How to Finance Your Company Using Sales as Collateral

One of the biggest reasons why small companies can’t get business financing is that they lack the collateral that most financial institutions demand. This puts business owners in a very challenging position because they need the financing to grow – but they can obtain it. Most business owners think that a business loan (or line of credit) is the only financial solution that will help their companies. This is incorrect. There are a number of alternative products that can be better than business loans for certain situations. One of these products is factoring, commonly known as invoice factoring. 
Factoring financing helps companies that sell to other businesses on net 30 terms. In other words, it helps companies that cannot wait 30 (or 60 days) to get paid for their invoices. It provides an immediate source of capital that enables you to cover your company expenses and puts your company in a stronger position to pursue new sales opportunities. Accounts receivable factoring offers a simple proposition. It provides an advance, usually 80% to 90% depending on the industry, for invoices that are going to be paid in up to 90 days. The remaining 10% to 20% is advanced, less a small fee, once the invoice is actually paid. 
Factoring companies consider your invoices from credit worthy clients to be great collateral, which is why they are able to advance funds for them. Qualifying for the services of a factoring companu is fairly easy; you need to have good clients and must be free of legal or tax problems. 
Another common financing problem that wholesalers/resellers have is getting a purchase order that exceeds their current capital. Most resellers area forced to turn away such orders because they do not have sufficient money to pay their suppliers. This is easily solved with po financing. Purchase order funding covers your supplier expenses associated with a specific purchase order. It enables you to complete and book large orders – positioning your business in a very strong position for growth. 
Although factoring and po financing are not very well known yet, they have been gaining traction in the past few years as a flexible solution for growing companies.
Factoring has also specialized sub products for different industries – freight bills factoring for transportation companies, medical factoring for the medical industry and construction factoring for subcontractors. These solutions are a great alternative to conventional business funding.