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Two Types of Alternative Financing to Help Bridge Cash Flow Gaps

  Arthur F. Rothberg, Managing Director, CFO Edge, LLC  
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  Article Summary  
With the economic recovery moving slower than we would like, many Los Angeles and Southern California business leaders are finding that it’s still difficult to obtain working capital financing for their companies.

The time lag that exists - between when cash is paid out for raw materials, inventory, or overhead and when receivables are collected - can lead to cash flow problems. With banks continuing to maintain strict underwriting guidelines for small business credit, some small firms are unable to currently qualify for a bank credit line.

This article looks at alternative financing solutions like asset-based loans (ABL) that are secured by the business' equipment, machinery, inventory or accounts receivable. Discussed are the two broad categories of asset-based loans - full-service factoring and accounts receivable financing - along with how they work, their strengths and their limitations.

Businesses needing a working capital infusion to help bridge cash flow gaps - but that don’t currently qualify for a traditional bank loan or line of credit - may want to consider alternative financing solutions like full-service factoring and A/R financing. Business owners and executives may find it helpful to talk with an outsourced CFO services professional with a proven track record identifying the best alternative financing options and negotiating the most favorable contract terms.

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