What Is Small Business Factoring? Is A Business Cash Advance Good For Your Business?
Small Business Factoring is a scarcely utilized financial practice that gives necessary funding to entrepreneurs via their credit card processor
. A very little amount of entrepreneurs realize that they have this option and head directly to family or a bank when they need funds to pay for expansions, repairs or upgrades of their stock and equipment. If you are a entrepreneur in need of capital quickly, you should look into factoring as well.The concept behind factoring is a bit like selling futures. You, as the entrepreneur, agree to sell future credit card receivables at a lesser price to the factoring company. The working capital is received now in exchange for anticipated receipts in the next several months.
These agreements are most commonly for the short term, rarely more than one year, and are a viable way for a merchant with a verifiable credit card sales history to attain necessary funding.
Unlike a conventional loan, in which the repayment term is fixed for the duration of the loan, a factoring arrangement takes into consideration the fact that in almost every business there are great months and bad ones. Your payment is directly tied to your credit card receivables, as a portion, not a set fee.
If you have agreed to pay a 10% daily capture and you charge 8,000 dollars one month, your payment that month comes out to $800. In the next month you may charge 10,000 dollars and pay $1,000. This flexibility is a very useful option for a growing company.
An additional benefit of a business cash advance is the speed in which the cash turns up in your possession. While a bank may take several years of deliberation and tell you how you use the funds when and if they give it to you, with a Small Business Factoring agreement, you will have the cash in about a few business days, and you can apply it to whatever you see fit.
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