When your bank says no…

Many of the companies I have worked with over the past six months are looking for an additional way of acquiring money when they cannot go to a bank.  In many cases, these are start-up businesses without the credit or assets to acquire a traditional loan.  In others, they may have a loan already, but just need some extra cash.

Factoring your receivables can be a good solution to help improve your cash flow.  Here’s some more info about factoring, click here.

Invoice factoring is a reliable source of financing for your business as over the years many businesses have used it to generate quick capital. The best way to describe it is as the sale of accounts receivables. Perfect for a start-up business or businesses in need of capital fast; invoice factoring allows lenders to make a decision based on the clients’ credit decisions, and not the business credit.

It can take a long time to get approved for a bank loan, and most businesses get turned down when they go after a regular loan. That is where invoice factoring comes in because it doesn’t take much to get approved. All it takes is some clients with good payment histories, and you will have the cash quick.

The process is simple; you sell your accounts receivables for a discount of maybe 5% to 10% of the actual value to the lender, or the factor. The factor will than work to collect the accounts receivables for the full amount which is where they make their profit. Even though you lose some revenue and profits, it is better for your business sometimes to have the capital quickly to fund new and better projects.

Here are some more benefits to invoice factoring:

1. You gain working capital without adding debt or diluting your equity
2. You can finally begin to take advantage of early payment discounts from suppliers for prompt payment
3. You can purchase equipment that will increase your profitability
4. It can protect and improve your credit ratings
5. It can increase your sales through credit extensions
6. And most importantly, it allows you to focus on the success of your business instead of worrying about your cash flow.

- hope that helps!