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How Factoring Can Help Get Young Businesses Off the Ground

Triumph Business Capital

September 30, 2019

Starting a business requires a leap of faith. Even when you know you’ve got the skills and know-how to be a success, there are many ways that your budding venture can go wrong.

Arguably, the toughest part for any entrepreneur is securing the funds to gain traction and grow despite having secured contracts with clients.

What’s worse for new businesses than to have to turn away paying opportunities because they don’t have the capital to finance their operations, hire new people or invest in new equipment? Most young businesses can’t afford to turn away paying customers. They also can’t afford for word to get around that they can’t take on bigger projects.

For start-ups and young businesses, there is a chicken-or-the-egg dilemma when it comes to qualifying for lines of credit or getting approved for a loan. Banks want to see history and a strong client base. But business owners can’t always build a decent portfolio without the capital to take on more clients.

For this reason, invoice factoring can be a way for new business owners to turn those early invoices into real working capital to get their businesses off the ground.

Young Businesses Need Capital: Factoring Provides It

You know the saying, “you need to spend money to make money”? Ask a business owner if this is true. Rarely, can a young business survive without consistent working capital.

In fact, a lack of sufficient capital is the second-most common reason that new businesses fail. New business owners often borrow money from friends and family to help support their dreams. Or, they go into considerable personal debt in order to finance those early stages.

Either way, you have somebody looking over your shoulder and expecting to be paid back. That’s a lot of pressure when you’re just starting out.

Invoice factoring provides working capital and predictable cash flow your new business needs. Unlike banks, factoring companies provide funding by purchasing your outstanding invoices. That means that if you’ve got invoices, you have access to an immediate source of funding. The best part is that you’re getting an advance on your money. So not only do you get your money, you get it without the debt.

As a start-up, you understand that it’s all about speed, and that’s the foundation of factoring. Once your application is approved, you can get funding in as quickly as 24 hours after you submit your invoices. You can use those funds for anything that you’d like, restriction-free. Use it for payroll, to pay rent or to invest in new equipment.

Young Businesses Need Support: Factoring Provides It

Business owners often find themselves wearing many hats in the course of a day. How often does a business owner say, “If only I had someone helping me with X, I can really focus on Y?”.

Factoring companies provide more than funding for businesses. They take some of the most time-consuming tasks out of the owner’s hands, like checking customer credit and collecting on outstanding invoices. These jobs can take hours of your valuable time and often require additional staff to manage them. Different from a traditional loan, you get a team of back office support staff at no additional charge. These and other value-added services are included in your factoring fee. Be sure to talk to your factoring company about what other services they provide.

Young Businesses Need Protection from Bad Debt: Factoring Provides It

For a new business, extending credit to a customer who doesn’t pay can be harmful at best and devastating at worst. It’s important to screen your customers’ credit. A factoring company will do this for you before you take on new business so you can be assured that the client has the funds to pay.

This saves you time upfront so you don’t start projects for clients who can’t pay, and it also means that the factoring company can work with you to advance you funds when you complete the work.

Young Businesses Must Avoid Taking on Debt: Factoring Won’t Add to Your Debt

One of the biggest reasons that factoring is ideal for young businesses is that it provides the money you need without adding to your debt.

Factoring isn’t a loan – it’s a purchase of your invoice. The factoring company buys your invoice, takes out a nominal factoring fee, and issues any remaining monies when the client pays. That’s it. End of transaction. No debt to keep track of or payments to make.

That means there’s no need to list your factoring balance as debt. There are no interest rates or hidden fees either. In other words, factoring provides you with the predictable cash flow you need without adding to your debt.

Young Businesses Need to Grow: Factoring Helps

Growth opportunities don’t come along every day, but when they do, you’ve got to take advantage of them. New companies sometimes struggle to accept large orders or attract new customers because they don’t have the financial stability needed to do so.

Invoice factoring provides a solution by smoothing out cash flow and making it possible for business owners to pursue growth opportunities in the moment.

Learn more how Triumph Business Capital helps entrepreneurs get their businesses off the ground.

Starting a business requires a lot of hard work – and some help. While it can be difficult to get a young business off the ground, factoring can provide you with the stability, working capital, and overall assistance you need to make your new business a success.

Is factoring for you? Click here to find out how Triumph Business Capital can help your young business get off the ground.

Click here to learn how we can help your business thrive.