Small Business Financing: Know Your Options

By Bibby Financial Services

30 May 2017

For many small to medium size business owners, securing sufficient money to fund their business can be the first and longest lasting challenge facing them. Whether the need is for an infusion of capital to expand, improved cash flow to meet expenses, or something else entirely, businesses that need money have a range of options. However, these decision makers may not always be aware of all options available besides loans for business. Depending on size, structure, how much is needed, and other variables, there are many different approaches to obtaining the funding needed to keep a business going strong.

 

The most common funding choices for businesses (standard bank loans, credit cards, or taking on investors) can work well for some. Alternative financing solutions have proven very successful for businesses that may need a different fit from what is available from most banks and creditors. We’ll review two of the most popular alternative solutions to business loans, asset based lending (ABL) and factoring.

 

Both asset based lending and factoring can be especially good options for companies unable to qualify for bank financing or for those that prefer not to take that route. These solutions are based on a business's holdings or what it is owed, and some proof of performance by the borrowing company is required.

 

Asset Based Lending

Asset based lending, or asset finance, is similar to opening a home equity line of credit or loan using capital equipment, accounts receivable, or other business assets as collateral. A business with an asset based loan is simply leveraging what it owns or its documented future revenues to obtain funding for the nearer term.

 

Factoring

Factoring, or accounts receivable finance, is a cash advance on invoices at a set advance rate, allowing the business to receive payments immediately instead of waiting out its customer’s payment terms.  

 

There are some similarities between these methods, but they also differ in many ways. The following chart provides guidance on which choice may be more suitable based on business size and financing needs.

 

Asset-Based Lending

Factoring

Advantages

  • Immediate infusion of liquidity
  • Flexible repayment schedules can be customized to fit the borrower's needs
  • Can be structured as a credit line to be tapped when needed or as a lump-sum amount
  • Immediate infusion of liquidity
  • Underwriting due diligence can be very quick and inexpensive
  • Non-notification is an option
  • PO Finance
  • Transportation Factoring

 

 

  • Medium to larger sized businesses
  • Established businesses
  • Smaller to medium sized companies
  • Businesses in growth mode
  • Start-ups

Size limits

Up to several million dollars

No limit. This is a sale, not a loan.

 

Financing is not a one-size-fits-all proposition.  Business owners should take the time to learn about which option and finance company is best for their current situation and can grow with their business.

 

Bibby Financial Services offers alternative financing solutions for small to medium size enterprises in a variety of industries including manufacturing, wholesale/distribution, staffing and transportation.  Contact us today at marketing@bibbyusa.com or 877.882.4229 to get the working capital that’s right for your business. 


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