each credit card transaction. It's easy, affordable and efficient for both the provider and the merchant.
Many retailers consider future receivables as a way to fund business growth. When access to credit is limited, the entrepreneur has zero in cash reserves and sales are on the decline, incorporating future receivables into a short-term business model is an effective business measure. The business cash received from future receivables can help the brand expand, hire new staff, invest in equipment or cover some of the daily operating expenses, such as payroll, overhead and inventory.
Young small businesses tend to resort to future receivables because it is hard to receive credit from conventional banks. Financial institutions oftentimes want to peruse a five-year profile and prompt enterprises to abide by tedious, expensive and even outdated application forms and regulations.
How to Get Business Cash
Quikstone Capital Solutions is a financial services firm that offers merchant cash advances for businesses that need a lump sum of money right now. It makes it simple to understand, apply and receive a business cash advance because it doesn't implement tiny print, hidden fees and exorbitant interest charges.
Check out the alternative business cash options Quikstone Capital Solutions can offer and find out if the method of future receivables is right for you.
