Blog articles discussing factoring companies, factoring loans, invoice factoring and all things related.
I wanted to talk today about an interesting observation we have seen over and over again with our clients. Most view an equity investor as a sexy option to their funding needs. As a validation of sorts that their business has been verified and good enough for a private investment.
However, the truth is that equity funding is only needed if you are looking for a source that has crucial industry contacts and/or need money for fixed expenses.
We often hear that “I can’t get bank financing, but the alternative lenders out there are too expensive.” Equity investors are the most expensive option in the pool of available funding options.
Factoring and asset based lending companies offer the best of both worlds – a flexible and reliable source of capital and lower in cost than equity investors.
Further, the main benefit of debt over equity is the fact that when you don’t need to borrow anymore you simply opt out of the renewal of your contract. With equity investors, you are committed to the long haul and in some cases up to and including the sale of the company!
A factoring company, some of which also offer lines of credit, will lend against the face amount of your invoices and your credit line is only limited by the sales you generate. If your invoices are to credit worthy debtors, you can obtain the financing you need with a factoring company.
Many factoring companies offer purchase order financing in conjunction with their factoring facility. In a recent example, Huntington Coast Capital obtained a $5,800,000 purchase order and factoring facility for a company that the bank was only willing to give $1,500,000 to. The difference was that the bank was looking at the financial strength of the borrower and the factoring company was looking at the credit strength of the borrower’s customer.
The money was freed up on a collateral basis and facilitated the order being delivered. Was it more expensive than bank financing? Sure. However, it was available and made the borrower a lot of profit as a result.
If your business could use a flexible funding source to assist your business growth, we would like to speak to you!
To your success!
Patrick Zazueta | Founder
Huntington Coast Capital, Inc.