Business Loans

It is very common in business to provide commercial and government clients with up to 60 days to pay their invoices. At the same time, many of the cash flow problems that afflict companies can be traced to the fact that they offer 60 day payment terms to their clients. And, it understandable. The business must cover all expenses – rent, suppliers, and salaries – while waiting to be paid. And since few companies have substantial bank reserves, it only takes a few unexpected large orders to tilt the cash flow balance to the other side and start having problems.

Most business managers have two standard approaches to this problem. The first approach is to try and negotiate quicker payments from clients. Unfortunately, this seldom works and clients almost always have the upper hand. The second approach is to go to the bank for business financing. Your success in obtaining bank financing will depend in your company’s balance sheet and track record. Generally speaking, to qualify for a business loan you will need a rock solid balance sheet and a track record showing consecutive years of profit. However, business loans may not be the best solution for this type of problem since many times business expenses are variable and tied to sales.

The best solution to the problem is to get paid for your invoices quickly. Now, what if your customers agreed to pay 80% of the invoice on the spot, and then pay the remaining 20% after 60 days? Would most, if not all, of your cash flow problems disappear? Most likely. This can be achieved, and without changing your customers’ payment habits. The solution is to factor your receivables.

Receivables factoring provides you with an advance on your invoices. This helps you put your company on a more stable financial footing, enabling you to pay salaries, rent and supplier expenses. Generally, the factoring company advances about 80% immediately, on your invoices for delivered products or services. The remaining 20%, less a small fee, is advanced once the invoice is actually paid by the client.

Invoice factoring, as accounts receivable factoring is also called, has a number of benefits over conventional financing. First, is easy to obtain and can be set up quickly. Second, and more importantly, your factoring financing line is tied to your sales. This makes it an ideal solution to address your changing needs as the line grows in parallel to your business. Your financing grows, as your sales and your company grows.

Author: Marco Terry
Article Source: EzineArticles.com
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We live in a credit environment that is tough. Most businesses, even those that were deemed very credit worthy not too long ago, are having a tough time getting any kind of business financing. Most banks and institutions have been hit by the financial turmoil and either lack the capital – or lack the will – to make business loans until the capital markets settle down. That is part of the problem however, since many businesses in the USA and Canada depend on business credit to function. Without it, they run into problems. This has lead to a vicious cycle, where the lack of small business loans is furthering the problem.

What can you do if your business needs financing but you can’t get a business loan? You have no other options than to look for alternatives. One of these alternatives is invoice financing, commonly known as factoring. Invoice financing can help your if your company sells to commercial or government clients (rather than retail clients) that pay their invoices in 30 to 60 days. As a matter of fact – most businesses would not have cash flow issues or need a loan if their clients paid immediately.

Of course, asking clients for an immediate payment will never work because they expect and demand, net 30 payment terms. Using invoice financing enables you to get an advance on that invoice, and provides the necessary capital to run your business. Invoice factoring enables small businesses who may not have substantial assets – aside from good customers – to get financing even in tough financing environments.

Invoice financing is simple to use. You first need to establish an account with a financing company. Once you have an account, you can start sending invoices for financing. The financing company with give you the first advance on your invoice – usually about 80%. You get the second advance, which is 20% less the financing fee, once your customer pays the actual invoice.

Credit decisions are based on your customer’s ability to pay an invoice. This enables you to leverage their credit. But more importantly, invoice financing is dynamic, and your financing line grows as your business grows.

Author: Marco Terry
Article Source: EzineArticles.com
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Getting business financing is one of the bigger challenges for business owners – especially during these times. Although it’s well known that getting a business loan has never been easy, nowadays getting business financing appears to be close to impossible.

Although getting a small business loan may be very difficult, there are other forms of business financing that remain relatively easy to obtain. However, not all solutions are suited for every type of business. For example, most companies that sell to commercial clients have to give customers 30 to 60 days to pay the invoices. However, they need to pay suppliers and employees regularly. This creates a situation where a company may have a substantial amount of money due to it – but very little actual cash at hand.

This creates a very real problem for business owners. On one hand they have a growing business that had a lot of potential, but on the other hand they have their resources tied in unpaid invoices, leaving little working capital to execute their plans.

Ideally, you should be able to go to your clients and ask that they pay their invoices quickly. But that will never work. Large corporate clients tend to demand payment terms as a condition of working with them. It’s a take it or leave it scenario. But what if they did pay quickly? That can be achieved by using invoice factoring.

Invoice factoring is a business financing tool that can eliminate the challenges of waiting for payment. It provides you an advance on your soon to be paid invoices, providing the working capital you need to pay employees and suppliers. It also enables you to take on larger orders, since you no longer need to wait to get paid.

Factoring your invoices is fairly simple. Once the work is completed, you sell the invoice to a factoring company. The factoring company buys the invoice in two installments. The first installment pays for 80% of the value of the invoice. The second installment, paid once the invoice is paid for by your client, pays for the remaining 20%, less the finance fee.

One major advantage of invoice factoring is that it’s easy to obtain. The most important requirement is that you do business with solid commercial clients that pay their invoices on time. Also, you company must be free of commercial liens, judgments and encumbrances.

Given that invoice factoring lines are based on your client base, they usually grow with you sales. This can be a great advantage over a conventional business loan, as your financing will adapt dynamically with your business based on current conditions.

Author: Marco Terry
Article Source: EzineArticles.com
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