Should A Bank Loan Fund Your New Product Release?
Posted on June 19, 2014 in Banking Issues
How much thought have you really given that new product release that you talked about in the past? As any business owner knows, releasing a new product is an involved process that requires a significant amount of planning and funding. If you want your product to get off to a good start, then you need to make sure that all of your pieces are in place.
Funding a new product release is always a very tricky proposition. There is so much to attend to that getting reliable financing can be extremely difficult. You could think about a bank loan to fund your new product release, but all of the moving parts in a product release can sometimes be difficult to fund with a bank loan.
When you get ready to manufacture a new product, your production needs are going to change. This may require you to invest in new equipment and it could also mean hiring more personnel. At the very least, you can expect to have to train your employees on how to produce the new product properly and in a cost-effective manner. Training, equipment and personnel cost money, and these can be very dynamic needs.
Anyone who has never put together a marketing plan cannot appreciate the comprehensive scope that an effective plan covers. A good marketing plan takes months to plan and years to implement. There is a significant amount of money spent on market research and packaging development before the final prototype is even created. The marketing plan will outline how the product will be advertised, distributed and sold. It is the blueprint that your company will need for a successful product release and it can cost a lot of money to develop.
When a company releases a new product, there is always the desire to explore new markets. A growing company needs to constantly find new target demographics to sell to in order to expand revenue. Opening up new markets can mean expanding the distribution network, hiring more home office personnel and opening a satellite sales office or two. It can be a tremendous risk, and expense, to expose your company to new markets.
An ongoing part of any good product release marketing plan is an analysis of the competition. Your company constantly needs to know what your competitors are doing to try and take market share away from your new products and you need to find out what you can do with the next product release to gain that market share back. Even in the planning of a new product release, research and product development play pivotal and costly roles.
The Challenges Of Financing New Product Releases
The problem with planning a new product release is that it never goes by the book. You can spend months putting together comprehensive plans, but there will always be that one research company that wants to do one more test to get you information that you honestly could use. There will always be the potential for a problem with the new production methods that will slow down manufacturing and cost the company money.
The challenge with financing new product releases is that nothing is consistent and the financing needs to be flexible. A bank loan could be the worst way to finance your new product release because it is either going to be much more than you need, or not even close to enough. If the loan is too much, then you just took on additional debt because you cannot return money to a bank. If the loan falls short, then you will need more loans to make up the difference.
Going back to a bank over and over again to finance your product release adds more debt to the entire process. Instead of just worrying about your product release costs, now you also have to worry about interest debt and monthly service charges. If you are using a bank line of credit to fund your release, then you will have to deal with compounding interest and service charges. A bank line of credit also comes with an unpredictable, and usually escalating, interest rate.
Use A Receivables-Based Line Of Credit Instead
When you look at your company finances, you can already see an ongoing source of funding that will give you the flexibility you need to launch your new product properly. Your invoiced sales represent the cash flow necessary to fund every aspect of your product launch and prevent the need for expensive bank lending. The reason more companies do not use their own invoicing to fund product launches is past due invoices.
Past due invoices slow your cash flow and cause financial issues within your organization. 1st Commercial Credit will show you how accounts receivables funding can be used to turn your past due invoices into cash and allow you to pursue your product release plans without worrying about how you will fund them.
Accounts Receivable Financing Is Your Flexible Line Of Credit
1st Commercial Credit can advance you cash against the face value of your receivables within 24 hours of receiving your outstanding invoices. We do not charge any set-up or facility fees, and we do not have any hidden fees.
As your invoiced sales go up, so does your invoice financing line of credit. This is the ideal solution for your product release because it offers flexibility based on your company's own sales activity. You will always have access to the cash you need to launch your new product when you sign up for our receivables-based line of credit.
Keep Costs Down As Sales Go Up
1st Commercial Credit is not a bank and we do not issue bank loans. That means that your invoice factoring account does not come with all of the added financial challenges that bank lending creates. We give you a reliable source of funding that you can use to expand your market share and grow your revenue.
We base all of our decisions on your customers' credit scores, which means we have programs that will help companies with bad credit, or even no credit at all. If your start-up wants to release a new product and you have qualified invoices to factor, then we can advance you the cash you need.
We do all of our credit qualifying online, which means that we never talk to your clients. We leave all of the long-term relationship building with your clients up to you so that you can pave the way for the success of your new product. Contact 1st Commercial Credit and we will show you how invoice funding can get your product release off the ground and on its way to success.