Traditionally, it has been difficult for startups and small businesses to raise capital from outside sources, and the chances of startups getting a bank loan are negligible. Startups don’t have a good credit history, and banks don’t want to lend money to companies without a credit history.
A proper cash flow makes it easier for a small business to maintain payroll and pay bills.
No wonder you keep reading the statistic that 85 percent of startups fail within the first five years. Some studies have shown that these failures could be more funding and better planning. These facts and today’s economy make small business financing more important than ever.
There are ways that a small business can avoid funding problems and find alternatives to get business finance. One method is receivables financing, also known as factoring, invoice factoring, invoice discounting, or debtor financing.
Accounts receivable financing allows small businesses to get the cash they need to keep their business going by getting the money they need without going to the bank for a loan or taking on additional debt. Instead, they can sell their accounts receivable at a discount rate to the factoring company. Factoring companies pay bills in cash and handle the collection process.
As you can see, factoring differs from a loan in that invoices are sold to the factoring company rather than offered as collateral. Small businesses or startups can turn their bills into transaction money without waiting more days to get paid.
Factoring benefits any business, especially a small business or startup. Accounts receivable factoring will shorten the collection process by giving your small business the cash flow it needs without taking on new debt. Factoring can also be an excellent option for a small business or startup that has been trying to get a loan and needs help getting a loan from a bank.
Many small businesses in a startup situation will need help to get a bank loan, making factoring services essential if they want to maintain sufficient cash flow. click here to find out more https://bizop.org.
Most small businesses need a collection department or adequate staff, and working with a factoring company provides a much needed service. Factoring offers them the cash flow they need to survive and allows the business owner to focus on daily operations.
Accounts receivable financing, accounts receivable factoring, or invoice factoring puts the collection’s time, cost, and effort of the collection into the hands of the factoring company. It allows the company’s employees to focus on what they were hired for and not worry about how to support the company financially.