So I've been reading about the steps to get credit and the requirements for loans but I think we are lacking the conversation of Types of Loans that are out there. Not everyone needs a cash advance loan for their business or an accounts receivable financing. I am thinking I can start writing about each type of loan to help educate our small business owners? Let's see the response I get.
The first type of loan I will talk about today is: FACTORING
What is Factoring? Factoring in short is when a Business sells it's accounts receivable (invoices) to a third party at a discount.
Lets say I am a machine shop and I need some money to start on a new project for a new customer but I don't have the capital to buy material. I can sell my invoices to a Factor (lender to simplify it). Let's say I have 4 invoices I can use at the moment, all with 30 days net due to me. 1 invoice is for $5,000, the 2nd Invoice is for $10,000, the 3rd invoice is for $4,000 and the final invoice is for $6,000. This means I have $25,000.00 outstanding in invoices that will be paid in 30 days. So I can sell these invoices to a Factor and get 75 - 80% of the $25,000. I can get $18,000 to $20,000 in matter of days. The benefits of Factoring is that your personal credit or personal Guarantee is not needed to be approved. Another great advantage is that you will not need to collect the payment from those vendors for those specific invoices anymore. The Factor does all the collecting. You will need to ask the Factor for their terms and conditions but in most cases, all Factors operate like this. I would recommend Factors who are non recourse factors, meaning that they will not go after your company in the event that the vendor does not pay. But as I mention, you might want to research more on the company you are doing business with. I can help you with any additional questions you might have. Thank you for your time.
Business Lending Consultants
109. S College Street
Covina, CA 91723
Direct # : 262-753-6314
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