Frequently cash flow problems occur at the early stages of business development or during a period of rapid growth. These difficult times often indicate that a company has not yet established the stability or maturity required by banks to obtain a loan. We have found in our experience that, generally, equity financing is harder to find and once found it takes longer to consummate than debt financing. Having said that, it has been our experience that some companies, especially start-up companies, have been turned down by banks because of the loan underwriting criteria. It has further been our experience that many businesses have not considered factoring when looking for financing, possibly because they do not understand it.
Conventional borrowing increases a business' expenses and normally requires additional collateral.
In the case of factoring, instead of analyzing a business' financial statements, the business is evaluated on the strength of its accounts receivable. If the business has a product or service that it provides to a creditworthy customer, then the business is a candidate for factoring. Factoring does not create debt or require additional collateral. It is very simple to use. Cash can be obtained for invoices normally in 24 hours or less, and as often as the business needs.