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Other Sources of Financing
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| Other Sources of Financing |
| Home Equity Line of Credit
Oftentimes for people starting business, access to debt financing is difficult. There are other sources of financing you can explore. For example, if you have equity in your home, then you could consider a home equity line of credit. You may be able to get funds quicker and at a competitive (or better) rate. The decision to take money out of your home to finance the start of a business should not be made lightly. You are putting what is likely to be your most valuable asset on the line. Your business plan should give you confidence that you can pay 'yourself' back. For more information on using a home equity line to finance your business, check this article out in Entrepreneur Magazine: Financing Your Business with Home Equity.
Credit Cards
You may also be able to finance the start up of your business using credit cards, but don't take this approach if you have any doubt that you will be able to pay them off on time. Those enticing introductory rates offered through the mail quickly disappear if you are even one day late with a payment. Check out this article on the Small Business Information Guide Site about using credit cards to start your business.
Credit cards can also be used to finance working capital needs in an existing business. The same rules apply - be sure your cash flow supports timely repayment.
Factoring
If you offer credit terms to your customers, you can manage your cash flow while waiting for their payment through factoring. The financing institution purchases the accounts receivable of a business and assumes responsibility for collections. If you factor, your business essentially is paid cash on delivery, while your customers get the credit terms they require. This is somewhat different from accounts receivable financing. It is not really 'lending'. The factor purchases accounts receivable for their value, usually advancing 60 to 80% of their worth when the company ships the goods. The company is paid the remainder - minus the factor's fees and interest charges - when the customer pays. The factor assumes all of the risk of collecting, and therefore charges a fee to compensate for this risk
To sit down with a certified business analyst to discuss your financing options, please call Nancy Franssen at (386) 506-4723 to set up an appointment.
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