On the surface, small businesses have many options available to them for financing. Yet when you scrutinize the choices, a very different story is revealed. Many commonly thought of financing options are inaccessible to small businesses. Moreover they tend to have very long waiting periods that don’t necessarily match the needs of some business owners.
For these reasons and more, many small- to medium-sized companies find traditional financing options such bank loans to be incompatible with their financing needs. Accounts receivable financing, also known as invoice factoring, is an alternative financing option that is more accessible and expedient to businesses of varying backgrounds and industries.
Skip the Long Requirements with Accounts Receivable Financing
Many businesses simply don’t meet the requirements for a bank loan, which puts this commonly thought of option out of reach. What are these requirements?
- A credit score of at least 640 though this number fluctuates.
- Three years or more of established business operations.
- A specified annual revenue that ranges from $25,000 to $150,000.
- Operating in an eligible industry; did you know that many profitable businesses do not qualify for business loans because they’re in a high-risk industry?
- A stack of financial and personal legal documents, including personal and business tax records and files, bank statements, income statements, balance sheets, articles of incorporation, licenses (these vary by state) and more.
- A well-prepared business plan, which includes sales and marketing strategies, business projections, management team review, company description, competitive analysis and SWOT analysis.
- Sufficient collateral that is offered up to the bank as a security or guarantee for the loan.
Factoring Receivables Requires Minimal Conditions
Since you have a business to run, making time to prepare for a loan application can be quite an accomplishment in and of itself. Invoice factoring, on the other hand, has no such elaborate, time-intensive conditions. It requires:
- Verification of an established business.
- Verification of invoices to clients, who have a solid credit record and history of paying their bills on time.
That’s it. From these simple verification procedures, invoice factoring companies such as Business Factors can offer your business financing in a matter of days.
Secure Financing Fast with Invoice Factoring
Expediency is the second reason many companies choose invoice factoring over other options. The underwriting process for business loans can take several weeks. This is after you’ve gathered all of the paperwork – the business plan, financials, and tax records – and submitted the formal application to the bank.
Many businesses experiencing phases of fast-growth do not have time to wait for loan processing and distribution. In addition, if you were presented with a once in a lifetime business opportunity and need capital immediately you can’t delay.
Factoring receivables is the preferred choice for many businesses because of accessibility and speed.