SMEs are independent firms which are characterized with a limited number of employs and the number of workers vary according to countries; others can have 250, 200 or even 50.It depends on but not compared to micro-enterprises who can have maximum ten employers and in some cases even five workers. And due to the advancement of technology and market growth, many business owners do not want to be left behind, therefore, they will require capital to boost their businesses, but they have no idea or information regarding the best financial methods for small and medium size businesses.
Methods of funding businesses
There are various ways of acquiring capital at https://www.orionbusinesscapital.com/ for your business, but you have to be keen while choosing them because some become beneficial but some can lead to the downfall of your company or business. Below are some of the most common ways of financing your business.
There are many ways for business owners to raise capital such as factoring whereby you can sell account receivables at a particular discount amount to a third party subsidy source. It has become a funding option to numerous corporations and among the oldest methods used to fund businesses.
It’s mainly used by specific industries like garments industry where extensive receivables are components of the commerce sequence. Perhaps you may wonder how this works, well it’s very simple, you as a client makes a sale and then deliver the merchandise and produce an invoice. Now the factor which is the financial source will purchase the privileges to collect on that invoice through accepting in agreement to pay you the face value of the invoice but less a discount 2-6%.
It’s very significant for you to understand that factoring is not a loan since it does not create accountability on a hinder assets or a balance sheet. However, it is the vending of an asset in this form, the invoice. Many people think that this is the most expensive way of funding which is not true, for those who are not fit to access any loan in the bank; this method is the best alternative no matter the interest. However, the fact remains the discount charge factors are more costly when compared to the interest you are charged when you get a loan from a bank.
Advantages of Factoring
The greatest Advantages of factoring is that it provides services which you cannot find in the bank for example accounting work for the customers like generating financial support and helping with credit checks.
Even if factory may seem expensive, it’s of greatest benefit to your business more so if you do not qualify to be given a loan to traditional banks. This is the fastest way increase to your cash flow typically within a period of 24 hours. These do not only solve short-term cash flow issues but also facilitates in the expansion of your business.