The Federal Reserve’s recent interest rate cut, along with predictions of more cuts by year-end, may lead you to believe that 2025 will bring smooth sailing. However, this view is worth a closer look. While inflation has eased, we’re still emerging from a period of high inflation that has pushed most prices significantly higher than they were just two or three years ago—and prices for most products aren’t dropping.
Rising energy costs are placing additional strain on Small and Medium-sized Business (SMBs), especially those in industries such as manufacturing, hospitality, and logistics, where energy consumption is high.
With inflation woes still nagging at the confidence of consumers and supply chain challenges, whether your company is missing opportunities is a critical question to ask. The cost of doing business has been on the rise over the past several years. With interest rates still higher than they had been for almost a decade, borrowing has become more expensive for SMBs, which rely on loans for expansion, working capital, or operational stability.
Now, consider this: if you were offered cash at 4.0 – 5.0% interest, fixed for 5 – 10 years, and treated as equity in your capital stack, would you take it?
The secret to unlocking new opportunities lies in using incentive financing like this to preserve your cash reserves and put it to work more effectively. Here’s how:
- Vendor Payments
Rather than relying on typical payment terms, imagine using that capital to pay vendors ahead of schedule. You could even negotiate early payment discounts. While a 2% discount might not fully offset your cost of capital, that’s only part of the advantage. By paying early, you position yourself as a preferred customer—one that gets priority access to limited inventory. This means more supply to keep production running, giving you the chance to drive more revenue while competitors are stuck waiting.
- Cash Management
Reevaluate your current cash flow strategy. Are you relying on a line of credit, factoring receivables, or using vendor financing to make ends meet? Incentive financing allows you to restructure your capital stack, reducing your overall cost of capital and improving cash flow. It also frees up capital for other high-return opportunities, offering flexibility to invest where it matters most.
- Accelerated Investment
While your competitors are holding back on investments to conserve cash, you could be pushing forward. Incentive financing allows you to upgrade equipment or expand facilities without depleting your reserves. Lenders are demanding more equity, but this type of financing can take its place, giving you a low-cost structure that boosts your project’s return on investment. With others being cautious, this is your chance to capture market share and grow when others can’t.
IMPACT Loan Fund
If you’re doing business in Washington County, there is a financial tool available to you that could support your growth. The Impact Loan Fund provides low-cost financing primarily to existing companies growing or relocating their businesses in Washington County. Our funds are readily available in amounts of $150,000 – $1,000,000. Rates are typically below market and fixed for a minimum of five years and often for the life of the loan—offering a stable advantage in what can sometimes be a volatile business environment.
By trading equity for low-cost debt with an IMPACT loan, you can fuel growth instead of missing out on opportunities for greater returns. Every dollar you free up is a dollar you can reinvest into building your business.
Let us help you navigate the world of financing and find new ways to preserve your capital and strengthen your cash flow. You may be surprised at the opportunities you’ve overlooked!
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