When a small business needs a loan, there are some different options available to them. Many of these options will depend on the age of the company, their credit history, what types of assets they possess, and what industry they are in. Newer companies in high growth, high-profit industries, can go after venture capital. Established companies, with good credit, can try for a bank loan.
Small businesses who have not been in business for very long, have average credit and few assets face a challenge to find funding. These businesses will likely find it very difficult to get a loan from a bank or private investors. Even if you have a high credit score and a record of success, you still may not be able to get a small business loan.
One option that is available is invoice factoring, also referred to as accounts receivable factoring or invoice funding. Invoice factoring is not a loan but a type of financing which requires that a company has good paying customers and have outstanding invoices. Invoice factoring can be an excellent option to improve cash flow.
Factoring doesn’t require taking on debt. Factoring isn’t a loan but selling the receivables of the business. You can get your money quickly. The usual turnaround time is 24 hours. There are fewer hurdles to overcome. The application process is quick and requires less documentation than a traditional loan. If your company needs immediate cash and you have receivables open, then you should consider factoring as an option.