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BUYER'S GUIDE

Commercial Financing Options For Your Business

When you first start a business you will need to ensure that you have sufficient financing to get started. You should have a business plan ready for commercial lenders to review.



It is important to understand that cash flow in a business is the single most important process that must be maintained in order for a business to survive let alone make a profit. Cash flow is dependent upon your customers paying their invoices. Depending on what type of business you are in, there are many times when customers do not pay their invoices quickly (and there are many times they do not pay them at all). If your business is internet-based and of the type where you do not collect payment right away, non-payment of invoices happens more often than you think. Those interruptions in cash flow can be especially disastrous to your business.

This is why receivables factoring is one attractive form of commercial lending. Receivables factoring is where a company known as a factoring company actually lends you money based on your accounts receivables. In many cases, the customers of the receivables will actually pay the factoring company. You are loaned the money based on the value of those receivables. The receivables are sold at a discount to the factoring company. Why is this advantageous? Mainly because you get to use the collection resources of a factoring company in the event your customers do not pay their invoices as now there is another party with an interest in making sure payment is received. If you have ever been in a situation of a non-paying customer, you will be glad to have a factoring company backing you.

Another type of commercial loan is based upon expected instead of actual cash receipts is where a commercial lender loans you money based upon your purchase orders. This is somewhat like accounts receivable financing but it is based upon an open purchase order with your customer. This loan allows you to pay your suppliers and take advantage of early payment discounts with them.

You can also get asset based financing where the lender will loan you money based on the value of your company’s assets such as equipment and real estate holdings. You can probably get a loan up to 60 to 80 percent of the value of assets. Another financing option is to get a second mortgage on your company’s real estate holdings - the amount and terms would be based on the fair market value of the property. You will definitely need a good business plan in order to get any type of commercial loan.


Click here if you are looking for a business loan for equipment, equipment financing, hotel financing, motel financing, financing for commercial real estate, business purchase, franchise opportunity, or if you need a business loan for working capital.

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