 Most business owners try to raise capital by going to the bank or trying to find investors. And this is when they are faced with financial challenges. The majority of business owners come out empty handed. And this doesn't matter whether banks and investors are an appropriate source of capital for some businesses.
Making loan decisions, bankers are notoriously conservative. Unless your business can show that it has important assets and can demonstrate three years of profitability, it usually won't qualify for a business loan or a line of credit. The more challenging thing is finding investors. The need of giving up an important stake of their ownership before seeing a penny arises in those that are successful in finding investors.
Alternatives
In case you own a business that sells products or services to other businesses then you have two financing alternatives. They do not demand you give up any ownership. And they are also easy to qualify for. That fact that you have a business with solid growth prospects and that you provide products/services to good paying commercial customers, is the main requirement.
Invoice Factoring
Waiting to be paid can be a big challenge when you are like most business owners. Besides, this becomes even more problematic when you need to pay rent, employees and taxes regularly. In this case 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. Factoring has no artificial high limits. Moreover, the amount of financing is directly related to your invoicing. Qualifying for your financing depends on how much you invoice.
Purchase Order Financing
Whether you own a wholesale, re-seller or distribution company; and what you would do if you received a large purchase order are the questions the best answer will be to use purchase order financing to perform it. With purchase order financing, the finance company takes care of paying your suppliers and assuring proper shipment and delivery to the customer. When the customer pays the invoice, the transaction is settled and then you receive the remaining proceeds.
You may finance your growing business without giving away equity and without having to go through the challenges of bank financing. Because both factoring and purchase order financing allow you to do this. These tools are available to new and established companies alike and the main requirement is that the company has solid prospects.
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