How To Use A Factoring Company To Finance Your New Business

Although the economy still has challenges, most experts agree that conditions are improving

. Unfortunately, this does not mean that getting conventional business financing will be easier. The sad truth is that many lending institutions are still licking their wounds from the excesses of the subprime credit bubble and few are willing to lend to companies - unless they have substantial collateral. Even institutions that are providing business loans to small businesses are focusing only on the bigger small businesses. So, where does this leave small and new businesses? Not in a very good place.

Small companies have had to improvise to survive the crisis. Not only bootstrapping their operations, but also looking for less conventional sources of funding. One of these less conventional sources of financing is invoice factoring. Although factoring has been available for decades, it's gained mainstream notoriety during the recession because it was one of the only sources of funding available to small and new companies.

One of the biggest challenges that small businesses are dealing with are slow paying commercial customers. In the past, commercial clients paid their invoices in 15 to 30 days. Nowadays it tales closer to 45 or even 60 days to get paid. Few small businesses, let alone startups, have the capital reserves to wait that long to be paid. Invoice factoring helps these companies by providing them with a funding advance against their invoices/receivables.

Factoring reduces the time to get paid dramatically, freeing up your cash flow and allowing you to meet existing business demand - or deploy it to pursue new sales opportunities. Most small companies use factoring as a stepping stone to grow the business and eventually qualify for more conventional financing.

As opposed to most conventional financing alternatives, qualifying for accounts receivable factoring is relatively easy. The most important requirement is that you do business with reliable credit worthy companies. Aside from that, your company needs to be free of legal problems.

by: Marco Terry

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