According to a report by CB Insights¹, the number one reason most startup companies fail is that they run out of cash and can’t raise new capital. A startup’s valuation doesn’t change in a linear fashion over time. Instead, it rises and falls depending on new customer acquisition, sales, the market, manufacturing timelines, internal hiring, and so much more.
Even if you make your sales goals, not all customers pay promptly, leaving you with unpaid invoices. That means you might wait for 30, 60, or even 90 days to be paid for a product or service already delivered. You end up cash poor and unable to grow your business.
While there are many small business financing options, with business loans and lines of credit as the most common, many banks traditionally don’t lend to startup companies—there’s too much risk for them.
Fortunately, invoice financing for startups can be a practical option that often serves you best. As a small business owner, you gain the working capital you need without adding more debt to your balance sheet, and keep complete control of your company without giving away equity.
Consistent cash flow is critical to any business, and startups are no exception. In fact, you can utilize factoring during your growth stage until you can reach your own independent cash flow. Invoice factoring works for almost any company in any industry. You get the cash you need to grow— for filling new orders, acquiring new customers, and entering new markets.
FundThrough buys your selected outstanding invoices and advances the full invoice amount, minus a small fee. Instead of incurring new debt via bank loans or lines of credit, passing credit checks, and jumping through hoops to get the funds your business needs, invoice factoring is a straightforward solution to your cash flow concerns.
Plus, unlike bank financing, your credit and credit history won’t work against you when applying. Instead, your unpaid invoices are financed based on the strength of your customers’ credit. Factoring is also flexible and grows along with your business, which can be very attractive to startups growing quickly.
In the past, factoring was largely misunderstood. Business bank loans and lines of credit were the traditional and accepted forms of financing, along with credit cards. Each of these different funding options have pros and cons to consider.
Costs for a new and growing business can be significant. You may need to purchase equipment and inventory, pay employees, and keep up with rent, taxes, and marketing. You may consider taking out a business loan.
A line of credit (LOC) is a lot like a credit card. You can borrow/withdraw money up to a certain maximum amount determined by your financial institution. You can cover day-to-day expenses and pay back your debt, only to borrow again when needed.
Like all forms of funding, business credit cards must be used wisely or things can go sideways very quickly.
Invoice factoring for startup companies is not a loan. The application process is quick, there is no repayment obligation, no high interest rates, and no debt to record on your company’s balance sheet. Plus, many more companies will qualify.
Choosing a factoring partner is a lot like choosing any lender. It pays to do your homework. There are also several questions to ask prior to starting the application process:
Most factoring companies work with most industries, but not all. Some factors specialize in only a few industries.
FundThrough works with B2B startups, offering factoring for medical startups and freight broker factoring for small startups
Advance rates can range from 60% to 100%, depending on the factoring company and sometimes the industry.
FundThrough— 100% of the invoice amount, less a fee.
A factoring company should be able to provide what factoring fees it charges upfront. But some companies may make it difficult to determine the total costs of using their service. FundThrough offers transparent pricing so you know prior to signing an agreement.
FundThrough pricing – 100% advance rates minus a flat fee. One up front price.
A minimum is the amount you must factor every period (month, each quarter or every year). Some factoring companies offer plans that require minimums, while others do not.
FundThrough doesn’t require minimums. Only fund when you need to.
Cash flow is the number one problem for most startups and small businesses, especially in the early stages of growth. Invoice factoring companies typically consider several situations before offering you an advance.
Factoring invoices is a sound financial strategy if you—
FundThrough takes the legwork out of accounts receivables financing. It’s fully automated platform is easy to navigate, it’s fee structure is transparent and a customer service rep is there when you have questions. Find out what FundThrough’s clients have to say, and start factoring your invoices today.