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There are two myths that, unfortunately, have tainted many business owners’ perceptions of alternative financing techniques like factoring. One is that factoring is too expensive, a myth that I debunked in my last article (contact me to receive a copy). Another is that if you factor you will lose customers because you appear financially weak.

The truth is that a lot of businesses fail because they simply refuse to consider alternative financing when it is the best solution. Instead they waste valuable time searching for bank financing or courting investors and partners. In the meantime, they alienate their suppliers, beg their customers to take early pay discounts and miss important deadlines like taxes. The net result can be far worse than anything an alternative financing source could cause.

How It Works

You have made it through the toughest 3-4 years of business; you have poured your energy, creativity and money into making your company sustain itself and grow. The start-up phase for any business is the most volatile time; lenders and creditors turn away from you when you feel like you need them most but the issue is, as statistics clearly support, your new venture is too risky to lend to.

Now it is 3 years later, you’ve survived, sales are being generated and you’re making money. You should be “bankable” right? Meaning, you should be able to approach a commercial lender for a loan or equipment finance at some amount and get approved. Most business owners would say “yes” but the real answer to the question is – it depends. It depends on how your business has operated during those initial years and what you plan to do with the money.