It’s hard preserving a small business in today’s market because many small businesses are confronted with financing issues that bigger businesses have already accounted for. Small businesses are seen as riskier investments than larger more recognised businesses and as a result have a much harder time obtaining finance. In the Invoice Finance industry this is a common issue with factoring for small companies, most people think that because they have a turnover of 100k – that factoring companies won’t even look at them. In some cases they are correct as some funders only like to look at companies that turnover £350k+. However there are funders out there that specialise in the smaller business and can tailor a facility around you instead of sticking you into a facility were the support you need just isn’t there.
Small business factoring has become so common that many banks are advising its customers to use factoring to help with small business growth and to stay competitive. The number of small businesses that use factoring have boomed in recent years, but finding the right one can be difficult because as we mentioned earlier not many factoring companies are suited to helping the small business with their Invoice Finance requirements.
If you are considering factoring as a viable source to maintain your cashflow there are hundreds of factors to take into account when choosing your funder. For example most funders tend to specialize in certain industries. Some Funders like construction or agriculture were other funders shy away from these industries. Using a factoring broker will alleviate all of these issues as we have access to the market and know what funders will favour the small business and what industry you’re in.
Countless small businesses are using business invoice factoring to keep up with their competitors, and in doing so are finding success. So waiting on payments to come in, in order to take on new business opportunities, is just not an alternative. Factoring can remove this waiting period and allow your business to continue its normal operations, using the working capital to stay on top of current expenses.
All too often small businesses get carried away with getting that ‘great order’ without considering if they have the cash to meet the needs of the contract. It’s understandable and the buzz of landing ‘a biggie’ can lure us all. But how are you going to purchase the parts you need, if you don’t get paid until you deliver or are still waiting to be paid for your previous job. Factoring won’t totally resolve the problem, but it’ll get pretty close. For businesses high on ambition but low on capital, factoring can work wonders.