The best ways to find finances for small businesses
How does invoice factoring work?
Many minor businesses face financial issues when running the company, and some do not know how to get finances using their invoices. Almost everyone knows about getting loans for the business without realizing the stress that will be put on you when you use loans.
So I want to show here how easy to get the finances using the invoices.
1. You deliver the product or service and invoice your client
2. You send a copy of the invoice to the factoring company for financing
3. The factoring company advances you up to 90% of the invoice. You get immediate funds.
4. Once your client pays the invoice, the transaction gets settled
Financing Your Business with Receivable Factoring
Do you own a growing business?
Are your clients taking up to 60 days to pay their invoices?
Learn how to finance your growth with receivable factoring.
Do you do business with commercial or government customers?
If you answered yes, you are also used to waiting up to 60 days to pay your invoices. One of the most challenging facts about doing business with big companies is that they pay slowly. Sure, they spend all right – they take their own sweet time to do it.
But you have expenses that you have to pay now. Suppliers need the payment. Must meet the payroll.
It creates a big challenge for small and medium-sized businesses.
Is the solution a business loan?
It seldom is. Difficult are hard to get. And when you get the loans, your hands are tied until you pay off the loan. With loans, you can only get one at a time. So, if your business grows and you need more money, you are out of luck.
If your biggest headache is slow-paying customers, a better solution is to factor in your receivables. Receivable factoring provides the necessary financing for employees, suppliers, and taxes. Above all, it gives you peace of mind by eliminating (or at least minimizing) your financial worries.
Receivables factoring works on a simple assumption.
Your invoices are valuable assets that you can finance.
The factoring company advances money for your slow-paying invoices and waits until your customer pays. Of course, they charge a small fee for this service.
It is how it works:
1. You do your work as usual. You bill your customer but then submit a copy of the invoice to the factoring company for financing
2. The factoring company provides you an immediate advance on 70% to 90% of the invoice (there is a 10% to 30% reserve). You can use that money to meet payroll and pay expenses
3. The factoring company waits to get paid by your customer
As you can see, factoring gives you immediate money for your slow-paying invoices, enabling you to run and grow your business. Qualifying for factoring is easy. An essential requirement is to do business with credit-worthy customers. So, if your customers are good (but slow paying), you can finance them.
4. Once they receive the payment, they close the transaction, and the factoring company rebates any reserves
Receivables factoring is a great tool to finance and grow your business to the next level.
How To Finance Your Small Business
If you have a great business idea or plan or would like to expand your existing business, don’t let a lack of funds stop you. There is a wide variety of financing available for small businesses. Let’s look at the financing opportunities that small business entrepreneurs can use to get the finances.
While the financing sources comprise diverse institutions, such as banks, government sources, venture capitalists, and “angel” investors, it is helpful to look at what all lenders, regardless of category, want when they loan money or invest in a business enterprise.
When you seek money for an already existing business, lenders will be interested to know about the history of your business and whether it has a track record of good management and performance. Lenders will be keen to see if you can repay a loan and will look at your current cash flow to know whether it is sufficient to enable you to meet your current obligations and take on extra debt.
Your credit history will also be under scrutiny. Good credit history will help you to get a loan. It is best to bring the past problems to the attention of the lender yourself and explain how you have turned the situation around.
You can also strengthen your chances of getting a loan by putting up security. It reduces the risk for the bank in case you default. And finally, if you can show that you invested your money in your enterprise, lenders will have more confidence in the proposition.