Wednesday, February 27, 2013

Financing Your Business Without Debt

Many entrepreneurs complain that access to business financing have the biggest constraint to grow their businesses. It is a sign of our current economic situation, but the companies are turning away business opportunities because they do not have the financial means to pursue them. Many believe that would be a business loan or line of credit to solve their problems. However, it is very difficult to obtain business financing in the current context. Most institutions are reluctant to business customers, who can not, lend considerable assets, collateral size and solid financial statements. Few small businesses can meet these criteria, the debt financing is generally available only for conventional companies that are financially sound excellent. There is an alternative, although it allows you to finance your business, without the help of foreign funding.
Problems with cash flow is one of the main reasons why. Many companies face increasing problems For many, these problems start because they give their customers a maximum of 60 days to pay their bills. This common practice of forcing companies to use their own resources to pay to cover costs while waiting for customers. This can cause problems if the company begin short of cash or at the customer to take more time to pay. At least it will prevent growth. In the worst case, and if it is not managed properly, it can bring your business into bankruptcy. There are two ways to solve this problem without a business loan. One option is to give your customers an incentive to pay off. A common practice is to offer a 2% discount if they pay within 10 days. The problem with this strategy is that you always eventually thank you for your customers. The second alternative is the invoice factoring facility, a tool that can get you the quick payments from your creditworthy customers are used.

Factoring accelerates your customer payments with a financial intermediary, called a factoring company buys your invoices at a small discount and pays you in advance for them. This eliminates the problem of having to wait for payment from customers, and increase your cash flow. If properly managed, you can factoring as a platform to use to grow your business, without conventional debt. An important feature of factoring is that most transactions are structured as purchases of bills as business loans.
Costs of factoring company, commonly known as the discount varies and depends on the size of your bills, your sales and your creditworthiness based invoices. In fact, the credit quality of your invoices are the most important criteria for qualification. This allows small companies whose main asset is a solid list of clients, factoring to their advantage.