In today’s economy, many entrepreneurs and corporate turnaround professionals find themselves facing a situation where they need additional and oftentimes immediate capital in order to move their businesses forward.
And while most companies try and tap traditional forms of lending, startups and turnaround businesses are often forced to search for alternative financing. It might just be because the company doesn’t have an established record of credit, making it nearly impossible to take advantage of traditional lending avenues, such as bank loans or credit cards.
When it comes to alternative financing for startups that are struggling, or a turnaround situation where the company has been denied by the bank, there are smarter alternative financing solutions available over other high interest options.
Learn how accounts receivable lending is different from traditional lending
Accounts Receivable or AR Financing provides fast working capital to startup and turnaround businesses. The source of funding comes from a company’s Accounts Receivables (invoices) and is immediately advanced to the company, providing entrepreneurs and turnaround professionals with a safe and predictable cash flow in times of need.
This sort of factoring depends on the strength of the company’s customer’s credit, not the company itself. This means that the business holds no risk, so even startups and turnaround companies may qualify.
Accounts receivable financing allows small to middle market businesses to get much-needed cash for working capital, which allows them to smooth out cash flow mismatches and enables them to focus on their core business without being burdened by continual short-term funding constraints.
A common situation for start-ups and turnaround companies is finding funding through Purchase Order or PO Financing. PO financing allows fast growing businesses to develop and expand beyond what their existing working capital can support.
This sort of financing is simple and straight forward. It involves one company paying the supplier of another company for goods that have been ordered to fulfill a job for a customer. In the end, the purchase order finance company collects the invoice from the end customer.
Similar to AR financing, PO financing depends on the financial strength and creditworthiness of the company who has placed an order with a particular business, and not on the business itself. This makes it even easier for startups and turnaround companies that may not have a perfect credit history to move forward.
While finding funding is not a one size fits all, PO and AR financing is a great alternative to traditional lenders. With its flexibility, convenience, and cost-effectiveness, it’s a logical step for the long-term financial success of any entrepreneur, startup, or turnaround professional looking for funding.