Product Financing Guide: Working Capital, Sale-Leaseback, Credit Cards

By Beacon Funding| Oct 7, 2020| 4215 Views
Product Financing Guide: Working Capital, Sale-Leaseback, Credit Cards

Looking for ways to get the funds you need to drive your business to its next level? As a strategic business owner, you know the value of having funds and being able to take advantage of opportunities at the right time.

There are many products to help you with these opportunities, but choosing the right one can be tough. That’s why we created a guide that helps you compare three different financing products: working capital loans, sale-leaseback, and business credit cards. By using this guide, you can decide which product best works for your buying potential and growing your business.

Sale-Leaseback vs. Working Capital vs. Credit Card

  Sale-Leaseback Working Capital Credit Card
Loan Amount $50,000 $50,000 $50,000
Initial Cash $939 $0 $0
Monthly Financing Costs $478 $625 $666**
Annual Financing Cost $5,736 $7,500 $8,000
*Above Comparison Based on Average applicant credit risk. Interest only credit card payment and industry average pricing

Let’s review how each of these products compare and what makes them different. What are their benefits?

What Do You Get With a Working Capital Loan?

If you need cash flowing into your business, a working capital loan is a powerful option. It’s a way to fulfill contracts, fund large-scale projects, or other projects that have high return on investments. Due to its zero upfront charges, you can start utilizing your funds to generate profits in a relatively short amount of time while building your business’s credit. A working capital loan is more expensive than a sale-leaseback because it’s an unsecured loan.

Unlike a credit card, there are no annual fees and no compounding monthly interest. Payments are fixed and terms are as short as 3 months.

Additionally, getting a working capital loan is a faster start to finish process. Beacon Funding’s application to funding process is streamlined and is much quicker than a credit card. The entire process can be completed in 24-48 hours with cash deposited directly into your account, giving you tangible funds for immediate use.

Benefits of Working Capital Loan:

  • Access to large amounts of funds quickly.
  • Increasing buying potential and lowering margins.
  • No annual fees.
  • No compounding monthly interest*.
  • Build business credit, making future purchases easier.
  • Fixed monthly payment and total repayable.

With its effectiveness and speed, a working capital loan delivers more power than a sale-leaseback and credit card.

An Example of When to Get a Working Capital Loan

Susan’s Embroidery gets a contract to make all the baseball hats for every little league team in the city. She will make a profit of $40K from the contract, but needs $15K to purchase materials, cover payroll, overhead, and other additional costs. If Susan gets approved for a working capital loan, she will not only have the funds to cover the contract within 24-48 hours, but she will also receive a decent return on her investment allowing her to pay back the loan in a short amount of time.

In this situation, a working capital loan worked best for Susan’s business because it allowed her to grow fast and pay her loan quickly.

What Do You Get With a Sale-Leaseback?

A sale-leaseback is an effective way to get cash and strengthen your line of business credit by unlocking the equity in your equipment. It requires a small upfront investment and offering up an asset as collateral, but out of the three options, a sale-leaseback allows you to take advantage of the lowest monthly and annual financing charges.

A sale-leaseback offers a low fixed monthly payment and a cheaper total repayable. This allows you to plan in advance for long-term goals and budget for the future. It also helps you avoid high interest rates you get from your average credit card.

Unlike some credit card lenders, there are no annual fees and the application process for a sale-leaseback is streamlined. Beacon Funding can approve and fund your transaction in 3-5 business days.

Benefits of Sale-Leaseback:

  • Inexpensive way to increase liquidity for long-term goals.
  • Competitive low interest rates.
  • Fixed monthly payment effective for budgeting.
  • No compounding monthly interest.
  • Streamlined application process.

An Example of When to Utilize Sale-Leaseback

John’s Towing Service wants to branch out and include automotive repair in his existing service. At the moment, John doesn’t have the funds to hire a new auto mechanic and he’s losing clients every day he doesn’t have a mechanic. John owns 4 tow trucks – if he uses 1 of them for a sale-leaseback, John will get the funds to hire a new mechanic, expand his towing operation to include automotive repair, and generate more income with his added service while helping his business establish credit.

A sale-leaseback is an effective way to get cash and strengthen your line of business credit by unlocking the equity in your equipment.

In this situation, a sale-leaseback worked best for John’s business because it allowed him to keep generating revenue and get needed cash to expand his operation’s potential.

What Do You Get With a Business Credit Card?

A business credit card doesn’t require any upfront charges and an asset to get started. However, because it is unsecured and is a revolving line of credit, there is no real fixed repayable schedule and has significantly higher costs than the other products.

A credit card comes with other limits: Compounding monthly interest, delays from approval to receiving the card in the mail, and annual fees. However, it is a viable means for making purchases.

Benefits of Business Credit Card:

  • No asset required for access to funds.
  • No upfront fees.
  • Limited business credit required.

A business credit card doesn’t require any upfront charges and an asset to get started. It's a viable option for businesses to make purchases.

Business credit cards are a viable resource for many businesses, but there are more viable options to consider when you need access to cash that offer fixed payment amounts at a cheaper cost of funds.

These work well for most businesses, but if you need funds sooner than later, large amounts for bigger purchases, and don’t want fixed repayment amounts, a credit card might not be your best option.

We’re Here to Help Achieve Your Goals

Growing pains are never easy, but you don’t have to go through it alone. Whether you have a contract to fulfill or have an opportunity to expand your business potential, each of these three products provides different benefits.

Many business owners assume getting financing is a long, drawn-out process. That’s not the case at Beacon Funding! With an easy online application and a dedicated financing expert, you can get a credit decision within 24 hours and, depending on your needs, access to cash in 1-2 business days.

Interested in one of these financing products? Apply for one today and we can help you get started.

Our team of expert consultants are willing to talk with you to see how our Working Capital Loan and Sale-Leaseback programs can help meet your business goals.

Talk with a financing expert at 847-693-3993.

Beacon Funding
Beacon Funding

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Since 1990, small businesses nationwide have been able to grow with fast affordable equipment financing from Beacon Funding.