Business Finance Expert Series: "Comparing Factoring to Other Financing Options"
There are a number of financial options in the market and you
need to analyze each in detail to determine which suits you the
best. A business can be financed with help from private
investors, lenders and financial institutions depending on your needs and
priorities.
Varied Commercial Financial Options
Credit Lines: In this the lender is actually a bank. The bank
gives
credit lines to ( h
ttp://www.hjventures.com/factoring/credit-analysis.html ) fill
the temporary shortages of business like inventories, receivables
etc. These shortages are mostly due to the time difference between
the payouts and the collections. Unlike factoring, financing through
credit line requires a good credibility record along with the
collateral. Banks also require business owners to maintain the
obligatory balance of funds in their accounts.
Short-term Loans: As the
name suggests these are the loans that are sought for term of a year
or less and are generally secured. They are taken to meet expenses
like insurance or to cash over the discounts offered by the supplier
and are mostly paid back in lump sum at the maturity.
Asset-Based Loans:
Similar to factoring, asset-based loans are raised on current assets
like inventory or accounts receivables. However its ambit goes wider
to include varied current assets while in factoring it is limited to
account receivables. The lender has a security in the assets of a
company and are mostly sought to meet the working capital needs.
Contract Financing: In
this kind of financing funds are advanced in accordance with the
work performed till date. Criteria on which finance are provided
under contract financing is the credibility of business to complete
a contract and its ability to perform. Under this contracts are used
as collateral to get short-term loans.
When it is difficult to
obtain finance through banks factoring is a promising option. The
method also relieves small companies of the expenses involved with
collection of receivables. It is not a one-time transaction and is
generally provided on a contractual basis.
Howard
Schwartz is a partner in several business strategy groups, including
HJ Ventures International, Inc. Howard has worked with hundreds of
entrepreneurs worldwide with a focus on writing Business Plans for
companies interested in raising capital from Venture Funds and Angel
Investors. Howard's business plans have secured several million
dollars in funding. For more information:
