Financing Your Company During a Recession

There is something interesting about recessions. Although nobody likes them, many times they provide growth opportunities to businesses. Through careful planning and solid execution, many business owners are able to increase their market share and grow their companies. The catch is that more often than not - they need business financing.

Getting a business loan, or any type of business financing, has been a challenge in the current economic client. Institutions are not lending, either because they lack the funds themselves or because they don't trust their client's collateral. Institutions themselves must also follow tough guidelines regarding what they can finance or not. Does that mean that you are out of options? Not really, it just means that you need to know where to look.

One business financing option that has been overlooked in the past few years is invoice factoring. Invoice factoring is a bit different than other forms of financing. It helps companies that have commercial or government clients and that have to wait 30 to 60 days to get paid for their invoices. While many companies can afford to wait to get paid, few realize the true cost of waiting, also called the opportunity cost.

Factoring invoices provides working capital, using the soon-to-be-paid invoices as collateral. Invoices from large or medium sized companies tend to be good collateral that can be financed, and that is where factoring comes in.

What makes factoring financing appealing to companies is that is relatively easy to obtain. The most important requirement is that you do business with solid customers. This product is usually offered by private finance companies called factoring companies, though some banks offer it as well.

Factoring is a tool that can be used to grow your business when other types of financing are hard to obtain or out of reach. It has the added advantage that it grows with your sales, providing your company with a dynamic form of financing.