Asset Based Factoring – Think Your Business Has No Assets?

Asset Based Factoring – Think Your Business Has No Assets?

It's simply time to expand your business. You have established clients and the money is more than sufficient to expect that the company has a long-term future. The problem is that you've spent more getting it off the ground than you had saved and there is a severely limited amount of immediate cash flow. To complicate the issue further, the work has simply become too much for you to handle alone, and it's "do or die" time. If you don't expand now, you're going to loose control of the business and your sanity!

When to Consider Asset Bassed Factoring

It may be time to consider asset based factoring. This is simply a method of giving your company some additional cash flow on a more immediate basis. It could be that one-time shot in the arm to get training for an additional employee (or two) or a regular method of bringing in money to cover paychecks and other growing pain expenses.

Consider this as something like a business loan. You can take it out as a one-time withdrawal or as an ongoing process. If you think your company has no assets that could be used to secure a loan, think again.

Take a look at your accounts receivables, outstanding invoices or whatever name you have for the money owed to you by customers. It may be only orders at this point, but it could very well be your company's biggest asset. For example, if you are a graphics designer and you make business cards, logos and stationary designs for your clients, you probably deliver your designs before you get paid. When you invoice customers, it may be weeks before those customers pay up. It only takes a few of these outstanding invoices to pay for that new computer, some new software or an extra set of hands you need to get your business off to the next level.

So what's the risk to you as a business owner? That's the beauty of the asset based factoring on outstanding accounts and invoices. You're typically under no obligations at all. This isn't a loan because your customers will be paying the factoring company. There are no repayments expected. The only thing you're gambling is your own money – you're only negotiating to have it available to you faster than if you simply sent out invoices and waited for customers to pay.

Things to keep in mind about Asset Based Factoring

One thing to note is that some companies charge based on the length of time it takes your customers to pay. That means your fee for factoring those customers may be higher than the fee for factoring those accounts that pay early. Know the terms before you start an asset based factoring process.

If you're experiencing growing pains but you think your business has no assets that would stand as collateral for a loan, consider asset based factoring.