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Why is a digital financing alternative for your startup more convenient than a bank loan?

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

This article was translated from our Spanish edition. Opinions expressed by Entrepreneur contributors are their own.

The most recurring problem for companies today, and the main reason for bankruptcy, is the lack of cash flow. In other words, when entrepreneurs start to run out of money to operate, a common mistake is to resort to loans for SMEs granted by traditional banks.

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

That is why Higo, the platform that allows you to pay, collect and finance all company invoices in one place to maximize cash flow, recommends using digital alternatives that allow them to operate, reduce the risk of bankruptcy, and not do even bigger debts.

The main reason for making use of these financial alternatives is that they can guarantee that your company always has liquidity. It is worth mentioning that even the most profitable industries can have operational flow problems, because you never know when the market can turn 360 degrees.

That is why entrepreneurs must turn to look at financing alternatives that help them, in a single click, to pay their suppliers when they do not have the money to do so, with the option to settle said payment in a period of 60 days. .

The foregoing gives certainty to the company when the capital stops flowing due to some external factor, it also prevents it from going into debt and having to resort to a conventional credit that can help it at the moment, but affect it in the long term.

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Another factor is the sudden and unplanned drop in sales. There are products and services that are sold more in certain seasons of the year, depending on their line of business and the need they serve, which is why entrepreneurs should know that there is no single formula to manage resources within their company, for On the contrary, they must always remain flexible and adaptable to changes that the context generates.

Another problem companies have is that customers take too long to clear payments to the company. For this reason, companies need an alternative that advances the amount of invoices receivable to the company. This prevents that in that period in which they wait to receive the money from the client who delays in paying their finances, they are affected by the lack of liquidity.

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

“For companies in the country it is important to have a financing alternative that helps them avoid that the lack of operating flow leads to the closure of operations. Even more so in Mexico, a country where the life expectancy of companies is between 7 and 9 years in the center of the country, which falls to 5 years in some entities in the interior of the republic, according to Inegi data ", considered Rodolfo Corcuera CEO & Co-Founder of Higo.

The entry and exit of cash is like the oxygen of the startups. Without cash flow, businesses are at high risk of being negatively impacted, even if they are profitable. Entrepreneurs require platforms created to help them avoid red numbers and streamline processes quickly and in a single click, instead of resorting to traditional methods that, beyond granting them a loan, can be the beginning of a long path of debts and interest payments.