Finance services include all the economic services availed by companies working in the finance industry. They include money lending, investment and savings services. They help support the operations of other businesses. Sometimes, however accessing this financial services is not easy. Particularly, when it comes to small and medium size companies. However, there is a number of ways in which these businesses can access capital. Below are some of the ways.
Factoring is also known as Accounts receivable Financing. It is an external source of capital for small and medium size businesses. Here, the business sells its accounts receivable at a certain percentage discount. Staffing factoring is especially helpful where small or medium size companies are unable to access loans or capital. It enables business to gain access to capital in a much shorter time. One of the advantages of factoring is that you are able to access capital without incurring debts. Also, it allows you to access capital based on your sales rather than by your net worth. This method of financing does not require any guarantee. Additionally, you do not suffer bad debts in cases when your customers fail to pay. Business can chose to use factoring as a source of insurance against bad debts.
Purchase order financing
Purchase Order Financing is yet another form of financing available to small and medium size companies. This form of financing is however not readily available. It entails the funding of the processing of a specific purchase order. Later when the customer receives their order and pays, the business can then repay the debt. Here, finances lent are tied to a specific transaction. This type of financing reduces transaction processing constraints resulting from inadequate capital. Also, it helps you increase your reputation among customers with the increased potential to deliver.
Asset-based lending refers to the financial loans that are dependent on the value of your business assets. This is also a common type of financing among the small and medium size companies. Primarily, the accounts receivable balances are used as security for this type of financing. But, this does not mean that other assets may be used in addition to the accounts receivables. This type of financing is very popular as it enables businesses to gain immediate access to money. Also they are available even to businesses who have not had a perfect history of borrowing. This means access to capital even when you still have a credit line.
Business should not have any excuses for lack of growth and expansion. At least, they should not claim that financing is a hindrance. They should consider one of this financing mechanics and find the most beneficial for them.