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I have a start up small business;can I factor?

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Factoring could my newly established business qualify?

Many businesses; either newly established businesses or existing businesses have to raise working capital to run their day to day operations and more importantly to expand.

There are many different kinds of business finance available. One example of business financing; specifically for working capital is Factoring.

Factoring is also sometimes known as cash flow financing and is simply a method of business finance, which releases the cash, already tied up in accounts receivable for immediate use in your business.

Now, if you want to use factoring on your new business you need to consider if the business qualifies for it and also if factoring is suitable for you business. Also; whether it is the most suitable form of finance

It is fair to say that most businesses that sell their goods and services on credit terms. Whether it is newly established business (a start up) or a well established business, can qualify for factoring finance.

The key considerations are usually; is the customer that is going to pay the invoice credit worthy and also, is the customer going to pay in full and on time. In this regard the building industry (for example) and other industries where there is a potential for deduction or set-off or part payment, probably won’t qualify.

In fact, start-up businesses often use factoring, since the majority of businesses are undercapitalized, and if they are successful and grow quickly, the need for additional working capital will grow right alongside the growth of the business. Factoring as a form of business finance is ideally suited for these situations.

For most start-ups, available cash is tied up in debtors and stock. Due to a lack of real estate security and established trading history, many banks and other financial institutions are unwilling or unable to help them. In assessing any application, banks will look at the consistency of turnover over a number of years and especially the real estate security available.

So, in summary, Factors will look at start-ups as well as established businesses. They will look closely at the systems and the experience of the business operator and also closely at the quality of the individual customers as the Factor of looking to the Customer and well as their prospective Client in the management of the finance facility.

If you would like more information on factoring and how it might assist you in managing and expanding your business; call Nova Business Finance on 1300 1386 186 or email us at sales@nbf.com.au

Visit Nova Business Finance at www.nbf.com.au

posted in Factoring, Growing your Business, Small Business Finance, Working Capital by Small Business Finance News

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