July 25, 2012 | Last Updated on: April 7, 2023
Small companies had difficulty finding loans during financial crisis. And now even if they do qualify to find loans from a bank, still they are reluctant to take on debt as they are not really confident about the economy. So, they have discovered other ways to secure funds for their companies.
Small Business owners are finding alternative means of financing and are turning to services that can get them paid better and faster. As they receive cash from other financers, so it becomes possible for businesses to invest for expansion, hire more employees, appraise staff and pay bills in time. So, to open the cash spigot is vital and small businesses are doing this in the following ways:
Selling Invoices: When a company is to receive cash from another company for the services rendered it can factor the invoices. So, with the money available upfront the company can fund its cash flow needs. Later on when the customer pays , the money goes back to the funder directly. Small businesses make use of their customers having solid repayment history and sell invoices on their behalf. So, it helps to reduce risk to a great extent.
Supplier Financing: In order to hold on to cash for a longer time, what the company requires to do is extend its relationship with suppliers. When the relation is good with a supplier, it can extend payment terms to 30, 45, 60 or 90 days interest free. Suppliers also agree to give discounts to customers who make early repayments. So, small businesses need to strengthen their relation with suppliers to finance their business during hard times.
Hiring Agencies: There are agencies that do the consulting work for companies. What happens is the agency matches lenders for a certain business organization. It also fixes the payment date of the company’s customers by making the customers commit themselves to a certain date. So, with the promised cash, the agency finds instant loans for the company from private lenders. Of-course, early payment from customers does help to solve a lot of financial needs of an enterprise.
This article was submitted by Raj Tulshan, Director of Business Development of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to info@biz2credit.com
