With each new day there is a new way for small businesses and entrepreneurs to “quickly access cash” for their companies. Download an app? Credit via your social media profile? Peer to peer loans? Crowd sourcing? Even traditional tech companies and payment processors are dipping their toes in the small business lending space by expanding their offerings to cash in on the nearly $1 trillion loaned to small businesses. The pool is fairly large considering any company with less than $10 million in sales is considered a small business.
When did this start? The first uptick in companies specializing in fast access to capital came pre-recession during the “credit crunch” when banks tightened their wallets and made it harder than ever for businesses to obtain traditional business loans. The ability to access credit by selling future receivables, using a credit card, became an immensely popular form of funding for many businesses. It also came with a hefty price tag.
A quick look at economic indicators today shows we are in a period of relative stability and moderate growth. However, many of today’s small businesses still need to step back, consider their business lifecycle and the appropriate non-bank options for access to working capital.
Before you could tap and swipe your credit card for fast cash consider factoring as an option. Factoring can successfully bridge the gap between cash flow shortages and business growth. Factoring is when an owner sells the business’s accounts receivable to a third-party funding source to raise capital. American Funding Solutions can give your business the stability and flexibility to take on business challenges.
Which companies are a good fit for factoring?
Companies that invoice other businesses on terms — including apparel, food and beverage, import and export providers, manufacturing, staffing, transportation and wholesale/distribution — are often the best fit for factoring solutions.
Once the first invoice is issued, factoring becomes a flexible, long-term funding solution that grows with the business, yet the business incurs no debt.