Reasons Your Startup Should Consider Other Business Funding Options
Although a business plan and vision are important, funding is crucial for startups to succeed. Every business can benefit from financing, whether it is for launching a new product or sustaining rapid growth. Many founders turn to traditional lenders and their own capital. However, there are many other options that can be more beneficial.
What is Alternative Lending?
Alternative lending is a way to get business financing options outside of traditional bank lending. Alternative lenders have fewer restrictions and costs than traditional lenders and can focus on flexible requirements and investment in small businesses that others consider “too risky”.
This relatively new funding source was driven by the Great Recession. Alternative funding started to grow rapidly as a result of the 2008 financial crisis. Although traditional lenders were forced to pay more for capital due to new regulations, alternative lenders offered funding options that would allow businesses of all sizes to be eligible for financing.
Today, businesses are increasingly choosing other funding options to traditional loans. Why? Consider the following benefits of invoice factoring:
What is invoice factoring?
Invoice factoring is one of the oldest forms for financing. It allows companies to convert their outstanding invoices into capital. Many companies offer payment terms. This means that you may have to wait for payment for 30-60 days or even for 90 days. Although payment terms are common, customers who have not paid their bills on time can leave your company in a difficult financial situation.
Factoring allows your receivables to be sold to a factor at an attractive discount. You can receive up to 95% off the invoice’s actual value. You are basically leveraging the unpaid invoices of your business to get quick capital to help you manage cash flow, fund growth, and operate smoothly. Factoring is a compelling cash solution because your business has money it already has to meet its immediate capital requirements.
These are just a few reasons your startup should look into invoice factoring companies for financing:
1. You have quick access to capital
Being a startup is critical to have quick access to working capital. This is particularly important during the initial stages of your company’s growth, when cash flow is limited and growth requirements are high. Your company is busy building a team and attracting new customers. You may not have enough cash to support rapid growth or manage unexpected costs. Invoice factoring allows your company to bypass the traditional 30 to 90-day invoicing process. You can get cash within 24 hours, which is a huge benefit for cash-strapped startups.
2. You Do Not Need Extensive Financial History
Startups may find it difficult to obtain financing from traditional lenders. Small businesses are more likely to be turned down by banks than established businesses that have a strong financial history. Factoring companies, however, don’t consider your financial history when determining your eligibility. Factoring eligibility is determined largely on your creditworthiness. Factors are responsible for collecting payments from clients. They are therefore most concerned about their financial status.
3. You Can Secure a Flexible Financing Amount
Rapid growth is one of the most difficult things startups face. Additional working capital is required to expand inventory, buy equipment, hire new staff, and accept large orders or multiple orders. Factoring solutions can help you accept new jobs rather than letting cash flow problems stop you from growing your company. Factoring allows you to access a limited amount of eligible invoices, which makes it the perfect solution for your company’s growth. Factoring allows your startup to grow at a much faster rate than it could on its own.
4. Gain Industry Expertise as a Partner
Every startup founder understands that each startup will have its own set of unique challenges. It is crucial to find a lender who understands your industry and the challenges you face. Reliable factoring companies not only provide immediate capital, but also valuable support. Some factoring companies specialize in a particular niche, while others serve many industries. A factor who specializes in your industry and business type will help you secure the cash solution that you need to meet your needs and goals.
Invoice Factoring Services for Security Business Capital
Do you want to establish a productive and long-lasting relationship with a factoring firm? Security Business Capital has a dedicated team made up of highly skilled professionals. SBC, a leading factoring company, is located in Midland, Texas. Our experts specialize in helping small businesses and startups secure the funds they require to operate efficiently, manage cash flow fluctuations, and grow their businesses. Our solutions are used in many industries, including oil and gas, business services, manufacturing, distribution and transportation.
Contact us today if you have further questions regarding invoice factoring and how our services work.
The post 4 Reasons Your Startup Should Use Other Business Funding Options originally appeared on Security Business Capital.
