Startups can often find it extremely difficult to get capital. Traditional banks will often put up a lot of hurdles between a business and loan capital. And startups often hope for venture capital that isn’t there– very few startups are capitalized through angel investors or venture capital. So what is the solution? Invoice factoring is an alternative that can help startups that already seeing success build on it and use capital for growth. How? It’s simpler than imagined.
Invoice factoring is very simple. Businesses create invoices, and those invoices get paid. But what if the invoices take a long time to get paid? That leaves startups in a difficult predicament: they have the customers they need to get their bills paid, but the money isn’t there yet. Banks don’t usually do short-term loans without a lot of paperwork. What alternative lenders who work with invoice factoring do is very simple: they calculate your invoices outstanding, offer capital in exchange for ownership of those invoices (calculating their fees into the loan amount), and get businesses money immediately. Then the lender will take care of the work of collecting on the invoices themselves.
For startups, invoice factoring therefore solves two pressing issues: it takes care of your capital needs, as well as taking care of collections. Alternative lenders therefore become a resource for startups through this method, which is why many startups actually have long-term relationships when it comes to invoice factoring: after all, it’s not only effective and gets business the capital they need, once all arrangements are made, business owners can get back to focusing on innovating with their business and products.
If invoice factoring sounds like the solution for you, just ask yourself: is payment usually longer than 30 days? Do you have a lot of invoices outstanding specifically due to the nature of the business? If so, contact a lending professional today to find out whether invoice factoring is right for your business.