We all know very well that trying to borrow from factoring companies and succeeding is not an easy task. But then again, you go through it anyway as projects and plans need funding. Plus, the sad fact daunts us that cash cannot be readily available at all times. They can be tied up in various places, receivables and invoices being two of them.
Two of the many institutions which can provide you with your needed resources are banks and factoring companies. Money is very hard to earn and very easy to spend. Again, that’s another sad fact but we all have to deal with it. We must work our way around it and plan our actions carefully so as to make the right decisions. Also, there are cases when we need funds but do not have any at hand. Banks can provide you with loans but these loans have to be approved first. Meanwhile factoring can provide you the cash provided you give them your invoice in return.
You’ve probably known by now that there are tons and tons (if not a gazillion) number of rejected loan applications. So how do you succeed in getting your application stamped with an approval? Here are some useful tips to help you.
- As always, do your research. It would be a very good idea to make a thorough research about your possible options to fund your needs as well as the available institutions from whom you are getting these funds from. Take this for example. There are banks that cater only to loans applied for by companies in a particular industry or sector. At the same time not all banks can provide for every loan applied for. Let’s say real estate. The amounts needed here can be high as we all know that properties are in no way cheap. Not all banks will say yes to loans that are in huge quantities.
- Look at yourself. Do you have a good credit score at the present? Are you paying your dues right and on time? If your answer to both questions is a resounding yes then you’re a step ahead, otherwise don’t expect any bank to approve your loan.
- Express your needs and payment plan preferences. It is important that you communicate well what your needs and expectations are as well as your planned mode or type of payment. It is true that your financial status and ability to pay will be highly questioned and looked into but having a good grade on those two won’t simply cut it. Business lending institutions will want to secure your invoice so they can make sure to get paid from your single invoice finance loan. In the first place, they won’t lend you if they get the idea that you won’t pay them right, on time and within the terms agreed upon.
These two words may sound a little foreign to most people but definitely not to businesses. Single invoice or spot factoring is the strategic process of raising financial resources against individual invoices. Here, cash is released which are still locked up. It is a business financing solution which enables a business to receive cash in advance on a single outstanding invoice. Companies involved in this provide their clients their needed resources by financing client invoices as they are generated and as they are needed.
There are some companies which are hesitant about factoring as they are afraid of getting tied up in lengthy contracts and on going commitments which in the long run can be fatal to them. Here the beauty of spot factoring comes in. It is a one time basis and unlike other factoring contracts, they won’t hold you down for far much longer than you would want to.
When looking for spot factoring companies there are three essential elements for you to consider and to study about. The first two are the size and amount of your invoice while the third is about customer impact.
These said companies will check upon your invoice, confirm that your products or services have indeed been delivered or rendered and then underwrites the credit worthiness of the debtor. When these are accomplished, they will advance a percentage of the invoice to the business which will depend upon the agreed proportion. The balance will then be released when the invoice has been fully paid.
Companies use this for several different purposes like unexpected expenses, the need to fund an important and urgent project, for extra income, a boost in employee morale, opportunities for growth and a better chance at reaching out and influencing the general community. Do know that those are only a few of the many things companies encounter that make them need spot factoring.
Whenever businesses urgently need financial resources for whatever reason and cash is not readily available, they would often reach out to banks or lending institutions where they acquire debt. This has been a common practice but is often frowned upon as a heavily indebted company is in very risky waters. When credit risk is so high, investors can get skeptical and scared that they might withdraw. So most companies would then turn to spot factoring. It does not incur them any debt and at the sane time it provides them with the resources they need.
Every business needs financial resources in order for it to operate. The thing is cash is not always readily available. Sometimes they are even tied up in receivables such as customer invoices. One of the options that businesses have and which many often practice is the getting of commercial business loans. This is a type of a debt based funding arrangement that businesses can set up with spot factoring companies. Most companies use these loans in order to provide for large capital expenditures and operations which they could not afford otherwise but should be provided for as they will either provide for growth or whose absence may prove fatal for the company. These are usually for a short term basis and may be secured by collateral or not.
What people often misconstrue is that commercial business loans are only available to large, well established and decades old companies. Do know that they are not. The only thing is most large and well established companies have done quite a number of things that newly opened companies have not yet done or are still starting to do. So whether you are an already established company, one who is still learning the ropes or a newly born one, here are some tips on how to get yourself a commercial business loan.
First, organize all your documents together. See to it that your documents especially those pertaining to your finances have been kept secured and organized. Financial institutions or spot factoring companies will look at your credit history. Do you pay your liabilities on time or do you always go beyond deadlines? Your credit score is something that you should keep an eye out as it will tell so much about your company. Furthermore, if lenders find it hard to look for and understand documents pertaining to this, it can pass you out as a company who is terribly unorganized. That is a total turn off.
Second, market your company as well. It is not enough that you express your desire to get a loan. It is also important that you communicate your company’s story, its history, what it does its processes, its people and its goals. It would also be good if you bring up a little about how you plan to use the resources. You don’t have to give them a detailed plan about it. Ideas and plans will suffice.
Third, study the financial institutions from which you’ll borrow your needed resources. It is also important that you know quite a lot about the institution you’re borrowing from. This will actually help you prepare for the needed documentations and various other related requirements they would need for them to grant you your needed commercial business loans.