If you are a mid-sized business owner, then you must be aware of the fact that getting finance for your business is not that difficult. Numerous business financing options are available for bigger companies, but very few investors want to stake their money with a middle sized company. One of the options available to you is to follow the conventional route, approach a bank or money lending institution and ask for credit. But this is not that simple as today’s economic times are difficult and banks are not willing to lend you money that easy.
In that case, you have to approach some uncommon business financing options that are especially designed for mid sized companies. One alternative is invoice factoring which is ideal for businesses that need funds sooner but their clients will pay after 30-60 days.
With factoring, you can convert your invoice into cash for meeting the payroll or starting a new project. The factoring companies are interested in your invoices’ strength because these represent your company’s best security or collateral. Businesses that usually qualify for this kind of financing option are labor intensive companies like consulting companies and staffing agencies.
It is a truth that factoring is not always the best solution for every kind of company. If you get an order from your retailer, you will need funds to purchase the products from the manufacturer and sell it to your retailer. This means that you will not receive your payment until your retailer has received the order, but you need money before that to purchase the order from the supplier. In that case, you can choose the option of order financing. In this option, you get the funds so that you can pay to the supplier to fulfill your retailer’s order. The transaction gets completed once the retailer pays you for the goods. In order to qualify for this kind of finance option, your transaction should have at least 20% gross margin and your client has to purchase the finished products from you.
Although these financing options are not yet used widely, these are gaining increasing popularity in the current economic times. With the help of these options, a mid sized business can grow as it is allowed to leverage on its most important assets, the invoices and purchase orders from their own customer base. In this way, you can get enough financing for your mid sized company and manage to survive in such tough economic times.