![\"Small-Business](\"http:\/\/www.01webdirectory.com\/blog\/wp-content\/uploads\/2016\/03\/factoring-for-small-business.jpg\")
<\/p>\nAccording to a recent Inc.com article, 96 percent of U.S. businesses fail within the first ten years.\u00a0 That\u2019s a staggering figure, even during the worst of times. But the primary reason for this high rate of failure has nothing to do with the overall economy.\u00a0 In most cases, the problem is a lack of cash flow.<\/p>\n
According to financial blogger Michael Lewis, \u201cOwners who cannot efficiently manage their cash flow are almost certain to fail.\u201d\u00a0 But for startup companies, this can be a real challenge.\u00a0 Income and expenses can fluctuate greatly during the formative years of a new business, and most entrepreneurs simply don\u2019t have the time or the inclination to effectively manage their collections activities.\u00a0 Far too often, minor shortfalls quickly snowball into major cash flow issues.<\/p>\n
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Cash Flow Solutions<\/strong><\/p>\n For established companies with a strong credit history the solution is frequently to secure a loan or line of credit from bank; however, traditional lenders are usually reluctant to lend to startups who typically don\u2019t meet their stringent lending criteria which can include time consuming audits and collateral requirements.<\/p>\n Instead, many small business owners turn to alternative funding sources.\u00a0 These can include loans from friends and family members, angel investors, venture capitalists and even high-interest cash advances on their personal credit cards.\u00a0 The basic problem with each of these solutions is that the cash flow relief they offer is ultimately negated in the form of increased debt for the business owner.<\/p>\n Over the last decade, another solution known as factoring has made a resurgence and has become a popular financing option among startups and even some established businesses.\u00a0 In fact, some banks have even gotten in the game, offering factoring programs of their own.<\/p>\n How Factoring Works <\/strong><\/p>\n Factoring is a quick and simple process that provides immediate cash flow to your business.\u00a0 Here\u2019s how it works.\u00a0 The business owner sells her accounts receivable to the factoring company at a discounted rate \u2013 typically 90% of the actual value.\u00a0 Factoring funds are often paid to the business owner within one to two days, providing them the immediate working capital they need to meet payroll, acquire new equipment or inventory, or take vendor discounts.<\/p>\n The factoring company handles the accounts receivable collections process and pays the business owner the remaining 10% of the invoice, minus the invoice factoring fees.<\/p>\n Unlike traditional bank loans, factoring does not require a financial audit of your business, and some factoring companies do not charge an application fee.<\/p>\n