Business Has Bad Credit? Infuse Your Business With Cash!
In the cutthroat world of small business funding, a bad credit score is a scarlet letter that warns all business lenders to stay away. You can take steps to improve your credit, but this takes time, time that you might not have. If you can’t get a business line of credit and feel like your small business is stuck because of a bad credit score, there are still options for you. Do not give in and take a high-interest cash advance loan that will keep you paying for years. Rather, by utilizing Invoice Factoring, you can get instant cash into your business’s checking account within a matter of hours.
Sounds too good to be true? Don’t worry, this isn’t just another way to suck you into a high-interest cash advance. Invoice Funding utilizes your business’s outstanding debts to generate quick cash. That is cash you can use to expand your business, pay employees, and ultimately improve your credit score. If you are sick of getting loan companies laughing in your face and not appreciating the true value of your business, read below to find out how Invoice Factoring can come to rescue.
Invoice and Purchase Order Factoring
Invoice Factoring: If you have bad personal or business credit, you need to know about Invoice Factoring as an alternative to business loans. Invoice factoring is a type of asset-based financing that can give you instant cash, help you mitigate risk, and make your small business run smoother.
Rather than taking a business loan from a traditional bank, with invoice factoring, you sell your invoice to the alternative lender. It’s not a cash advance or a loan; instead, you are actually selling the right to receive payment on your invoice. The customer that you originally billed will then pay back the factoring company directly. The factoring company will take the money they fronted you plus a small fee and return the remaining balance to you.
Invoice Financing usually pays 90% of the actual invoice price. However, this can be higher or lower depending on the credit score of the customer whose invoice you are selling. Clearly, the benefits are numerous. You are able to get cash, regardless of credit score, for payments that you might not receive for months. Invoice Factoring is often used as a method of business funding when owners need quick cash without having to deal with traditional bank loans that take months to complete. It is also a great way to manage risk for companies with large amounts of cash tied up in awaiting payment invoices.
What Are the Benefits of Invoice Factoring?
- Cash in your hands in as little as 24 hours
- Up to 90% advanced on Your Invoices
- We become your credit department
- Payroll funding
- IRS issues and liens can often be a non factor
- Pre-approve your clients credit
- 23 years servicing industries of all kinds
- Credit protection against bankruptcy through Non Recourse Factoring
Purchase Order Factoring: Purchase Order Factoring is simply a type of Invoice Factoring. It is another great option for those businesses that work as middlemen or fulfills large contracts for customers. If you have bad credit, it is tough to get a loan from a traditional bank even for existing orders. Luckily, purchase order factoring is not a business loan at all, nor does it depend on your personal credit. Rather, it’s a type of asset-based financing that utilizes your small business’s working capital to fulfill current orders.
If your small business receives an extremely large order from a customer, it could be a groundbreaking opportunity. However, many small businesses do not have the initial collateral to pay the supplier for the materials needed to complete the job, especially if they have bad credit. Or perhaps the funds are available, but it is simply too risky to tie up all your business’s working capital at one time.
Purchase order factoring is a cash advance on that invoice. The business lenders will pay your supplier for the materials, allowing you to fulfill the order. Then, your client will pay the invoiced company directly and charge you a small fee. Rather than selling the invoice and pocketing the money, the factoring company provides the money directly to your supplier.
What are the Benefits of Purchase Order Financing?
- PO Financing is not a loan
- PO Financing Pays Your Suppliers or gives them Payment or Vendor Guarantees
- PO Financing allows you to take on bigger orders
- PO Financing with BusinessCash includes AR Management
- You can leverage our fulfillment and logistics expertise
- Credit protection against bankruptcy through Non Recourse Factoring
Non-Recourse Factoring: Some factoring companies will provide non-recourse factoring. This means that if your customer does not pay the invoice that you sold to the factoring company, you will not be liable for repaying it. This is a great option for business owners who want peace of mind and a safe alternative to loans. However, depending on the customer, these types of loans will often have higher fees associated with them to account for the increased risk.
How Factoring Works With Personal and Business Credit Issues
Having bad credit is an endless cycle if you are a small business owner. You need a line of credit to expand your business, but no business lender will give you the chance with a bad credit score. You find yourself stuck waiting to complete your contracts and then for your customers to pay their invoices. There is no way to get ahead.
Invoice factoring puts an end to this trap and is a great option for a quick business line of credit, even if you have a bad credit score. This is because the Invoice Factoring companies make their decisions based on the strength of your customers and their ability to pay the invoices. The more reliable the company purchasing from you is, the more likely they are to promptly pay for the services. Also, because Invoice Factoring relies on an existing order, there is much less risk than with a traditional bank loan.
A Merchant Cash Advance Loan is NOT Invoice Factoring
Merchant Cash Advances are a popular, but extremely risky source of business funding. A Merchant Cash Advance will give you a quick influx of money into your business, but with a high rate of interest. The alternative lending company will then take a portion of your monthly income until the balance is paid off.
Merchant Cash Advances should be the last resort for any business owner with bad credit. The problem is that many small business owners are not educated about factoring. They, therefore, go straight to the risky Cash Advance lending companies that vigorously advertise. There are some major differences between factoring and cash advances that you should know.
First, a Merchant Cash Advance will cost more in the long run. Some lending companies charge upwards of 200% interest. A reputable Invoice or Purchase Order Factoring company will front 90% of the invoice amount and only charge you a small fee. The remaining 10% is returned to you after the invoice is fulfilled. This will save money and leave you with more working capital.
Second, Invoice Factoring is not borrowing. The money you get from the business lender is money you already own, and will soon earn. A Merchant Cash Advance company, on the other hand, charges you a premium for money that you have not yet earned. If you have financial troubles, your credit could take an even worse hit. Invoice Factoring gives you money that you can use to repair your credit without having to worry that you’ll default.
Why Invoice Factoring is a Better Option Than an SBA Loan
A Small Business Administration loan is an option for business owners with bad credit. However, don’t be mistaken, the loan itself still comes from a traditional bank. The Small Business Administration will front up to 40% of the loan for the bank in case you default. This lowers the bank’s risk and allows them to lend to riskier businesses with bad credit.
Because an SBA loan is still a business loan and not alternative lending, there is a minimum credit score, rigorous application process, and many of the other aspects of a traditional business loan. You will still have to put up collateral as well. Because it is a government funded program, however, there is an additional level of screening. SBA loans are only eligible for businesses that meet certain requirements, including cash flow, annual revenue, assets, and equity. A business owner may also be required to put up 10% of the loan.
Compared to Invoice Factoring, an SBA loan is more formal and may not be an option for those with extremely poor credit. Interest rates will also vary anywhere from 6% to 8% depending on your business. These payments will be due monthly and will directly impact your balance sheet. Additionally, an SBA loan will also take longer to organize because you are going through a traditional lender and may not be feasible for those who need money quickly.
Finally, with Invoice Factoring, it is much easier to improve your credit score. One missed a payment on an SBA loan will damage your credit the same as missing a payment from a traditional loan. Invoice Factoring can provide you with business funding that you can use to expand your business or pay off current loans to improve your credit.
Benefits of Invoicing Factoring For Those with Bad Credit
Invoice Factoring can be done by nearly any business regardless of its credit score. Even businesses in bankruptcy can benefit from Invoice Factoring if they have open invoices with quality companies.
First, Invoice Factoring is much cheaper than other options available to those with bad credit. Factoring companies only charge a small fee, unlike cash advance companies that charge inflated interest rates. These savings can be put back into your business and help it grow.
Additionally, Invoice Factoring is a great way to help improve your credit. This is because the best way to improve your credit is to consistently make on-time payments for as long as possible. A missed payment and you could end up in a worse position than when you started.
Invoice Factoring is an option that you should always keep in your back pocket in case you might not be able to meet an upcoming payment. You will quickly be able to turn a latent contract into business capital you can use to bolster your bad credit score. Usually, it takes fewer than 24 hours to get your cash from Invoice Factoring.
Finally, because you are not taking out a loan, Invoice Factoring will not impact the debt amount on your balance sheets. Rather, the cash influx will count as revenue for your business keeping your debt to equity ratio up to par. When you do improve your credit and eventually apply for a traditional business loan, your balance sheet will represent the true state of your small business.
Ultimately, Invoice Factoring provides your business with much-needed cash. How you choose to use it is completely up to you!
Use Invoice Factoring to Improve Your Credit Score
Now that you are aware of this amazing opportunity to get instant cash into your small business, you can use that money to begin repairing your credit score. The Federal Trade Commission recommends that anyone looking to improve their credit score first request a free credit report and ensure the accuracy of the information. Once you check the report, you can find a list of Department of Justice approved credit counseling agencies that can help you set budgets and plan the future of your business. If you are not quite ready for that step, Experian provides small business owners with a list of things they can do to slowly improve their damaged credit.
Even with bad credit, you still have options for funding as a small business owner. Don’t be suckered into accepting high-interest cash advance loans from shady lending companies. You could quickly fall into a cycle trying to pay off the high-interest advances leaving you with bad credit and in debt. Rather, use your business’s invoices as a means of working capital to meet temporary shortfalls. Contact a reputable factoring company today to pre-approve some of your clients. You never know when you could be in need of some quick cash!