There was a recent poll asking successful entrepreneurs what they personally believe affects the success or failure of a startup business today. The 549 founders of various companies came from all industries, including computing, electronics, aerospace and health care. The top most critical success factors included learning from their mistakes and their successes, previous work experience, a good strong management team and good luck. 98 percent said prior work experience was an important factor as well. And surprisingly, a few mentioned a tactic known as invoice factoring.
Some of the most common questions asked on the government's Small Business Administration (SBA) website are: How do I get a small business loan ... or grant? How do I get started in a business? How do I find an investor for my business? What type of interest rate, terms or fees does the SBA require on its Guarantee Loan program?
Following are some real tried and true financial aids that can help any business grow, as small business entrepreneurs head into the year 2010.
The first reason is do not waste money! By using good financial strategies, you can stick to the plan to help lower operating expenses. Review your expenses to make sure you are not paying double for anything. Look at the year in quarters, then set aside time each quarter to review your expenses. You will most certainly find areas to cut back. For instance, do you rent or lease a vehicle? Did you know that a company vehicle is best purchased because they can be depreciated on your company tax returns. You will get a higher return on your investment after the vehicle has been paid off, than if you lease. But think about leasing your company’s computers, which is usually a tax deduction, so that you can always trade them in for newer technology when the time comes.
The next financial business strategy is to begin invoice factoring your outstanding invoices. An invoice that won't be paid for 60 to 90 days isn't doing your company any good today. However if you find a factoring company to factor one or more of your outstanding invoices, you can use the money wisely to invest in your business and grow faster. Many factors today do what is called "single invoice factoring" where they will spot one invoice at a time.
Accounts receivable factoring is particularly helpful if you need cash in a hurry because once a factor receives your application and reviews your invoices, you can receive payment within as little as 24 to 48 hours after they have pre-qualified the vendor that owes you the money. Remember your credit isn't checked, but the vendor that owners you the money will be pre-qualified by the factor.
Factoring companies, just like a bank or any commercial financial institution, charges a fee for its services. First the factor will want to examine your invoices and check the creditworthiness of your customers You should be prepared to show the factor the following: 1) A current financial statement; 2) An accounts receivable aging report; 3) A certificate of incorporation or partnership; agreement; 4) Proof of insurance; and 5) Invoices and other business documents.
A factor will take charge of collecting your receivables, so they will want to make sure your customers pay their invoices on time. Once you have selected which invoices the factor will purchase, they will typically pay you an advance; for example, the factor might pay you 80 percent of the total amount of your invoices and then reimburse you the other 20 percent once your customers pays the invoices.
Factors get anywhere from 3 percent to 7 percent or more of the total they collect. Factors' fees vary depending on the size of your invoices, your customers' creditworthiness and the number of days (30/60/90) until the invoice is due.
For more information about invoice factoring, go to www.ifgnetwork.com.
This article was added on Wednesday 27 January, 2010.
