A recent article in the Wall Street Journal detailed an interesting lending trend. Although the number of small business loans increased over 10% from last year, the dollar value of those loans actually dropped by over 3% during the same period. The loan amounts have decreased over 17% drop since small business lending peaked in 2008. This means banks are making more loans, but in smaller dollar amounts. So they are spreading their risks over more borrowers and minimizing their loan exposure to each borrower.
Put simply, banks are still being extremely cautious about lending to small businesses and it remains extremely difficult to get a loan‚Äù as Daniel Cohen-Dumani, chief executive officer of Portal Solutions LLC, a technology-consulting firm in Rockville, Md lamented at the end of the WSJ article. So how can you navigate this difficult lending environment? Let me offer you a financing alternative to bank loans.
You can use factoring in a couple of different ways. First, you can use it to fully fund your need for operating capital, expansion capital or even acquisition capital. Or you can use it to cover the gap between the lower loan amount you qualify for and your actual need. For example, if you need $100,000, you can factor your invoices for the whole $100,000 or if your bank will only loan you $50,000 of the $100,000 you need, you can factor a portion of your invoices to raise the additional $50,000.
For those who are new to factoring, here's how it works. You sell your invoices for a discount to a factor. There are a wide variety of fees and percentages out there, so I will tell you how we do it. Meritus gives you 97% to 99% of the face value of your invoices. You will get 70% to 80% upfront once we evaluate the creditworthiness of your customers and the remainder when the invoices are collected less the 1% to 3% for our services. In addition to providing you the upfront cash in 24 to 48 hours, we also take on the responsibility of collecting on the invoices. This eliminates your need to dedicate yourself or your employees to this task.
Also factoring is much better for your credit standing then taking on new debt. The less you utilize your available credit the more positively it impacts your credit rating and score. Plus, if you are unbankable and cannot secure a loan because you lack a credit history or have a compromised credit history you can still get approved for factoring based on your outstanding invoices and your customers creditworthiness.
So the good news is that accounts receivable factoring is a viable option for raising necessary capital even when bank loans are difficult to find. If you have any questions or want exact fees and terms based on your invoices, contact us at 877-648-3709 or fill out our contact form.
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