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Why is a digital financing different extra handy to your startup than a financial institution mortgage?

Traditional loans offer fixed amounts with a fixed interest rate for a fixed term that is paid in fixed installments. This rigidity forces companies to borrow more than they need and therefore to pay more interest than they should.

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June
21, 2021

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This article was translated from our Spanish edition using AI technologies. Errors can occur because of this process.

The most common problem facing businesses today and the main reason for bankruptcy is lack of cash flow. In other words, when entrepreneurs run out of money, a common mistake is to resort to SME loans provided by traditional banks.

Traditional loans offer fixed amounts with a fixed interest rate for a fixed term that is paid in fixed installments. This rigidity forces companies to borrow more than they need and therefore to pay more interest than they should.

This is why Higo, the platform that allows you to pay, collect and fund all company bills in one place to maximize cash flow, recommends using digital alternatives that allow them to work, reduce the risk of bankruptcy and not get into bigger debts

The main reason for using these financial alternatives is that they can guarantee your company liquidity at all times. It's worth noting that even the most profitable industries can have operational flow issues because you never know when the market may turn 360 degrees.

Because of this, business owners need to look for funding alternatives that will help them with one click to pay their suppliers when they don't have the money, with the ability to make that payment within 60 days. .

The foregoing gives the company security in the event that the flow of capital is interrupted due to some external factor, it also prevents it from going into debt and having to fall back on a traditional loan that can help it right now but adversely affect it in the long term.

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Another factor is the sudden and unplanned decline in sales. There are products and services that are sold more at certain times of the year, depending on the industry and needs, which is why entrepreneurs should know that there is no single formula for resource management within their company, because on the contrary, they must always be flexible and adaptable to contextual conditions Changes remain.

Another problem facing companies is that customers are taking too long to process payments to the company. Because of this, companies need an alternative that will advance the invoice amount to the company. This prevents them from being hit by the lack of liquidity while waiting for the money from the customer who is behind with paying their finances.

In this way, the entrepreneur has the money and can pay the platform for the early payment afterwards.

“It is important for companies in the country to have a financing alternative that helps them avoid the lack of business flow leading to the closure of the business. Even more so in Mexico, a country where the life expectancy of companies in the center of the country is between 7 and 9 years, which, according to Inegi, has dropped to 5 years in some entities in the interior of the republic, "said Rodolfo Corcuera CEO and co-founder by Higo.

The entry and exit of cash is like the oxygen of startups. Without cash flow, companies are at high risk of having a negative impact, even if they are profitable. Entrepreneurs need platforms that help them avoid the red numbers and streamline processes quickly and with a single click, rather than resorting to traditional methods that, beyond obtaining a loan, can be the start of a long road to debt and interest payments.

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