Small and mid-sized businesses often run out of capital. This occurs mostly to those that have been in business for a short while or are just starting out. Traditional banks are usually unwilling to lend to small businesses because they may not have enough collateral, may have a poor credit history or the cash flow may not be steady enough. This is where other financing options come in. Other financial options that can greatly benefit small and mid-sized businesses are:
With this option, a company can access large amounts of capital secured using assets such as accounts receivable or inventory. This option has many advantages for example;
• An organization does not need a great credit history to access this type of financing. As long as, assets like inventory are available, and then the loan can be accessed. This option is, therefore, excellent for companies involved in manufacturing as they can access funding based on their machinery.
• Also, asset-based lenders typically are not concerned with what you use the money for unlike traditional banks. Hence, it can be used for day to day operations, restructuring and also for facilitating mergers and acquisitions.
• Because fewer agreements are signed during financing, one can obtain funding relatively faster with limited restrictions.
Factor funding involves borrowing money against outstanding invoices. Mostly, an establishment is given a loan amounting to the value of their invoices minus processing fees. This option is a one stop financial solution as apart from funding, a company can get critical functions done. These functions include credit management as well as protection, working capital financing among others. Factoring is an excellent option for manufacturing establishments whose receivables yield cash slowly. It is also very suitable for rapidly growing companies looking to snap up presenting opportunities. Hire dedicated financing experts at Sallyport Investments founded by Doug Foshee.
Account receivable financing
This is another excellent option. In this, a business can receive funding using accounts receivable as collateral. Account receivable financing is almost similar to factoring. The only difference is that in this option the company owns the invoices while in factoring the lender has ownership of the invoices once they remit funds. The benefits of choosing this option are that an entity can access the money fast, no collateral is required, and there is no need to lose a part of your business.