subject: Business Advice - Looking For A Small Business And Business Factoring [print this page] Individuals looking for small business are usually searching for information related to small businesses, including operating procedures, financial resources, and laws or regulations. The number of employees it hires, which is usually less than one hundred, defines a small business. Other common characteristics of small businesses are conducting a small amount of business, being owned and operated by few individuals, and not being the leading business in its area of operation.
The biggest concern for most small businesses is money. A large majority of small businesses declare bankruptcy or go out of business within five years of operation. Under capitalization, the inability to obtain the necessary capital to start and maintain a business, is the main reason so many small businesses have such a short lifespan. Start-up businesses with little or no collateral to secure a loan are often denied by traditional lenders, such as commercial banks. Many entrepreneurs mistakenly turn to high-interest rate credit cards and loans to finance their business.
While it can be difficult to secure funding for a small business, the Small Business Administration (SBA) can help those businesses that have been denied by traditional lenders. Their most common loan program is the 7(a) loan. To qualify for this loan, a business must employ fewer than one hundred employees, have been denied traditional financing, and supply the necessary financial documents. SBA provides funding through its guaranty program, in which it secures a percentage of a small business loan provided by a lender to minimize the lenders risk.
Looking for small business factoring generally refers to business owners researching the different factoring options available to obtain immediate cash funding. Factoring allows a business to sell its accounts receivables at a discount to another company, which is known as the factor. This is the perfect solution for business owners in need of immediate cash because factoring is not considered a loan. Basically it is a sale made by a business; therefore no debt is incurred on the balance sheet.
In order to participate in factoring, a business must process credit card purchases and must have been doing so for a specified length of time, which is usually three to twelve months. Some factors also require businesses to process a certain dollar amount of credit card purchases in order to qualify. Depending on the factor company, minimum credit orders can range anywhere from a few hundred to a few thousand dollars. Once a business is approved, the factor will supply the needed funds. The factor company will then collect the payments on the credit accounts from the businesss customers until the funds are replenished.
A quick online search when looking for small business factoring will turn up hundreds of companies, available online or locally, who specialize in factoring. The discount that businesses must give when selling their accounts depends on the factor company. Some factoring programs last until the funds are repaid, while others may only last for a specified amount of time.
by: Madden
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