Need a Business Loan? Consider Financing Your Invoices Instead
Looking for business financing can be one of the most important tasks that a business owner handles. Unfortunately, the chances of successfully getting a business loan are actually quite small, especially in the current credit environment. When it comes to business loans, most institutions are very conservative and will only lend to the strongest borrowers. That means that you business will need a solid track record of success. You will need to provide financial statements, most often audited, dating a few years back. You may also need to put up your home as collateral for the business loan.
What can a business owner do if they don’t qualify for a business loan? One alternative that has been gaining popularity is to finance their invoices. Most companies that have commercial or government sales need to wait 30 to 90 days to get the invoices paid. However, they have expenses that must be paid immediately. Employees, suppliers and landlords must be paid in a timely fashion. This discrepancy in the timing of your supplier payments and your clients’ payments can create a substantial working capital problem. This problem can easily be fixed by factoring your invoices.
Suppose that instead of waiting 60 days to get paid, you got paid a few days after invoicing. Would you still have cash flow problems? Probably not. You can achieve that by using invoice factoring. Invoice factoring provides a simple solution to a simple problem – it advances you funds on your slow paying invoices tiding you over until your client pays. The factoring company charges you a small fee for that service, usually a percentage of the invoice.
One of the advantages of invoice factoring is that the financing company makes their decision based on the credit worthiness of your client. They consider your invoices from reliable clients to be a solid asset and are willing to finance them. This means that small companies whose biggest asset is a roster of good clients can usually qualify.
Another advantage of invoice financing is that your financing line is based almost exclusively on the credit quality of your clients and the size of your sales. Because of this, your financing line evolves and grows with your sales. This makes it an ideal financing program for emerging and growing companies.
Comments
Comment from Finance F
Time March 17, 2010 at 2:45 pm
Have you always wanted to be able to do compound interest problems in your head? Probably not, but it's a very useful skill to have because it gives you a lightning fast benchmark to determine how good (or not so good) a potential investment is likely to be.
The rule says that to find the number of years required to double your money at a given interest rate, you just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years.
Yes, it is a useful tool and is reasonably accurate.
Comment from jay27
Time March 18, 2010 at 10:53 am
It is a problem in a matter of law.
You should turn to your laywer for professional advice.
Comment from Finance F
Time March 17, 2010 at 2:31 pm
The answer is 418.76 pounds.
Ok. This is a 'fairly' simple growth question. The formula I'm using is for compound growth which I'm sure you've heard of, as you put this question in the right section. (Compound growth is used most in finance). This is how the formula looks:
FV = PV ( 1+i )^n
Where FV is future value (his future weight which is what you want). 'i' is the growth rate. 3% growth means i will be 0.03. And n is the number of years he'll grow over, which is 60-35 = 25 years old. For this question the formula could be worded as:
Weight, multiplied by ((1+percentage growth) to the power of number of years he'll be growing).
= 200*(1.03^25)
The answer is 418.76 pounds.
To help you understand. If you're growing by 3 percent a year. then next year you will be 1.03 multiplied by the weight you are now. This would be 200 * 1.03
His weight in two years would be 200 * 1.03 (the weight after the first year) which will then grow by 1.03, so the above bit needs to be multiplied by another 1.03. So in two years he'll be 200*1.03*1.03 or 200*1.03^2. You'll notice the power is simply the number of years he's been growing. After three years would be 200*1.03^3.
So it ends up being 200* (1.03 to the power of 25)
Good luck with any other questions.