Funding For Start-Ups And Small Businesses

Starting a business in the 21st century is not the easiest thing in the world, unless you happen to be one of the very few people with plenty of spare cash. If you have just received an inheritance or sold a Ming vase at auction that was sitting in the cupboard under the stairs and nobody knew what it was, then you may have enough cash to get a business off the ground.

However, for those in the real world it can be very different. To begin with, you have nothing. You need customers so you have to go out and sell your product or service. Then when you have a few customers you have to provide the product or service and this could take time. You might have to manufacture the product and for this you will need the materials and possibly some machinery. Or if you are, say, a building contractor you will need to purchase materials and build whatever it is that you build. Only when you have supplied the product or carried out the work are you in a position to send an invoice.

Very many businesses work on sending an invoice during the month, and then a statement at the end of the month, and then allowing 30 days for payment from the statement date. So the due date for payment could easily be six or seven weeks after you sent the invoice. Only then are you going to see some actual money coming into your business – and that is assuming that the customer pays on time. So this could quite easily be five or six months after you opened your doors for business during which time you have had no money coming in at all. If you have staff you have had to pay them and you have also had to pay your own mortgage and buy food.

Furthermore, borrowing from the bank is exceedingly difficult. Banks are very reluctant to lend to start-ups and/or businesses which have not been going for very long. Not only that, even if they do hand over any money they will want security, and in most people's cases that means their home. So if the business fails or does not do as well as expected to start with, then you could lose your home at the end of the day.

This is why it is so hard to start a business and get it up and running successfully. However, there are a couple of sources of money which many people do not consider simply because they are not really aware that they are available.

Purchase Order Financing

Purchase order financing is one method. Many businesses would like to bid for government contracts because one thing you can be reasonably certain of is that you will get paid at the end of the day. When you deal with another company there is always the chance that that company could go broke and you finish up with a bad debt. The government is not very likely to go broke – or if it runs short it just raises taxes – so from that point of view a government contract is a great option.

However, even though your money is secure, government departments are not noted for prompt payment. For this reason many small businesses don't bother quoting on these contracts because they are afraid that they won't be able to fund the job until pay day arrives.

Purchase order financing may make this possible, because a factoring company will secure a line of credit with a company's suppliers or pay cash for the supplies. The company then makes the product or carries out the contract, invoices it, and at the end of the day when payment is made the factor receives back the money used to buy the supplies plus a percentage of the profits.

Purchase order financing using a factoring company in this way enables a small business to compete for a government contract on a level playing field with the big boys who have access to plenty of cash. Of course, it can be used for any size of business regardless of how short or long a time it has been running, and also without regard to past credit history.

Compare Invoice Finance is a company that specialises in finding the right type of finance for businesses of any size and any age. The company has access to a wide range of funders, and will be able to find the cheapest option.

Invoice Finance is now the leading way of business borrowing and also protecting your cashflow too. With confidential invoice factoring there are more choices.