Small Business Factoring

If you are a small business, you probably have a pretty grim view of the financial world. Even before the current credit crunch, lending institutions have been fairly hostile towards factoring companies.

Small businesses are the backbone of this country. Why is it then that most lending institutions will not touch them with a 10 foot pole? The standard rule is any small business under two years old is a huge risk because statistics show that most such businesses will fail. Even if you make it past this period, however, one tends to find credit institutions refusing to finance small businesses. The good news is small business factoring is not only possible, it is very small business friendly and one of the most common forms of small business financing.

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What is the one area that small business after small business has problems with? Cash flow. When invoices are all paid up, you are cash rich. When most of your invoices are outstanding, you can barely get buy. This is cash flow in a nutshell and it is a huge problem for small businesses who issue invoices that their clients can pay net 30 or longer.

Factoring is a savior for small businesses because, well, the factoring company doesn’t care that you are small. They are far more interested in the party that has to pay the invoice. As a result, the fact your business is less than two years old or is small really has no impact on the decision to buy your invoices. This may sound like a small thing, but it is a godsend and any small business owner who has sought out financing can tell you as much.

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