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27 Mar
American Receivables - Financing vs Funding
Financing vs Funding for Small Business

Financing a business can be a challenge.  The old tradition of walking into the bank to get a loan has become more complicated.  You can no longer get a loan on a handshake.  As a small business owner, you may find that you do not qualify for a bank loan.  Banks require good credit and personal guarantees, which put you at risk if your business fails.   Banks usually require a proven track record of up to 3 years or more.   These criteria are impossible to meet when starting a new business.   This can be discouraging, because financing is crucial to any business.

Cash flow is the life blood to a business.  Operating expenses such as payroll, rent, office equipment, inventory, marketing, and the list can go on, require a business to have cash on hand to cover these expenses.  How you finance your business and the cost of the financing affects your bottom line and your ability to grow your business.

Family and friends are one source for getting cash and are a popular strategy for start-ups. You should present them with a strong business plan in place, as well as some incentive for them to take the risk.    Consider if it will be a loan, or if you will offer equity in the company.  It is also important to provide solid projections to indicate when they might get their investment back. However, if you run into problems with cash flow, or needing more capital, you may have to find new options.  The downside is that however you work it out, if the business fails, you may lose or damage the relationships.

Using a business credit card to finance your business can be helpful in emergency situations when you need cash, but using it for full time capital can be dangerous.  The interest rates are usually very high and if you only make minimum payments you will never be out of debt.   Falling behind on a credit card payment will put the business further behind and will damage the credit score of the owner. You can use it in temporary situations when your cash flow is problematic, but it will still be costly.

These are just a few of the options available in today’s market.  As a business owner, consider “funding” your business rather than financing your business.     Factoring or invoice factoring, has become more popular over the decades.  This method of funding allows you to use your receivables to fund your business and better manage cash flow.   Factoring is not a loan.  You, the business owner, sell your receivables (invoices) to the factoring company.  They in turn, give you a percentage usually within 24 hours and they wait for your customers to pay.  This is especially helpful with slow-paying customers. The factoring company waits for the payment and then returns the balance to you, less fees previously agreed upon.  Selling your invoices for cash, allows you to keep a positive cash flow for the needs of your business. Not all factoring companies are the same, do your homework. There are good companies in the marketplace, however some require long-term contracts and may require you to sell them all of your receivables.

American Receivable has been helping small business owners with funding and cash flow for 40 years. We work individually with each business owner to find the right solutions for their specific industry and needs.  American Receivable is ranked #1 Nationally among factoring companies by multiple ranking agencies.  We pride ourselves on excellent customer service, tenured and experienced account managers, and value our clients as our greatest assets.  We are owned and managed by the original managing partners.  Call American Receivable today and find out how we can benefit your business and save you time to manage and grow your business without the worry of cash flow and funding.

16 Oct
The Value of Business to Business Relationships

shaking on a factoring agreementThe Value of Business to Business Relationships

American Receivable Corporation considers it’s business relationships within the financial community to be one of its greatest assets. American Receivable’s partnerships within the banking community and with professional CPA’s spans over 39 years These relationships have been mutually beneficial to us,  the bankers and CPAs as well as our factoring clients.

No matter what type of business, it is important to have good financial advisors.  Commercial lenders help clients manage accounts within the bank and review projected capital requirements.   A well-respected CPA will help manage taxes, cash flow, and other financial challenges. 

These relationships give American Receivable the ability to match clients with the right financial professionals. Commercial lenders often send us clients that do not meet the federal banking criteria for business loans. When this happens, the lender will contact American Receivable Corporation.  We work with the client to find the best solution for their cash flow needs and their specific business.  In turn, we recommend they keep their accounts with the lender that sent them to us.  At the point they qualify for a traditional business loan and wish to go that route, they already have a lender familiar with their business and their challenges.  

CPA’s managing business accounts often call us when they see cash flow needs for their client.  We work closely with the CPA and the client to ensure the best solution for their specific needs. The CPA continues to handle accounting for the growing business and catch any cash related problems early. 

American Receivable is proud of our long term relationships in the industry. These relationships allow us to work together for our clients.  We consider our clients based on the credibility of their customers, not on their personal credit.  American Receivable is able to work around many of the criteria that are required in traditional business lending.

Our clients are always our first priority.  At American Receivable we pride ourselves on our exceptional customer service and dedicated and tenured account managers.  We can provide funding within as little as 24 hours in some cases.  The success of our clients is the success of American Receivable.

 

 

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