Recently, a survey asked successful entrepreneurs as to the factors that determine the success or failure of a business startup. The 549 founders of different companies came from all industries, including computing, electronics, aerospace and health care. For them, the primary factors to success are: learning from past mistakes and successes, work experience, good management team, and good luck. 98% said prior work experience was an essential factor as well. And surprisingly, a few mentioned a strategy known as invoice factoring.
Several of the usual questions on the government’s Small Business Administration (SBA) website are: How do I get a small business loan … or grant? How do I get started in a business? What are some tried-and-tested tactics that can help me attract investors for my business? What kind of interest rate, terms or charges does the SBA require on its Guarantee Loan program?
Following are some real tried and true financial aids that can help any business prosper, as small business entrepreneurs head into the year 2010.
First and basic of all, do not waste money. Have good financial options prepared – those that can help minimize operating expenses – and stick to them. Be conscious of your expenses, make sure that you’re not paying double for anything. You can evaluate your financial health per quarter – taking the time to review and make adjustments in the expenses. You’ll definitely find areas to cut back. Do you lease or rent a company car? Did you know that a company vehicle is best purchased since they can be depreciated on your company tax returns. You’ll get a higher return on your investment after the vehicle has been paid off, than if you lease. It’s another story when it comes to company computers: leasing them is a better alternative because it can be treated as a tax deduction and later on, you can exchange them for newer technology.
Another great financial tactic is to use invoice factoring for your outstanding invoices. Rather than letting invoices that won’t get paid in 60 or 90 days remain idle, why not use them? However, if you come across a factoring company to factor one or more of your outstanding invoices, you can use the money wisely to invest in your business and make it flourish. Many factors today do what is called “single invoice factoring” where they’ll spot one invoice at a time.
If you are in a hurry for some cash, you can try accounts receivable factoring; it can forward to you your needed cash in fast as 24-48 hours after your invoices are being reviewed and your vendors are pre-qualified. In this financial option, your credit history is not evaluated, but your clients will be – so make sure they are as creditworthy as they can be.
As in any financial institution, factoring companies shall charge you with a fee. Be ready because firstly, the factor will examine your invoices and the creditworthiness of your customers. In addition, get ready with these documents because the factor would need these: a current financial statement, an accounts receivable aging report, a certificate of incorporation or partnership agreement, proof of insurance, invoices as well as other relevant papers.
A factor will take charge of collecting your receivables, so they will want to ascertain that your customers pay their invoices on time. Once it is clear which invoices will be due for factoring, then the factor will advance you the money, say 80% now and 20 percent later, when the customers pay their invoices.
Factors get anywhere from 3 percent to 7 percent or more of the total they collect. Factors’ fees differ depending on the size of your invoices, your customers’ creditworthiness and the number of days (30/60/90) until the invoice is due.
For more information regarding invoice factoring, go to www.ifgnetwork.com.
