Factoring for new start businesses

In the current economic climate, doing business as new start up business is harder than ever especially when you are just starting up for the first time. At factoringcompare.com we understand that you will have a number of pressures as a start up; finding suppliers, employing new staff, winning new business, and making sure customers pay their invoices promptly – not to mention the importance of having adequate funding in place for a start up.

Start up factoring finance is a flexible form of working capital, which advances money to a start up company as it issues new invoices.

Arranging start up factoring finance for a new start business should be relatively straight forward however, not all factoring companies offering start up factoring are the same so it is imperative that if you are starting up a new business that you choose the correct type of start up factoring finance company for your specific requirements. A well run start up factoring service will release up to 90% of your unpaid invoices within 24 hours and provide a start up business with much needed working capital. 

As the economy continues to face credit challenges, small businesses, especially new, start-up companies are finding it even more difficult to find the start up capital they need to take their ideas and concepts and turn them into viable businesses.

Private equity firms and angel groups are no longer actively seeking new investments in start up businesses. They are more concerned with preserving and protecting their current portfolios. Further, private investors, like your neighbour or local doctors, accounts, lawyers, are not investing in local start up companies as their investments and retirement portfolios (usually the main source of their investment capital) have taken such large hits that any new start up investments are just out of the question.

Start up factoring services are especially suited to new starts & growing businesses and those with insufficient security to attract more traditional lending. Issuing invoices has its downsides for a business such as generally having to wait for payment. Start up businesses could have secured a lucrative contract, undertaken all the work, but still have a long wait to receive payment for the goods or services they have supplied.

This can sometimes put a start up company in a difficult financial position. They might have bills to pay, suppliers to pay, or might just need the cash to grow the business with new customers.

Start up factoring therefore has several benefits. Firstly, surety when you will be paid every time you issue an invoice and how much of the payment you will receive. This allows a start up business to plan cash flow more effectively so it can cover outgoings each week or month.

Another benefit is that the factoring company will take on the role of managing the sales ledger and chasing customers for payment. This frees up time that would have otherwise been spent on phone calls and letters to customers.

Some business owners become worried that with a third party contacting customers over payment, valuable relationships could be tainted. However, working closely with the factoring company on the nature of the communications with customers, and maintaining your own contact with customers on a regular basis ensures that there are no negative effects

Benefits

• Factoring fuels cash flow
• Factoring relies on the strength of your business's customers
• Factoring is accessible to most growth companies
• Factoring gets quick results
• Factoring is flexible

Start up factoring offers a reliable, continuing source of cash without the requirement of making separate loan applications. In addition, start up factoring avoids the necessity of obtaining funds from venture capitalists, who receive an interest in the business and generally have a say in how the business is run.

With start up factoring, periodic delays and negotiations are eliminated, allowing the business owner time to do what he or she does best – run the business.

Author: Toni Nicholson, factoringcompare.com, 02/03/2010