The Distinction between Bank Financing and Factoring Invoices?

You will find two special instances when a business owner commonly runs into cash flow problems. The first is when the business is just starting out, and the second is when the business starts growing rapidly. Unfortunately for the small business owners, banks are not looking to extend you credit in either situation. However, you can find factoring companies like Neebo Capital who will work with companies in both situations.

The heart of American business is the start-up, and everywhere you look today you see a unique start-up. This is what makes the economy grow, but start-ups experience an especially difficult time getting qualified for a bank loan.

First, a start-up doesn’t have any solid assets to secure loans. In reality, the company’s main asset is its accounts receivable, that sorry to say isn’t solid enough for a bank line because accounts receivable may disappear rapidly and with out warning. Banks look for assets which can be more tangible for example machinery, equipment, basically something actual physical that they can take hold of in the event the business defaults.

Alternatively factors provide cash depending on the stability of the company you invoice, your accounts receivable becomes your asset.

Failing Rates for New Businesses Are Too High

The second situation that could prevent a new company from obtaining a business loan is that banks will not contemplate loaning to businesses who are in business for fewer than 3 years due to the fact of the high failure rate for new businesses.

Keep in mind, factoring companys (Neebo Capital) have a different approach for lending capital to new businesses plus they aren’t turned off if your company is just starting-up. Capital lenders should stress to entrepreneurs that factors such as Neebo Capital the credit-worthiness of their customers and the quality of their invoices.

Furthermore, factoring companies such as Neebo Capital investigate the credit-worthiness of their clients customers. For a start-up is is important to be aware that the businesses they sell goods to have a good credit history as a way to gain easier access to capital from factoring companies.

Expanding Companies Do not Have Enough Credit History

Another time when entrepreneurs end up short of funds during fast growth periods. Most of the time, a fast growing company visits a standard bank in search of a much larger loan than what last year’s earnings could justify because they intend to use the loan to double or triple last year’s revenues.

Banks as we mentioned above will not lend a credit lines to new growing businesses.The bank is looking for tangible assets in order to lend the capital.

Factoring companies, alternatively, lend to start-ups and growing businesses.

In summary, companies who are just starting out or have begun to expand quickly can be approved for factoring even when banks have previously turned them down because the lending criteria differs. If you find your business in this situation pick up the phone and speak to a finance represenative at Neebo Capital for Free.

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Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions. Give us a call toll free at 1-888-382-3766 or Visit us online at www.neebocapital.com

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