If you own a business and you need money, who is the first person you call? Your banker. Most owners think that when they need money, they must need a loan or a line of credit. And therefore, they must call their banker. However, this may be a mistake. You really need to understand your long term cash flow needs before getting a loan. By focusing on solving the short-term need, many owners paint themselves into a corner and eliminate (or at least really limit) their chances of getting financing later on. A loan or line of credit can paint you into a corner unless you know what you are doing. When you buy a house, the bank that gives you a mortgage also takes first position on your house. When you get a business loan, the bank wants first position on your business assets. When you get a business loan, the bank will almost always file a UCC lien (also known as a commercial lien) that encumbers your business assets. Although getting a second mortgage may be easy in todays market getting secondary business financing is almost impossible. So chose very, very carefully. If you need a product that grows with your business, is easy to qualify for and leverages your strongest asset, you should consider either invoice factoring or purchase order financing. They have many features that loans do not have. Invoice factoring is a financial product that provides you with financing using your strongest asset as collateral your slow paying invoices from strong commercial customers. Factoring financing provides you with an advance on your invoices, giving you money to pay suppliers and business expenses. Your second option is purchase order financing. PO financing is ideal for distributors who are growing too quickly and have exhausted their bank financing options. Purchase order financing provides you with financing to pay your suppliers, enabling you to fulfill the order and make the sale. As opposed to bank loans, both products are easy to qualify for and can usually be set up in days not months. So if you need business financing, be sure to explore all your options before going to the bank. |
