Can AR Financing benefit Immigrant Entrepreneurs and SBOs?

Author Team Coral Capital

Immigrants make a significant contribution to small and middle market business ownership in the United States.

So much so, that according to a report by the U.S Small Business Administration, roughly one out of ten immigrant workers owns a business, and 620 of 100,000 immigrants start a business each month. This sort of ownership rate reflects the positive impact immigrant-run businesses have to the economy, business formation rates, as well as the overall employment rate within the United States.

As with any small to mid-size fledgling business, securing additional financing can be difficult. This could be due to various reasons such as overall operating costs, backed up payroll funds, or even a sudden uptick in business.  In any case, in situations like these it’s important to find the best means of financing.

While many small to middle market businesses think to apply for a bank loan or credit card, immigrant-run businesses are a bit different. According to the U.S SBA, roughly two-thirds of immigrant business owners report that the most common source of capital comes from personal or family savings.

What happens when savings run dry?

As noted, many small businesses and entrepreneurs feel compelled to take the traditional avenue to finding additional funding. But unfortunately, traditional bank loans and credit cards are increasingly difficult to secure. Luckily there are a few alternatives. One of the most fitting for immigrant-run small to mid-sized business owners is Accounts Receivable Financing.

AR financing is an alternative form of commercial finance that can provide fast working capital to business owners. It uses accounts receivable as the basis for financing, providing a fast and predictable cash flow. This form of finance, also known as factoring, helps business owners smooth out cash flow mismatches, enabling them to focus on their core business without being weighed down by continual short-term funding constraints.

How is AR Financing a good fit for Immigrant entrepreneurs and SBO’s?

It’s quick.

As an immigrant business owner, applying for a bank loan or line of credit can be a lengthy and complicated process. And if approved, it can take months to actually receive capital from the bank, which is an issue in itself. This is where AR financing reigns superior. After being approved, which is a short process in itself, the business will most likely receive cash within the next few days—or even next day in some cases.

It’s easy—Businesses with little to no credit are great candidates for AR financing due to the fact that while factors do look at a business’s credit score, they are not as critical as banks as they are more interested in the creditworthiness of the client’s customers.

It’s affordable—When family or personal savings run out, there may not be much cash upfront to work with. Luckily, the cost of factoring is extremely competitive among other financing options, including most traditional loans—which come with high interest and additional fees.

Overall, factoring can be a smart alternative source of financing for small to mid-size immigrant-run businesses. It can replace the use of family or personal savings and provide immediate cash in order to push the brand to new levels—without having to deal with the complications of a traditional bank loan.

Alternative Financing for Startups