Why is a digital financing alternative for your startup more convenient than a bank loan?
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The most recurring problem for companies today, and the main reason for bankruptcy, is the lack of cash. In other words, when entrepreneurs start to run out of cash to operate, a common mistake is to resort to SME loans from traditional banks.
Traditional loans offer fixed amounts, with a fixed rate for a fixed term to be paid in fixed installments. This rigidity forces companies to borrow more than they need and therefore to pay more interest than they should.
That’s why Higo, the platform that lets you pay, collect, and fund all business invoices in one place to maximize cash flow, recommends using digital alternatives that allow them to function, reduce the risk of bankruptcy and avoid getting into more debt.
The main reason for using these financial alternatives is that they can ensure that your business always has cash on hand. It should be mentioned that even the most profitable industries can have operational flow issues because you never know when the market may turn 360 degrees.
This is why entrepreneurs must turn to financing alternatives that help them, with one click, to pay their suppliers when they do not have the money to do so, with the possibility of settling said payment on time. 60 days. .
The above gives certainty to the company when the capital stops flowing due to an external factor, it also prevents it from getting into debt and having to resort to conventional credit which can help it at the time, but affect it in the long term.
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Another factor is the sudden and unexpected drop in sales. There are products and services that sell more during certain seasons of the year, depending on their industry and the need they serve, which is why entrepreneurs should know that there is no formula. unique to manage the resources within their company, because on the contrary, they must always remain flexible and adaptable to the changes that the context generates.
Another problem that businesses face is that customers take too long to clear payments to the business. For this reason, businesses need an alternative that advances the amount of invoices receivable to the business. This avoids that during this period when they are waiting to receive money from the client who is late in paying their finances, they are affected by the lack of liquidity.
This way the entrepreneur has the money and can then pay the platform for the prepayment.
“For businesses in the country, it is important to have an alternative financing that helps them prevent the lack of operating cash flow leading to the closure of operations. Even more so in Mexico, a country where business life expectancy is between 7 and 9 years in the center of the country, which drops to 5 years in some entities inside the republic, according to Inegi data ” , said Rodolfo, CEO of Corcuera and co-founder of Higo.
The entry and exit of cash is like the oxygen of startups. Without cash flow, businesses run a high risk of being negatively impacted, even if they are profitable. Entrepreneurs need platforms created to help them avoid the red numbers and streamline processes quickly and with one click, instead of resorting to traditional methods which, beyond giving them a loan, can be the start of business. ‘a long road of debt and interest payments.
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This article originally appeared on entrepreneur.com
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