Alternative Lending for Small Businesses
Nearly all businesses experience financial challenges from time to time. Is your capital tied up in outstanding receivables? Have you been turned away by banks and credit unions or, worse, subject to high interest rates and other stringent funding limitations? Fortunately, small businesses have a number of alternative lending options to secure the funding they need.
Factoring is a Small Business-Friendly Alternative to Banks
Traditional loans and lines of credit are difficult to obtain despite clear signs of economic recovery. To qualify for these loans, companies must have an established history of good credit and may have to pledge collateral to qualify. The small business must then wait weeks or months for a funding decision, and may wait longer after approval for a disbursement.
Even if all of the above goes as planned, the small business owner must now contend with added debt and a strict repayment schedule with unforgiving interest rates should she be late as little as one time. Increasing the borrowing base requires even more tedious paperwork and often an audit, and is never a guarantee.
The Alternative: Invoice Factoring
Invoice factoring is not a loan and does not create debt on your balance sheet. Unlike a loan, small businesses with bad credit – or no credit at all – can qualify for a competitive factoring program in as little as 3 to 5 business days with basic company and customer details.
Once you are approved for invoice factoring, you will receive up to 95 percent of your factored invoice amount directly in your account within 24 hours of invoice verification. You can continue to factor as many invoices as you need, as often as you need to steady your cash flow. The factoring company takes their fee directly from the amount they hold in reserve upon funding, and when the invoice is paid you receive the remainder.
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Additional Alternative Lending Options for Small Business Owners
There are, of course, other alternatives to both conventional lending and financing your invoices through invoice factoring:
Unsecured Business Loans
Unsecured loans for small business owners are a quicker and easier alternative to banks. Recent startups can qualify and approval only takes 3 days. These loans do not require collateral, which makes them an appealing option for many business owners.
If your small business has a decent credit score, you may be able to qualify for a small business credit card. You can use a company credit card to purchase materials and supplies for your business, as well as to pay bills with any creditors that accept credit cards. Cash advances are also a possibility, depending on your creditor.
This alternative does include an interest payment, and creates new debt on your balance sheet – potentially raising your overall cost of doing business.
If you are a startup, you may be able to find financial support from angel investors interested in the product or service you are providing. Angel investors are private individuals looking to invest their money and time into getting compelling companies off the ground.
This method of funding often requires a personal connection to a potential angel investor, as well as geographic proximity. In addition, the investor will likely want to take a hands-on approach to your business and you may find yourself with an unexpected partner. The investor will typically reap their financial rewards with a stake in your profits.
Crowdfunding has gained traction as a means to fund any operation such as movies, new tech products, and even personal endeavors. The “crowd” of several (even hundreds) of individuals will contribute to your idea, and if they reach the funding goal you set then they will typically receive an incentive that you choose – such as a free product or production credit of some kind.
As popular as crowdfunding is, it is also an incredibly difficult option to pursue. Every crowdfunding company’s criteria for a worthwhile concept are different, and far more concepts are denied than are approved. Even so, if you have a revolutionary idea then you may be able to drum up the support you need from the online community.
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Alternative lending helps small businesses gain financial freedom. Contact us at 855-322-8671 to learn more.
Other Small Business Benefits of Invoice Factoring
Invoice factoring with Factor Finders holds a number of other advantages for small businesses looking to control their costs. The relationship is far more than a cash advance.
As mentioned above, you can factor your invoices however you choose and are not required to factor all of your invoices – or even all of your customers. Factoring fees do not begin until the day you sell the invoice, so by holding on to the invoices until you need cash you could potentially reduce the amount due for factoring it.
You also have complete control over the cash you receive so you can invest it in the area(s) of your business in the most need.
Avoid spending hundreds or thousands of dollars per year on background and credit checks or collections efforts, as well as the hours of paid time required to complete them. Instead, use the invoice factoring company’s complimentary administrative services to keep more money in the bank.
Online Account Reporting
Online reporting is available 24/7 so you can keep tabs on every element of your account. See which customers are taking longer to pay, what invoices are still open, and how close your customers are to their credit limits. You can also get early warning about potential customer issues and address them before they become real problems.
Without a doubt, invoice factoring is a wise alternative lending choice for small business owners nationwide. No matter your industry, we have the right program to meet your specific company needs and the ability to navigate your customers’ requirements.
Small business owners are essential to continued economic growth. Don’t let slow paying clients keep your business from taking on new opportunities – contact Factor Finders today.