alternative business financing

What is Alternative Business Financing?

Finding the best solution for financing a business has been a big challenge for most of the business owners. Most of them are aware of the traditional financing methods, such as lines of credit or business loans that are offered by the banks or other financial solutions. Although these products work well, they are mostly offered by the lenders that have strict lending norms which makes them inaccessible.

Not too long ago, you could easily get approved for a business loan, especially if you have some property as it could be used as collateral. Nowadays, it is impossible to get a business loan unless you have a good credit score and own a highly successful business. Banks ask for 2 or 3 years worth of financial statements and then advance loans if they are satisfied with the reports. However, small and medium businesses cannot offer such reports to the lenders. This has give rise to alternative business financing programs.

Most of the small and medium businesses look for financing programs because they face cash flow issues. This mostly happens because they have to offer 30-60 days payment terms to their customers but have expenses that have to be paid quickly and cannot wait for 30 or 60 days. The best way to fix this issue is to use alternative business financing to cover the expenses while waiting for the payment. Invoice factoring is one of the best alternative business financing programs that is hot favorite among the businesses.

Factoring is one of he best financing programs that speeds up your cash flow due to the slow paying buyers. It uses a financial intermediary, known as factoring firm that advances funds against all slow paying invoices of the company. In these types of financial programs, company holds all these invoices as collateral, while your business gets much needed cash infusion to meet your business expenses. The transaction is settled once your buyers pay these invoices.

Most of the financing transactions under alternative business financing are structured so the invoices are funded in 2 stages. The initial advance is offered as soon as the work is completed and you issue an invoice to your customer. Initial advances are for 70-80 percent of the invoice, but may vary depending on the conditions. The second advance is offered once the buyer pays the invoice in full and covers the remaining 20 percent of the amount, less the factoring charges.

The biggest benefit of these financing programs is their flexibility. Most of these factoring lines are not based on any fixed amount, but are rather tied to your sales.

No collateral is required for merchant cash advances. Specializing in alternative financing, not traditional loans.
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