Difficulties financing a small business

When faced with financial challenges, most business owners try to raise capital by going to the bank or trying to find investors. Although banks and investors may be a suitable source of capital for some businesses, the majority of business owners come out empty handed.

Bankers are notoriously conservative when making loan decisions. Unless your business can show that it has significant assets and can demonstrate three years of profitability, it usually won’t qualify for a business loan or a line of credit. Finding investors (whether angel funders or venture capitalists) is even more challenging. And those that are successful in finding investors always have to give up a significant stake of their ownership before seeing a penny.

So, are there any alternatives?

If you own a business that sells products or services to other businesses you have two financing alternatives. Both are easy to qualify for and do not require that you give up any ownership. The main requirement is that you have a business with solid growth prospects and that you provide products/services to good paying commercial customers.

Invoice Factoring

Do your customers take 30 to 60 days to pay their invoices? If you are like most business owners, waiting to be paid can be a big challenge. This becomes even more problematic when you need to pay rent, employees and taxes regularly. Invoice factoring allows you to finance your business using your invoices as collateral. Usually, you can get up to 85% of the gross value of your invoices advanced to you as soon as you deliver your products and services. As opposed to loans and lines of credit, factoring has no artificial high limits. The amount of financing is directly related to your invoicing. The more you invoice, the more financing you qualify for.

Purchase Order Financing

Do you own a wholesale, re-seller or distribution company? What would you do if you received a large purchase order? An order that you can’t afford to fulfill. Your best option is to use purchase order financing to fulfill it. With purchase order financing, the finance company takes care of paying your suppliers (usually with a letter of credit) and ensuring proper shipment and delivery to the customer. Once the customer pays the invoice, the transaction is settled and you receive the remaining proceeds.

Both factoring and purchase order financing allow you to finance your growing business without giving away equity and without having to go through the challenges of bank financing. These tools are available to new and established companies alike and the main requirement is that the company has solid prospects.

About Commercial Capital LLC

We provide business financing alternatives (such as factoring and Purchase Order financing) to the traditional business loan. Marco Terry, the president, can be reached at (866) 730 1922.