Businesses Seeking Sba Loans Think About Accounts Receivable Factoring

Factoring could be an answer for small to medium-sized businesses to get alternative funds during these difficult economic times

. Why? Because two of the Small Business Administration (SBA) loan programs will be running out of funds in the near future

The SBA will be opening the Recovery Loan queue to track applicants, for the fourth time, wishing to collect the last few remaining dollars. The funds used by the SBA were first allocated in 2009's Recovery Act. It was intended to temporarily reduce fees for borrowers and increase the guarantees banks receive on loans made through the SBA lending programs. However, the money ran out last November, so they have been relying on temporary extensions, the latest of which will expire at the end of this month.

Losing the SBA's fee waiver can make a loan more expensive for the borrower by the many thousands. Plus, the banks don't want the risk - they're willing to make some loans only if the higher SBA guarantees are in place.

Most businesses seeking loans must look for alternative funding methods such as invoice factoring. Factoring has long been used in business. What is accounts receivables factoring? If you own a business, accounts receivable factoring means that you sell outstanding invoices or receivables at a discount to a finance or factoring company who assumes the risk on the receivables and in exchange, provides quick cash to you for your invoices.

Factoring is a business practice that has been used for over 4,000 years, and it is also known as accounts receivable financing, accounts receivable funding, invoice factoring or simply factoring. Factoring is used by business owners when their business is experiencing a cash crunch, which is happening more nowadays thanks to the economic situation worldwide today.

To decide if factoring could work for your business, you basically need to be trying to attain capital for the company's growth, or to meet a cash flow shortage. Due to the fact that loans are limited, accounts receivable financing might be the ideal solution to help keep the cash flow going for your business.

Following are some of the benefits of invoice factoring: 1) Collections are outsourced, which frees up resources so that you and your employees can focus on more productive activities; 2) Free up working capital tied up in inventory; and 3) Quick financing via accounts receivable factoring requires no business plan, tax statements or lengthy credit applications.

There are few potential drawbacks to using this method to finance your company. One of the biggest concerns among people using accounts receivable financing is the cost. Sometimes using factoring is just the cost of being able to do business.

by: Kristin Gabriel

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