Obtaining business financing has always been a challenging task for business owners. But if it’s hard to get financing in good times, it’s nearly impossible to do so in the tough economic environment that we live in. Banks are being especially cautious before making business loans. They are asking owners to provide a lot of information about their business. Usually, they’ll ask for two or three year’s worth of financial statements, sample invoices and orders, a business plan and usually personal financial statements form major stake holders. Unless these are perfect, you won’t get the business loan. It’s unfortunate that when businesses need it the most – when their financial statements look bad – business financing is not available for them. However, there are business financing options for companies that can’t get a conventional bank loan.

For example, many businesses get into trouble because their commercial clients pay their invoices in 30 to 60 days. While this is typical in most commercial sales, it can also be very damaging to companies that don’t have a strong cash position. They may be forced to delay payments to key suppliers, employees and even turn projects down. Calling the client and asking for a quick payment seldom helps, especially if the client is a large company. Waiting to get paid is the rule of the game.
One alternative is to try and get funds from friends or private investors to help through these tough times. These two sources, while available, have problems. Mixing friends and money often causes more problems than it solves. And the only way to get investors to provide funds is to give them a piece of your company, many times at a discount.

However, you can eliminate (or at least mitigate) this problem by using invoice factoring instead. Invoice factoring provides you with an advance on your invoices from credit worthy clients. It gives you funds to pay suppliers, employees and other businesses expenses while waiting to get paid. And as opposed to many institutions, factoring companies base most of their decisions on the buying power of your clients. So, if you have solid clients, your chances of qualifying are good.

Although accounts receivable factoring is not a cure-all, it is a solution that is available during tough times, when banks and institutions don’t make small business loans, and when business owners need them the most.