There are several reasons the current systems of applying for loans through banks simply doesn’t work for most small businesses. These are inherent in the small business credit reporting system and, since bank loans are all based on those numbers, they are inaccurate in reflecting the true creditworthiness of the vast majority of small businesses.
The Traditional Lender Outlook
A bank starts by trying to compare all small businesses as if they were the same. The comparison is based on the Consumer Credit Assessment model which individuals use to provide everyone with a credit score based on the same factors.
The problem for a small business is there are 29 million different small businesses in the United States. They all offer different services, use different models, and having various financial profiles, geographic locations, operating histories and working in different sectors of the economy.
Think of how difficult it would be to determine the creditworthiness of a startup tech company compared to a local family restaurant in business for decades. How would a model be developed to determine which had the lowest risk or the best credit score given their current and potential future financial status?
The reality is lenders don’t have an adequate model, which is why it is so difficult for a small business to get a traditional business loan. To add to the problem consider the cost, time, and effort involved in obtaining a business loan if you are lucky enough to be approved.
The Factoring Firm Outlook
This is where business factoring invoice services can provide the working capital a small business needs. As a factoring company, we don’t look at your business net worth or require a personal guarantee from the business owner or owners. We don’t have to use this information to make a loan and, in fact, we aren’t lending you money at all.
Instead, you sell us your business factoring invoices, and we provide you with working capital within three to five business days. You aren’t borrowing the money; it is just being provided in advance of when the invoice is due from your customers. We assess your application based on the invoices and not your current business net worth or an arbitrary business credit score.
We use a range of variables to approve your application for factoring including credit pedigree of the invoices, types and diversification of B2B accounts receivables, and what the future holds for increased growth and expansion of your business.
We strive to create a strong, positive factoring relationship with you and your clients. We provide collections, provide backroom services and assist in credit management and risk mitigation across your business. Just don’t take our word for it, the factoring industry is now about $3 trillion globally and is used by savvy entrepreneurs around the world.
