Financing small businesses

Financing small businesses is mostly done with loans, which can be easily availed if you have all the required documents ready.

Bank loans are the most common, provided that you meet all the requirements. Usually, the rate of interest of bank loans is very high, the amount of funds you can get is very limited. That is why, most of the small business owners need to be aware that there are other options

             1.       Factoring coupled with an active credit control process

 Factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. In "advance" factoring, the factor provides financing to the seller of the accounts in the form of a cash "advance," often 70-85% of the purchase price of the accounts, with the balance of the purchase price being paid, net of the factor's discount fee (commission) and other charges, upon collection. In "maturity" factoring, the factor makes no advance on the purchased accounts; rather, the purchase price is paid on or about the average maturity date of the accounts being purchased in the batch.

2.       Invoice discounting coupled with active credit control process

Invoice discounting is a form of short-term borrowing often used to improve a company's working capital and cash flow position. Invoice discounting allows a business to draw money against its sales invoices before the customer has actually paid. To do this, the business borrows a percentage of the value of its sales ledger from a finance company, effectively using the unpaid sales invoices as collateral for the borrowing.

Although the end result is the same as for debt factoring (the business gets cash from its sales invoices earlier than it otherwise would) the financial arrangement is somewhat different.

    3.       Asset Based Lending

       In the simplest meaning, asset-based lending is any kind of lending secured by an asset.

There are other options the above are just a few. If you would like more information please give Liquid Recovery a call on 0844 811 9463 or email info@liquidrecovery.co.uk