How an Unsecured Line of Credit Can Work for You

As is the case with many small businesses, having an open line of credit is a must in order for a company to succeed.  There are many different options for financing a company and one of those options is an unsecured line of credit.  Applicants with good credit are typically able to use their personal credit history to obtain a line of credit for their company. 

How it works is that instead of offering up something you own as collateral for the credit, such as a house or a car like a secured line of credit would, you simply are charged a fee.  When you begin receiving the line of credit, you will be charged a pre-set annual fee in place of collateral. 

One major benefit of having an unsecured line of credit is that you are able to borrow more as needed and pay it back whenever you are able to.  This can benefit small businesses greatly because as long as you continuously pay it off when you can, the money is always there.  This can help you fulfill purchase orders and pay bills while you wait for your receivables to be converted into cash on hand.  Another benefit of a line of credit is that they typically have a better rate than a credit card would offer.

While having an unsecured line of credit can be great, it is not going to be a solve-all to your company’s money problems.  Typically with unsecured lines of credit, the risk of default is high so lenders protect themselves by limiting the amount one person can borrow.  If you make consistently pay off your balance, your credit amount will go up.  Ensuring your company never borrows more than you can pay off is one way to increase your company’s limits.

Unsecured lines of credit can be very beneficial for companies that have money in their receivables that will shortly be turned into cash.  It provides cash on hand that you know can be paid back on time. 

 

 

Fulfill Your Customers’ Needs Through Purchase Order Financing

It is a problem that happens to many companies.  You have a purchase order from a customer but you do not have the money on hand to pay the suppliers for the raw materials needed to fulfill the purchase order.  You try to go to the bank or other investors but they are unable to get you the funds to fulfill the order.  What do you do? Well one option your company has is purchase order financing. 

Purchase order financing is a financing option that would enable you to get your purchase order financed on a short term credit agreement.  How it works is that after a purchase order has been made, the financing company will determine whether or not the customer can pay.  If the customer can pay, the financing company will contact your raw materials supplier via letter of credit and the supplier will send you the goods to assemble. 

After the goods are assembled and sent out to the customer, you will await confirmation of the goods being received.  Once received, you will send an invoice, payable to the financing company, to the customer who will in turn pay the financing company.  Once the financing company is paid, they will take their fee and send your company the remaining cash.

Why is it a good idea? Well the main reason is that it fulfills a customer’s needs and will in turn, keep the customer returning to you with their business.  It is bad businesses to turn down an order you are capable of making solely because you were incapable of obtaining the raw materials.  Losing customers means losing money and that is a good way to run a company into the ground.  Purchase order financing is a great way to obtain a small amount of money quickly to complete a customer’s purchase order.

What is account receivable factoring?

Getting Financial Help with Accounts Receivable Factoring

In a small business, cash is king.  All small businesses need cash on hand to maintain operations and continue to grow.  You have bills that need to be paid and money needed to fulfill purchase orders.  Sometimes, you may not have much cash on hand but you do have an excessive amount of money in your company’s receivables that simply have not been paid yet.  What can you do? Well, one option that your company has is called accounts receivable factoring. 

Account receivable factoring is done when a company asks an accounts receivable factoring company to purchase their current receivables in order to get immediate cash on hand.  The receivable’s company will research and investigate to determine whether or not the purchase is acceptable.  If the offer is accepted, the receivable company will pay the client company a large portion of the payments as well as future payments on the receivables while also keeping a portion of the funds as a payment for their services.  The main large payment is typically around 90% of the value of the current invoices.  Should a particular customer default on a payment, the receivable company will sell the invoice out to another company.

Account receivable factoring can be beneficial to a company for many reasons.  One main reason that factoring can be beneficial for a company is that it gives a company cash funds immediately to use as they need.  In the event of an unexpected incident or opportunity, quick cash can be the difference between a company succeeding and failing.  Cash on hand can make all the difference in the world when it comes to paying off creditors. 

Many small businesses need financing and account receivable factoring is just one of many different options that are out there.  If you are still unsure, contact America Corporate Turnaround to determine if account receivable factoring is the right one for you.

What is purchase order financing?

Keeping Small Business Out of Bankruptcy: What You Need to Know

When it comes to running a small business, it is going to begin as an uphill climb.  Many small businesses do not actually even record a profit for about three years.   About 70% of small businesses remain after two years and about 50% survive five.   Keeping your company out of bankruptcy is going to be vital to making sure your company stays above water. 

Start with Enough Cash

One way to ensure your small business avoids bankruptcy is to always have enough cash.  As obvious as it sounds, many small businesses will try to run their company on credit and this business model is not going to last long.  If your company is running on no money, it will cause a major distraction for you and keep you from advancing the company.  One way to do this is to ensure you borrow enough money when you get your startup cash.  Most small startups do not borrow enough money at the beginning of their business and this can come back to haunt them.   

Consult with an Expert

Another way that your small business can avoid bankruptcy is to hire an outside consultant who can bring in a fresh new idea to the company.  When you are the only manager around it can become difficult to constantly come up with new ideas for the company.  Hiring an outside consultant can be like a new beginning for the company.  These people are experts at assisting small businesses and have a plethora of information they would be able to share. 

Discipline Your Budget

Lastly, a major way to avoid bankruptcy is to decide how much money you would require for living expenses, bare minimum, and only take that from the company.  Do not try and live a lavish lifestyle with a giant house and multiple cars.  Keep yourself realistic on what the income your company has brought in and don’t live outside of your means.

Your business is your live so make sure you do everything you can to sustain it.  Cut cost where you can and maintain new ideas to keep your company out of bankruptcy.