Financing A New Company By Factoring Invoices

For new companies, the odds of obtaining a bank loan are near zero.  The vast majority of banks would not even consider lending money to a company that hasn’t been in business for at least 3-5 years.  They consider it too much of a risk.

Companies that are brand new have not had the chance to have a built up credit history, so the ability to determine their credit worthiness is simply not possible.  Banks, especially in today’s economic climate, are just not ready to give money to companies with little or no credit history.  Fortunately, there are other options available for businesses just starting out.

Another great benefit of factoring is that it allows companies to bankroll certain projects without a loan.  As a result, when a corporation is in a position to receive a loan, they will be more likely to qualify for it because they don’t have a surplus of existing debt.  Below are few of these benefits more in depth:

Even business with below average credit can qualify for factoring: One of the biggest hurdles for companies trying to get a bank loan is their credit. Banks typically only want to do business with companies that have clean credit records.  Therefore, businesses that have a few blemishes may be automatically excluded from consideration, even if they are strong in other areas.

Factoring companies consider the credit worthiness of a business’ clients because that is who they will be collecting from. They are not as concerned about the credit history of the company selling the invoices.

Factoring is not a loan; factoring involves a business selling their invoices or accounts receivables. Factoring is not a loan by any means.  Factoring makes the company appear stronger on their balance sheets because they are not mired in debt.

A business can sell as many or as few invoices as they like.
Factoring allows for a quick cash infusion: Imagine if your company needed money in 8-10 days.  The likelihood of your business being able to secure a new bank loan in this period would be small.  In fact, it would probably never happen. However, getting cash in this amount of time may be possible with factoring.  Factoring can help your business get the money it needs in as little as 48 hours.  It is much easier and requires far less work than attempts of securing bank financing.

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