There many types of helpful pieces of advice that new businesses can receive. However, while advice can range from hiring practices to the use of outsourced services, some of the most important pieces of small business advice has to do with business financing.
Having sources of financing in order for businesses to be able to purchase the equipment and resources necessary is essential. Understanding what to do when a business has a shortfall of cash is also extremely helpful.
The Challenges of Operating on Financial Margins
Saving money for times when cash flow is at a minimum is a good idea. The problem is that many small businesses operate on financial margins and taking a great deal of money and setting aside for times when cash flow is less than adequate may not be possible. In addition, a business may not want to go into debt by borrowing money in a traditional method, such as with a bank or another investor, to have the money necessary to keep the business operating on a day-to-day basis.
A Different Type of Lending
Alternative forms of lending may be more beneficial as they can work within the constructs of a business’ day-to-day operations. One such option is factoring. While this type of financial transaction is considered a loan, it has much more to do with the day-to-day operations of the business than going to a bank and applying for a small business loan would.
Factoring presents a solution to cash flow that are common problems that many businesses face. Often times, businesses have huge sums of money locked up in outstanding invoices. This is money that may be needed to operate the business on a daily basis.
No Future Financial Impact
Factoring allows a business to either borrow against or to outright sell outstanding invoices in return for operational cash. Once the invoice is paid, the debt is repaid and a business can go on it’s way without any lingering financial impact.
Whether your business is in a place where outstanding invoices are making it difficult to maintain operations or you’re looking to avoid this from happening, factoring can help. You may do well by researching this alternative form of lending to see if it will be right for your business.