What is a Startup Company?
A “Startup” is a company that is in the first stage of its operations. Start-Up companies are often initially bankrolled by their entrepreneurial founders in the form of maxing out their credit cards reluctantly borrowing from friends and family.
Family relationships are severe enough to get the required working capital. For Example, imagine borrowing money from your aunts, parents or cousins and the business going bust. Thanksgiving will not be a happy occasion.
What is Accounts Receivable Factoring?
Accounts Receivable Factoring is a form of asset-based financing. AR Factoring is the process of selling commercial accounts receivables by a business. It is beneficial to obtain immediate cash payment of the accounts before their actual due date.
Accounts Receivable financing differs from borrowing in; you sell accounts receivables rather than merely offering it as collateral. The net result is that your company can convert its receivables into immediate operating cash. You will not have to wait 30, 60, 90 days or more for your customers to pay.
The process places the time, cost, and effort of a collection into the hands of a funding company. Factors allow you the time to concentrate on what you do best – run your company. Your company receives the cash it needs when it needs it, so that you may best manage your business.
How can My Start-up company qualify for Accounts Receivable?
A start-up by definition is non-bankable. Bank lenders require credit history which start-ups don’t possess. Do I have to sign a Personal Guarantee? Because we Credit Protect you and include AR Management services in our fee. The real risk is your performance in meeting your customer’s needs and sadly, the occasional fraud. We ask that you stand behind your work and be honest with us in all our dealings. This is why we ask for Personal Guarantees from your company’s ownership.
Why Accounts Receivable Financing for Start-ups?
Due to limited revenue or high costs, most small-scale operations are not sustainable in the long term without additional funding. From the beginning, an entrepreneur needs funds to turn their ideas into a profitable and rewarding venture. Many start-up entrepreneurs don’t know about Accounts Receivable Factoring.
Non-bankable start-ups are perfect for AR financing. The primary requirement has a creditworthy larger client, and start-ups can get non-recourse accounts receivable financing. Meaning, credit protection is included if your larger client goes bankrupt. AR financing gets you the working capital you need without putting your house and family at risk. It’s the perfect solution for start-ups that already have more significant, creditworthy clients.