How Businesses Can Avoid Prepayment Fees

When looking at various financing options, flexibility is key. Small and emerging businesses need some financial leeway in order to avoid straining their cash flow. Prepayment fees can frequently hinder business growth and success. Fortunately, there are options available to business owners that do not have prepayment fees attached, so companies can thrive and flourish.

How Prepayment Fees Work

With traditional loans from banks and similar lending channels, prepayment fees are usually part of the fine print. Traditional loans are set up to require businesses to make monthly payments on the total amount borrowed. Paying less than that amount puts the business in danger of defaulting on the loan. Paying more than the set amount triggers prepayment fees. The big drawback is that if businesses are in a position to pay off the loan ahead of schedule and wipe debt off of the balance sheet, traditional lenders levy penalties and fees in order to keep drawing out interest-only payments as long as possible before getting to the actual amount borrowed.

Financing Without Prepayment Fees

There are a number of financing options which do not penalize business owners with fees. A merchant cash advance, for example, is scaled to sales. There is no set monthly payment. Instead, a merchant cash advance applies a percentage of sales toward the total. This gives businesses much more flexibility during both light and heavy sales periods. Additionally, if businesses experience growth and find themselves in a position to pay off the balance of the merchant cash advance, they can do so without penalty. Merchant cash advances are designed to help businesses grow, without having to budget every month or experience a cash flow strain trying to make regular payments. A merchant cash advance is one of the most budget-friendly financing options available to new and growing businesses.

Other Financing Options

There are other financing programs which forgo a balance completely, and do not require businesses to take on debt or compromise their credit ratings. Invoice factoring removes the lag between customer payments, and gets businesses the revenue they are owed. Purchase or financing is an advance in capital to cover the cost of production for large orders, and the amount is rolled into the invoice so business owners can grow and deliver without experiencing a financial strain.

Find Out More Today

If you want to avoid both debt and prepayment fees, you need a financial partner with the capital resources to offer reliable alternatives to traditional loans. Contact Biz Com Loans today to learn more about our flexible, affordable, and debt-free financing options.

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