Innovative Small Business Financing Solutions
Improve cash flow and finance growth with proven small business alternative funding solutions such as factoring, accounts receivable financing, purchase order (P/O) financing and asset-based lending. Unlike a traditional bank loan or venture capital investment, which can require that personal assets be pledged or equity is shared, these financing solutions are secured by corporate assets such as accounts receivable, equipment and inventory.
Cash flow is everything in business!
80% of business failures can be attributed directly to a lack of cash flow and/or working capital. A business may be growing leaps and bounds, but if accounts receivables are not generating cash on time to pay wages and creditors and the business doesn't qualify for bank financing, then the business is in danger of failing from being cash starved. This is why, as a business owner or manager, you want to be aware of alternative financing solutions offered through an established commercial financing provider with a track record for working with small and medium-sized companies.
Factoring is the purchase of qualified businesses assets - not a loan.
Factoring is an alternative form of non-bank business financing. Factoring refers to the process of selling your invoices at a discount before they are due to a third party (a factor). Most factors initially pay you in two stages; the majority (70% to 85%) up front as the initial advance, and the balance when the invoice is collected minus a commission of 2% to 5% or higher depending on a range of variables. Described below are different forms of factoring and other alternative financing options that can be useful to you and your business depending upon your working capital needs and objectives.
Accounts Receivable (A/R) financing is when you submit your invoices to an Accounts Receivable (A/R) financing company and they will professionally manage them for a set fee. The amount you can then borrow from them is calculated daily and an interest rate is applied on the monies you borrow. This form of alternative business financing is available when your business is doing a little more volume and you are close to qualifying for bank financing. When the business does become bankable, a strong track record with this type of financing will make it easier to establish a bank line of credit.
Spot Factoring is when you submit one (1) invoice to a finance company to borrow against. While Spot Factoring is a way to improve cash flow, it can be more expensive than other options - 5% to 8% percent. Also, unless the basis for securing advanced cash flow is short-term, this option may not fully address working capital objectives. Contact your BUZGate Industry Expert, The Commercial Finance Group, to discuss your needs.
Full-Service Factoring is when you need to build working capital over time. The factoring company manages the receivables until they are paid and you will typically pay a discount fee of between 2% to 4% of the invoice. This form of alternative business financing is ideal when a traditional bank line of credit is not an option. Full-Service Factoring may involve full recourse or non-recourse (who bears risk of nonpayment), and notification and non-notification (the means by which the debtor is informed of the factoring relationship) terms.
Purchase Order (P/O) Financing is when your business has a valid purchase order from a financially solid customer, but lacks the funds to fill the order. With a track record for filling similar orders, you can work with a P/O financing company to secure advanced funds against the total purchase order value. While this can be a viable option for being able to fulfill the order, it can also be expensive and time consuming to administer this type of financing. You will still need to factor the resulting invoices. All other solutions should be explored before resorting to using this form of finance.
As the term implies, Asset Based Lending (ABL) refers to using all of your business assets to secure lending, such as Accounts Receivable (A/R), real estate and inventory. Under this arrangement, your objective is to secure a large amount of working capital (>$1 million). You would continue to manage and collect your Accounts Receivable while submitting monthly A/R Aging reports to the ABL financing company who reviews and periodically audits the reports. While the fees and interest for this type of business financing solution are more expensive than traditional bank financing, the increased access to working capital may justify the expense.
Supplier credit refers to the payment terms that your vendors and suppliers offer you. Common examples include net-15 or net-30 days, which mean you must pay the invoice within 15 days or within 30 days respectively. One of the ways you can improve your cash flow is to ask your vendors for longer payment terms. Another option that improves your financial position is to ask the vendor for a discount if you pay early. For example, 2%20, net-30 means that you can take 2% off the total invoice amount when paying within 20 days versus 30 days. Establishing and maintaining a strong credit rating is also important when using supplier credit as a financing tool. Learn more by understanding your options for securing full back office services by an established service provider.
To work with a Commercial Financing Company, such as your BUZGate industry expert, The Commercial Finance Group, you and your business will need to:
Different financing solutions cost different amounts based on difference variables such as:
The objective is to sufficiently demonstrate your business capacity for delivering a quality product/service to creditworthy customers.
In business, cash flow comes from an efficient turnover rate on inventory and efficient Accounts Receivable collections. Improving your operation in these areas can improve cash flow. In addition to working with a Commercial Finance Company for alternative financing, you may also outsource the following operational tasks to The Commercial Finance Group to improve cash flow, as well as free yourself up to focus more on improving sales and profitability...
Factoring and Asset-Based Lending (ABL) solutions require sufficient business assets, quality products/services and a well defined accounts receivable collection system to work. The most common reason for borrowing against assets is the amount of time involved in collecting the receivable. Different types of businesses that are well-suited to this type of alternative financing include but are not limited to:
Consider pursuing factoring, Asset-Based Lending (ABL) and other alternative financing solutions listed here if your business can benefit from the following:
Achieve your business working capital objectives by selecting from the following options:
About Your Industry Expert
"The Commercial Finance Group provides working capital financing and back-office solutions for small to medium-sized businesses (SMBs) and specializes in assisting companies that are unable to qualify for adequate bank financing. Through financing solutions such as factoring, accounts receivable financing, purchase order (P/O) financing and asset-based lending, and by providing credit approval on orders, administering invoices and lock boxing payments, The Commercial Finance Group offers SMBs the flexibility needed to finance working capital objectives when undercapitalized, or in a start-up or turn-around situation."