When it comes to accessing capital there are typically some common misconceptions small to mid-sized government contractors have when looking into financing their awarded work. The biggest issue sometimes lies in “you don’t know what you don’t know,” but even more often is lacking the access to the expertise that can advise your decision making. Having a CPA knowledgeable in government contracting is a great start, or having an outsourced CFO develop and oversee the financial strategy for your business is beneficial as well. Utilizing debt to grow your business isn’t taboo, it’s often a necessary step. Remember, businesses spend money to make money. If the only thing standing between you and the growth you’re after is capital, that is easily solved by a business line of credit.
Selling equity in your business to simply fund a contract or purchase order isn’t necessary in most cases. All you are doing is giving up an exponential portion of your future growth capabilities. Although it may appear to be a quick fix to a working capital shortage, it isn’t the best or only option if banking lines of credit are not in the cards. Debt isn’t always a bad thing. Especially if your business is in growth mode. Debt can be paid back and income can be earned all at the same time. But if you sell off your assets, whether through invoice factoring or through equity, it can be difficult and expensive to get back. The use of strategic debt is making a calculated decision to leverage other people’s money to make more profit. In that process, you pay a nominal fee, pay back the loan, and keep the rest, including all of the assets attributed to the business. Nothing is lost along the way.
Don’t miss out on contract bids because you don’t have the capital to support the work. Utilizing a revolving line of credit to fund increased payroll and operating costs is a perfect example of strategic debt. It will increase your ability to continue going after bigger contracts without draining a personal bank account, giving up equity in your company, or selling off your invoices and paying exorbitant fees. If you are currently bidding and would like a consultation on what options are available to you, reach out to our team of professionals today! Don’t let what you don’t know about available alternatives to banking lines of credit cost you….literally! Visit our website to learn more about our option and how Parabilis can create a plan for your own strategic use of debt on your current or next contract award! Contact us today to learn more about how strategic debt can help grow your business.