As many businesses grow, owners often find that plans and processes don’t always change at the same speed as their business. The more successful the growing business, the more demand and need there is for cash flow with bigger orders, larger staff needs and the requirements for more equipment or a newer facility that can accommodate the increase in opportunities. Couple growing pains with long waits for payment from customers or payments that land in default and the cash crunch can quickly hurt an otherwise profitable business. Many small to medium-sized businesses find qualifying for traditional bank lending is more of a hurdle than they have time for and the temptation for a quick fix gets them lured into ‘quick business cash’ agreements because they may not be aware of other alternatives. For Small Business Week 2018, Bibby Financial Services (BFS) is sharing a few important tips on choosing a factoring partner for a relationship based approach to financing.
What is Factoring?
Factoring is the process of selling your invoices that are awaiting payment in accounts receivable. First, the funding provider advances the majority of the invoice value so that your business has the cash it needs now. BFS typically advances more than 90% of the value of invoices. The factor then collects the invoice for you, paying you the remainder of the value after withholding a fee for the service. This is not ‘debt financing’ and you will not have a new bill to pay when using factoring.
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What Should a Small Business Look for When Choosing a Financing Company?
There are a few things to take notice of when you are looking for a financing company. By making sure you have a financing company, such as a factoring partner before you need access to working capital, this will ensure that if your business faces a cash crunch you already have a solution on hand and don’t feel the pressures or temptations to go with less favorable and more costly options for short-term results. Take these three things into consideration before making a decision:
- Look for a finance partner with a demonstrated commitment to building lasting client relationships. Seek a lender that believes in its clients' successes.
- Seek out financing professionals who understand their clients' industries. By having a relationship with a professional that understands the types of transactions and how your business operates, you’ll find that the solutions they provide will be more tailored to your business’ needs. Some lenders differentiate themselves by working within select industries.
- Search for value-added support. Some financing companies provide more comprehensive support for their clients including back office support including servicing and collecting invoices, checking new customers for creditworthiness before offering them terms and providing ancillary financial management help to help small businesses run leaner and more competitively without increasing overhead costs.
During National Small Business Week (April 29 to May 5), Bibby Financial Services acknowledges the hard work of business owners who contribute jobs, opportunities and innovations to our U.S. economy. We believe in business and pride ourself on maintaining a close relationship with our clients, one that understands the unique needs of each business. Contact us today to learn how we can help your company.