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Dig a Well Before You Need One – Starting a Commercial Financing Relationship

The best time to dig a well is when you don’t need one. The result is also right: don’t wait until you need one to get one. The same is true for building a relationship with a commercial finance company. The most desirable time to establish a financing relationship is before you’re in dire need of one. Please don’t wait until it’s too late for someone to get to know you and your business.

Starting a Commercial Financing Relationship

Commercial Financing Relationships

Benefits of a Commercial Finance Company Relationship:

  • A commercial finance company provides liquidity to small and medium-sized businesses through the purchase of accounts receivable, or a loan against these or other assets of the company. Liquidity, also known as working capital, is the lifeblood of any business.
  • Finance companies also support expansion, equipment purchases, and other aspects of a growing enterprise.
  • Many commercial finance companies are guided by a “relationship” approach to doing business. Meaning, the more they know the challenges and opportunities unique to your business, the more they can tailor lending solutions to your needs, including periodic accommodations.

No time like the Present:

If you don’t already have a relationship with a finance company, then now is an excellent time to begin one. Alternatively, if you have a relationship that needs improvement, then now is the time to strengthen it. Don’t wait until you need the help to go looking for it.

Why build a commercial financing relationship now?

  • The US economy is doing very well:
    • The Dept of Commerce reported annualized adjusted second-quarter GDP growth of 4.0%.
    • The latest Wells Fargo/Gallup Small Business Index (conducted July 11-18) scored business optimism at the highest level in the 15 years it has been polling.
    • Equity markets in the US keep pressing to record highs.
    • Unemployment is down
    • Overall hiring is up
  • By extension, the commercial lending community in the US is also faring well at the moment. Well managed factoring companies, asset-based lenders, and specialty finance units are posting reliable results and are themselves hiring additional staff:
    • Loan portfolios are in good shape as clients’ prospects have improved
    • Increased growth in the general economy has led to increased loan demand
    • Rising interest rates have improved lending margins
  • Commercial finance companies are working hard to attract new customers during this point in the economic cycle. Given the competitive marketplace, new financing arrangements often feature price breaks on rates and fees and more flexibility in terms and conditions.
  • Starting a financial arrangement now allows you to get more comfortable and secure while times are good.
  • Developing a history with a financing source now can help a business receive periodic accommodations down the road when help may be needed. Lenders and financing sources won’t bend the foundational rules for prudent lending (and they shouldn’t). However, they will be more inclined to look for solutions for clients they know, as compared to new applicants. This is not a criticism of the financing industry, far from it.

Where to start—Factoring (Invoice Discounting)

The easiest, simplest, and arguably most beneficial relationship for a first time “borrower” is factoring or invoice discounting. Factoring is not a loan. Instead, it is the sale of the accounts receivables or invoices for cash. The required paperwork is straightforward, and it’s not uncommon for relationships to start within 24-48 hours.

Benefits of Factoring:

  • Factoring provides working capital, thereby addressing the highest pressure point of any small or medium-sized company
  • Because factoring is a sale of an asset and not a loan, invoice discounting arrangements can be entered into quickly with much less paperwork
  • Factoring is highly flexible — a business can sell specific invoices while retaining others
  • Factoring can be undertaken alongside an existing bank line of credit
  • Factors can provide additional services such as credit insurance on invoices, assistance with collections, and helpful management reporting

Get Started Now!

Favorable conditions prevail in many industries at present, and the commercial finance industry is thriving and competing heavily for new customers. Headwinds will come. Start a relationship with a finance company now. Get to know them, and let them get to know you. The well you dig today will serve you well when you need it most.

Get your financing relationship started today!

Apply Securely, call 888-400-5931 ext 1 or email us.

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