Finding business financing during hard times

As the country continues to struggle and fight a recession, business owners have a great opportunity to grow their business. Smart business owners can increase their market share by using factoring or obtaining proper business financing. Finding business financing during a recession is difficult because lenders do not have the money to lend and many of them have been hurt with high-risk lenders that defaulted on their loans. Factoring is one of the best business financing options during a recession and it can help your business expand.

What is factoring?
Factoring involves selling your invoices to lenders in order to get paid now. Factoring companies will charge interest to the customer and turn a higher profit. If you struggle with collecting your invoices in a timely manner, factoring may be your best option.

Besides getting the money to increase their cash-flow, businesses also use factoring to increase their market share. They have more money available to produce high-quality products that meet their customer's expectations as well as money to advertise with.

What do you need to use factoring?
To use a factoring company, you must demonstrate a high credit rating and a balance sheet. The factoring company will also check to see if your clients are one-time customers or repeat customers. Some of the best customers are government agencies because they take 30-60 days to pay their invoices, giving the factoring company plenty of time to collect interest.

Why should you use factoring?
One of the benefits of factoring is that you no longer need to deal with collections. Once your invoices are created, you can sell them to the factoring company and they will handle the rest. Exercise companies like Gold's Gym and Lady of America often use factoring as a method to collect on their past-due gym members.

Factoring provides you with money immediately, which you can use to pay your employees, increase your advertising, and keep your business afloat. Since you are paying a small fee for factoring, it is an expense and it is tax deductible.

Another benefit of factoring is that it allows you to outsource your bookkeeping. Since the factoring company is handling all the past-due bills, you no longer need to keep track of payments and invoices. This can save the business a large amount of money and time, especially if you have a bookkeeper.

Factoring can also help your business fix its cash-flow problems, which can increase your chances of getting future funding for the company. Since your money is not tied up in invoices, you can use this money to invest as a down payment for a larger loan that can be used to purchase new equipment to help the company expand.

Who offers factoring?
Your current lender may offer factoring, but it is wise to use a factoring company. Factoring companies have more experience and expertise with past-due collections and they are able to help the company expand easier. Some lenders that provide factoring services are unable to collect on the invoices so they end up charging their customers higher fees to make-up for the difference. Do a search in your area to see if there are some local factoring companies available. There are some good factoring companies you can hire and they come with all the service you need (bookkeeping, past-due collections, bankruptcies, court fees) so you can focus on growing your business.

As you can see factoring is a great way to re-gain control of your cash-flow and help your business during hard times. When your lender denies you for a loan, turn to a factoring company so they can help you find the money you need to get your business back on track.