graduate to bank financing

How Factoring Can Help You Graduate to Bank Financing

When you need working capital to support your small business growth, you may apply for a bank loan or line of credit. Bank financing is desirable for a number of reasons, but often, bank financing can be just out of reach for small business owners. This is because of approval requirements for things like time in business or business credit score. Startup businesses or small businesses that have strained cash flow might not qualify for some or all of the bank financing they need. This is where invoice factoring, an alternative financing tool, will help small businesses fund their business and improve their cash flow in order to graduate to bank financing.

Factoring Can Help You Graduate to Bank Financing by:

  • Building your business credit
  • Having different approval requirements
  • Stabilizing your cash flow
  • Providing fast working capital
  • Showing custom financial reporting

Build Business Credit

Many small business owners find bank financing difficult to obtain due to personal or business credit scores. A bank loan or line of credit may require a higher business credit score than small or new start businesses have. So, in order to qualify for bank financing, a business first needs to build their business credit. A reliable way to do this is to pay your suppliers on time or even early. Make sure your suppliers are reporting payments to business credit bureaus like DnB, and your business credit score will increase. Selling on credit terms will affect your available working capital. Invoice factoring will provide you cash on hand instantly, so you can have the capital to make these payments early and build your credit.

business credit funding

Different Approval Requirements Than Bank Financing

A major benefit of invoice factoring is that the approval requirements are different from bank financing requirements. This is because factoring is debt-free. We do not rely on your business to pay back the invoice advance. Instead, we wait the duration of credit terms with your customer and collect upon the due date of invoice payment. So, we do not require a long time in business or high credit score in order to purchase your open invoices. This positions invoice factoring as a great cash flow tool for small business owners that are trying to grow their sales.

Stabilize Your Cash Flow

Growing businesses often experience periods of cash flow instability. This is because selling on credit terms requires you to wait before your business gets paid. Your sales and operations may not have time to wait for more cash to meet demand. Factoring your invoices creates stability during the growth process. You instantly have the working capital to afford more orders. This cash flow stability will help you meet bank financing requirements.

fast business funding

Speed of Funding

Factoring is fast. Rather than a lengthy application process with a binder of paperwork, factoring can fund your business in as little as 24 hours. Most small businesses have 28 days or less of cash reserve. This means a bump in the road could derail or even cause your business to fail. Factoring also requires less paperwork than bank underwriting. You probably will not require a CPA to help you prepare an application for invoice factoring.

75% OF BUSINESS OWNERS HAVE 28 DAYS OR LESS OF CASH RESERVE

Custom Financial Reporting Can Help You Graduate to Bank Financing

When you are building your business financials in hopes of securing a low-cost small business bank loan, it’s important to know what shape your business is in. Factoring with Eagle Business Credit means you have access to financial reporting and an online dashboard to show your business health. You don’t have to guess at the shape of your receivables. Instead, you can see a breakdown of your receivables with an aging report or custom reporting. When it comes time to submit paperwork for your bank application, you can be confident in the financial health of your business.

infographic on how to get a bank loan
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