Make it past the first year; that is what all small business owners hope to achieve. However, does making it past the first year mean that you are in the clear? It’s a good start, but you still have a long way to go before your business beats the odds. According to a study conducted by the Statistic Brain Research Institute, depending on the industry, only around 25% of startups fail during the first year in business. In other words, 3/4 of startups are going to break the year mark. Those seem like some great odds!
You are probably in a rush to set up shop upon learning that your business idea has a 75% chance to surpass the infamous year mark. If that’s the case, you may want to put a halt on those plans. Upon further inspection of the data, it becomes clear that the majority of businesses do not fizzle until the fifth year.
How could a business survive for five years and suddenly fail? The answer: money. Working capital is the key to keeping your business afloat. Without it, nothing can move forward. When the well runs dry, many business owners turn to high interest loans to solve their problems. Unfortunately, the costs associated with these loans usually cause more harm than good.
If loans aren’t the answer, what is? Help can come in the form of a fellow business. Business owners will find that some financial institutions offer a solution called accounts receivable financing, also known as factoring. Accounts receivable financing was made for businesses that typically sit on unpaid invoices for months at a time. While you are waiting to collect on these invoices, your money continues to be spent due to operating costs. When money is going out but not in, trouble is imminent. Instead of waiting to collect from your customers, you can sell your invoices to a factoring company in exchange for immediate working capital. With money in the account, business owners can cover their expenses and continue to grow.
What if I do not have invoices to sell?
Accounts receivable financing is just one of many funding paths that a startup can take. Some of these include: selling assets, angel investors, or crowdfunding campaigns. The most important thing is to look at all of the cards in your hand. Once you see the right one to play, play it. The wrong move can result in your business being another number in the heap of failed enterprises.
When searching for a financial solution, the most important qualities in your financier are stability, service, and price. Transfac Capital has been around since 1942. Our service standards have created the most loyal client base in the industry. Contact us today to see how we can help your business get the funding it needs.
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