How Revenue-based Financing Can Ease Production Process During Festivals
For consumers, festivities bring an abundance of feelings, such as joy, good vibes, and the willingness to spend more on themselves and their families. Therefore, during the festive season, the demand for products generally reaches its peak. This brings ample opportunities for businesses to drive more sales.
While such periods help businesses to grow, they also make it challenging to satisfy the rising demand. This is especially true for MSME manufacturers, who may lack the resources to hold on to the fulfillment of the orders received. MSME manufacturers require adequate cash flow to keep their operations going during the peak business period, that is, during the festive season.
However, manufacturers can rely on various funding options to resolve their financial hardships to continue serving their clients and customers without missing out on any orders. One of the most convenient choices here to help manufacturers function optimally could be opting for a short term finance for the festive season, such as revenue-based financing.
What is revenue-based financing?
Revenue-based financing is a financing method used to generate capital to fund business operations. In this capital raising method, businesses generally approach investors or financiers to provide funds in return for a specific percentage of the company's ongoing year’s gross revenue. In this type of financing, the capital can be raised for a company without giving up a part of their assets as collateral. Therefore, revenue-based financing can be a low-risk funding avenue for manufacturers to opt for to generate funds. This can assist manufacturers in easing their production processes, to meet the high demand that festive season brings.
Benefits of Choosing a Revenue-based Financing for Manufacturers
Revenue-based financing requires no assets based collateral for the borrower to get the funds. Therefore, in times of sudden increase in demand for goods and services, especially during the festive season, manufacturers may find this type of business finance convenient.
Quick Access to Funds
Manufacturers can rely on revenue-based financing to improve their cash flow. They can do so by opting for this funding option, which can assist them in receiving the required money to meet high festive demands. Businesses can approach revenue-based financing investors to start and make the most of this financial tool. As these investors do not demand firms to have significant equity exits, the funding procedure finishes in a shorter period. This helps businesses in accessing cash quickly.
No Asset as Collateral or Mortgages Requirement
Revenue-based financing don't need the borrower to give the lending company any asset based collateral as security. This can help businesses save time and resources that the lender would otherwise take to assess the asset based collateral provided as security in other types of loans. More importantly, the MSMEs will not be required to pledge their inventory or capital assets in exchange for credit, making such loan options relatively low-risk in nature.
Diversified Loans
Any purpose is acceptable for this type of loan. Borrowers are not required to present thorough plans outlining how the money will be spent. MSME manufacturers can utilize it for growth, to cover operating costs, to hire new employees, or for any other business activities without having to worry about creating detailed plans. Lenders often won't ask too many inquiries regarding where and how the funds are spent because the borrower alone makes such decisions.
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How can manufacturers boost their production?
Once the manufacturers are free from any financial difficulty, they can optimize their production by bringing proper production planning, equipment maintenance, and inventory, among other things.
Proper Production Planning
Manufacturers face pressure to increase their production during high demand. In this scenario, opting toward a revenue-based financing option can improve business finance to increase production processes. Loans like these help with improved cash flow, which enables manufacturers to plan their production methods better. If MSME manufacturers have their product plan in place to tackle the expected hike in demand, businesses can effectively avoid facing struggles in manufacturing more goods.
Maintenance of Equipment
How many companies neglect periodic machine maintenance is startling. In the manufacturing sector, this is a big mistake against productivity. Maintenance schedules are necessary to keep the operation running and the equipment in good working order, even though they can sometimes be inconvenient. This kind of maintenance is necessary to minimize downtime and enhance resource utilization, especially for MSMEs with slim profit margins. However, regularly maintaining equipment lets manufacturers stay on top of their businesses and not let sudden rises in demand, for example, during the festive season, affect their capacity to accept bulk orders.
Optimizing Inventory
Maintaining an optimal inventory is the most obvious way for businesses to use revenue-based financing for ramping up their operations. During festive periods, it is crucial for manufacturers to keep track of inventory levels and stay assured that they have the adequate amount of stock to cater to their clients without any hassle. Moreover, working within their ERP systems may assist manufacturers in optimizing their inventory by setting up automated triggers for inventory, invoicing, and materials billing, helping them work efficiently and to stand firm in completing the requested orders during the festive season on time.
Businesses usually place a premium on promptly attending to demand, particularly during the festive season. This may call for speeding up production processes from manufacturers to deliver their client commitments seamlessly. There are various ways through which manufacturers can speed up the production process. However, accelerating the methods may require businesses to opt for financial solutions to cater to their requirements, like obtaining revenue-based financing during the festive season. This can assist MSME manufacturers in optimizing their entire supply chain and fast-track their goods and services in the market to boost profitability. You can contact us to learn more about how you can get access to revenue-based financing easily via Bizongo's lending partners.
