Why It’s Better to Partner with a Factoring Company for Start Up Business

The largest benefit of a capitalist society is that you can go into business of your own if you want to. You don’t have to remain an employee all your life. You can save up, quit your job and start your own business – or you can also do this the other way – save up, start a business and then quit your job when your business becomes stable. But sooner or later you’ll realize that you need more money than you started with, and your best option may be a factoring company for start up business.

Look at your other options, and you’ll realize that they all have serious drawbacks:

  • You can go to a bank for a loan. This is true, but only in theory. The reality is that banks these days don’t really feel enthusiastic in lending money to startups. Your startup company doesn’t have a long record for profitability, and that frightens banks that may not be sure about your ability to pay back a loan. That means you need to have an excellent credit, and you need some collateral as well.

Add the fact that loan applications are time-consuming, that banks don’t have a high approval rate, that you may not get the amount you need, and that your bank may also have provisions as to how you will spend your money, and you’ll realize that a bank loan may not be the solution you need.

  • You can use your credit card. A lot of small business owners use this method, because it’s quick and easy, plus they can just pay off the interest each month. But just about every financial expert agrees that this is a terrible idea. The interest rate can really siphon off a lot of money from your business. And what’s more, the more you borrow the more your credit score goes down. And of course, the credit card may not offer a lot of money in the first place.
  • You can borrow from friends and family. This can seriously damage your personal relationships if you are unable to pay off the debts.
  • You can partner with venture capitalists for a slice of your company. While this may look good, the more successful you are the more you have to pay for that money you receive.

For example, let’s say your business is now worth $100,000. You then get $30,000 in return for giving up 30% of your business. With your great idea and your hard work, you manage to eventually grow into a million dollar business. And that means you received $30,000 and paid for it with $300,000.

The Benefits of Factoring

All of these examples prove just how beneficial it is to just use factoring for your funding needs. The entire approval process is very short, and approval is much more certain. You don’t get into debt at all; you get an advance on the value of your accounts receivables (from 70% to 90% or even higher) and the factor gets its fees when the invoice is paid in full. The factoring company sends you the rest of the payment minus its fees.

As a startup, you won’t have to set up your own collection department, as the factoring company does that for you. You can get as much money you need as long as you have the accounts receivable to factor. And the factoring company can even investigate potential clients for you so that you know which ones deserve credit from you.

With a factoring company for start up business, you get the money you need with less hassle, and you get more added services should you need them.

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