Is My Business Too Small for Factoring?Posted by Factor Funding Co. on March 3, 2015
As a new small business owner, you understand the precaution that you must take when it comes to handling your company's finances. Because you are new to the marketplace, you may lack the assets to get financing when and in the amount that you need.
Rather than stake your business' financial wellness on a bank loan, you could enjoy a better choice with factoring. Factoring offers small business owners like you these unique benefits that cannot be found with traditional bank lending.
Bad Credit Criteria
Your credit may be the ultimate deciding factor when you apply for a bank loan. If your own personal credit score is less than stellar and your business lacks a solid credit rating because of its newness, a bank more than likely will turn you down without question.
With factoring, however, your credit does not come into play as much as the credit and bill paying history of your invoice customers. As long as the billed parties have solid payment records and good payment records, your factor application should be approved, even if your own credit is sub-par.
Start-Up Cash Opportunity
The process of launching your business and getting it off the ground successfully requires that you have start-up cash to rely on for at least a few months, if not longer. If your business bank accounts are bare, you may not be able to afford to wait several months for your invoice customers to pay their obligations to you.
Instead of risking your company's immediate future on outstanding invoices, you can sell your accounts receivables and get the money you need in just a few days. Many factors can have your money to you in a day or two, letting you have almost instant cash to:
- Buy advertising for your new venture
- Purchase inventory
- Pay your employees
- Pay utilities
- Meet with clients and expand your business
When it comes to getting the start-up revenue you require for your future success, time may well be of the essence. Factoring can be your best answer if you cannot afford to wait for your invoices to be paid.
Short Term Commitment
Your new business may be your pride and joy, one that you are not necessarily willing to share with others. However, when you apply for a bank loan, you are basically telling the bank that you agree to it keeping an eye on your company and even taking a long-term staked interest in your enterprise. Because it can take months or years to pay off a bank loan, you must put up with this meddling until you have satisfied your balance.
However, factoring tends to be a much shorter commitment and one that is generally settled within a few months' time. As soon as your invoice customers pay their obligations to your factor, you are free from your obligation. You have the choice to renew it or continue on without another factor loan.
Virtually Fail-Proof Transactions
In the end, factoring can offer you the greatest advantage because these transactions are virtually fail-proof. As long as your invoice clients have good credit and solid bill paying histories, you stand a low chance of being turned down for your money.
Even more, you avoid the fear that a bank will scrutinize your application, only to deny you for a reason that may be beyond your control. With factoring, you get the money that your business needs today without the embarrassment and frustration that accompany traditional lending.
Even if your business is brand new, you can still access the cash you need with factoring. Factoring offers you and your start-up advantages that have yet to be found with getting money through bank loans.