Purchasing power is key to business success. Whether it’s buying materials, upgrading equipment, or investing in marketing, having the ability to make these purchases can significantly expand your audience and boost sales. However, not all methods to increase purchasing power are equal.

Increase Purchasing Power with Loans

Loans have long been the traditional method for increasing purchasing power. They are typically used for specific, short-term purposes where additional capital is needed to achieve a particular goal. However, loans are finite, and once the capital is spent, businesses must allocate a significant portion of their revenue to repay the balance over several years. Additionally, loans add debt to the books, which can hinder growth potential—something new and growing businesses often try to avoid.

Improve Purchasing Power with Cash Advances

On the surface, cash advances can seem appealing. They provide capital with no specified use and no debt. Repayment is made through a small percentage of total sales, which seems less restrictive than traditional loans. However, the interest rates on cash advances are much higher, and the small repayment percentages can lead to a large balloon payment at the end of the term. Without a significant increase in sales, businesses could find themselves in financial trouble due to cash advances.

Leverage Assets for Greater Purchasing Power

Asset-based lines of credit offer increased purchasing power without the restrictions of traditional loans or the high costs of cash advances. By using the value of inventory, equipment, and receivables, businesses can create a revolving line of credit that can be used as needed. There is no debt, and the capital can be accessed as required, rather than in one lump sum. This approach provides low, manageable payments and increases financing availability as the business grows.

At LMC Alternative Business Capital, we specialize in asset-based working capital solutions for growing businesses. Contact us today to learn more about how we can help you increase your purchasing power and achieve your business goals.