Small businesses today are not only looking to financial institutions, but also to their suppliers, as sources of funds. Recently a Small Business Association (SBA) Office of Advocacy study documents trade credit as almost as pervasive as bank credit in both incidence and volume. The study looks at how small businesses’ use bank credit or loans, versus trade credit, or supplier credit.
An alternative method such as invoice factoring allows a company to provide credit to its customers while at the same time obtaining cash for business operations and expansion.
This research compares firms that use credit – leveraged – with those that do not use credit – unleveraged and which kind of credit leveraged firms use. For example they could use bank credit, which includes loans or lines of credit, or trade credit from suppliers, or both. According to the research bank and trade credit are often used simultaneously by smaller businesses. Three-fifths of the small firms that use credit use trade credit.
Our economic times are challenging, and as policymakers continue to focus on how to get banks to increase lending to small businesses, it may very well be in everyone’s best interest if they also addressed the equally important trade credit channel of funding.
While the study provides a better understanding of the credit used by small business, alternative forms of financing such as invoice factoring allow a business to provide credit to its customers while at the same time obtaining cash for important business operations and growth. Read the rest of this entry »
Often a person s credit rating has been destroyed due to no intention on their part. It was not planned that way it just happened. I got carried away with a credit card so to speak and it just overwhelmed me is a common refrain. Once into debt it is often very difficult if not impossible to get out. On top of that your credit rating may be in not good shape or even in shambles.
How can you restore your credit rating? A person s reputation and to an extension their credit rating is among the most valuable of assets, Like a mirror once sullied it can be most difficult if not impossible to restore the mirror to its original previous state.
What can be done? It all comes down to personal honesty and consistent efforts at repairing your credit history and creating a new and outstanding current credit report. It all comes down to personal honor, integrity and sincerity. Read the rest of this entry »
The actual sums on the Aging Accounts Receivable more likely will be in the 31-60 or 61-90 columns rather than the 1-30 column. When Net-30 day terms are not paid within the net-30 cycle, companies develop cash flow problems. It is one of the most common problems of growing companies.
New companies trying to expand have difficulty operating from day to day when their credit does not allow them to have a large enough line of credit to keep up with operational costs and expansion due to additional orders. Yet these companies have a great potential to become successful in the market place.
When a company is unable to qualify for conventional bank loans, there are alternative ways to finance business operations and growth. Factoring accounts receivable is a viable alternative to allow a company to utilize overlooked assets. Once products and/or services have been delivered, an invoice becomes a company asset. Since factoring is the sale of an asset, it should be considered a debt-free line of credit. The balance sheet is not negatively effected as a result of factoring because the accounts receivable are converted to cash. Read the rest of this entry »
