Running a business is difficult. Sometimes the golden opportunity for growth arrives, yet you don’t have the funds for it. The next best option is to get a business loan from a bank.
But a bank loan has a strict list of requirements; because it is usually lengthy and labor-intensive, it takes as long as 90 days to receive an approval. The interest could also further hurt your company’s finances.
For businesses that cannot qualify for a conventional business loan, they can explore several alternatives.
PO Funding Company
A purchase order funding company is ideal for wholesale businesses with an unexpected large customer order. It’s a simple process that involves letting the firm cover the supplier and other business costs. In turn, the business turns over their purchase order. The funding company than returns the remaining balance of the invoice less the fees.
This option is great because it’s short-term. The fee is a fixed percentage. Moreover, the waiting time can be as short as ten days. It doesn’t ask for a lot of requirements, and you can receive the loan you require quickly.
Also known as invoice factoring, it involves surrendering the value of the invoices and receiving a portion of it in the process. For example, if one has a total invoice worth $150,000, the factoring company may give 80 percent of it first. It releases the remaining 20 percent if all debts have been settled. The company also receives fees. It is recommended when a business has debtors that take some time to pay.
The possible issue is when the debtor defaults. If it’s a recourse arrangement, the business owner may need to pay the unpaid invoice.
The concept of pool lending is simple: different investors put in money to raise capital. In turn, they receive a portion of the income. They may also have a share in the business. It is advantageous when one needs to raise funds fast. If the pool company has many potential investors, it can fulfill a financial requirement in hours. The downside is business owners have to mind a lot of lenders.
More than 45 percent of the small businesses do not get past a year. Although many factors can affect their survival, having other alternative sources will guarantee help is available when necessary.