The greatest challenge an entrepreneur or start up faces is raising capital to finance the new venture. Business plan in place, financing is the next step. A traditional business loan requires specific criteria, and most new businesses will not qualify. A traditional bank loan requires the business owner to have good credit and usually 2-3 years or more in business with a proven success record. Cash is the blood line for any business. Fixed expenses such as rent, payroll, product, and insurance have to be paid. When cash is slow, or the business is new and has receivables owed to them waiting for customers to pay, these expenses can become problematic.
Many entrepreneurs and start up business owners are turning to invoice factoring, or receivable financing for a solution to cash flow problems. Most invoice factoring companies will accept new businesses who have performed a service or delivered product to a customer. There is no required length of time in business with many factoring companies. So, let’s look at the differences between traditional lending and invoice factoring.
Traditional Bank Loan vs Invoice Factoring
- Requires 2-3 years proven success
- Requires good credit score
- Can take up to a month to get approval or denial
- Incurs loan debt and interest to be repaid personally
- No flexibility,
- Cap on amount loaned
- Will work with start-ups
- Based on client’s customer’s creditworthiness
- Business can be approved in 2-3 days with simple terms
- Can be long or short-term
- May require business unaudited business financials
- Assistance with collections
- Funding within 24 hours of submission of invoices
- Will run credit checks and set up credit limits for you
Cash flow is the blood line of a business. Payroll, rent, product and other operational expenses are ongoing. When a company is low on cash, the business suffers. Invoice factoring provides a solution to keep a positive cash flow and allow for growth of the business. This is beneficial for entrepreneurs and start-ups as well as growing companies.
To discuss the funding options available to your business. Please do not hesitate to contact us on 0161 280 4220 or email@example.com