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strategies of working capital

The 3 Types of Working Capital Funding Strategies

When considering a home renovation and shopping for contractors, the age-old advice is to pick two: price, quality, or time. You can finish your back deck quickly and at high quality, but it will cost more. You could also finish your deck inexpensively and quickly, but it will lack in quality. This choose-two dilemma applies across various decisions, and working capital funding strategies are no exception.

  • High Quality Working Capital Funding

  • Fast Working Capital Funding

  • Inexpensive Working Capital Funding

working capital financing choices

High Quality Working Capital Funding

First, high quality business funding could mean low-cost, well-informed, opportunities for growth, great customer service, or all of the above. The first thought of high-quality business funding for entrepreneurs is a small business loan from the SBA. An SBA loan is inexpensive and can afford your business new opportunities if you qualify for enough funding. However, one downside of an SBA loan is the speed of approvals. It usually takes months. Also, the difficulty of approvals is another downside. Typically, your funding potential is determined by credit scores, time in business, and bank statements. The same holds for large or regional bank loans.

high quality working capital financing

Fast Working Capital Funding

Then, there are fast working capital funding options. These options typically refer to MCAs (Merchant Cash Advances) or online loans. Horror stories circulate of entrepreneurs losing their businesses and also their personal finances to predatory commercial lenders. Often, these same lenders offer fast business funding to small business owners with poor personal or business credit. Entrepreneurs searching for fast or immediate working capital funding solutions should be wary of the cost of these strategies.

Inexpensive Working Capital Funding

Lastly, inexpensive working capital funding strategies typically come at an alternative cost. Investors or venture capitalists will want a say in how you run your business. After all, they have some equity in the company. Traditional business loans take months to process, and small businesses that need immediate working capital for growth will not have the time to wait on approvals. A line of credit only charges interest to the money you use, which serves as an attractive business funding option for small business owners. So, if you qualify for them, there are several inexpensive financing options available.

working capital management importance

High-Quality, Inexpensive, Fast Working Capital Funding

Invoice factoring stands apart as high-quality, low-cost, and fast business funding. Maybe you’ve heard of invoice factoring as a small business funding strategy. Possibly, your suppliers use accounts receivable funding strategies, and you are already familiar working with a factoring company. Does invoice factoring provide the best-fit working capital funding option for your business?

Is Invoice Factoring a High-Quality Working Capital Financing Strategy?

Factoring involves selling your open receivables at a discount to a factoring company. It is a simple revolving line of credit that grows with your business. No reapplication or refinancing is necessary. Also, determinations for approval relies on the credit strength of your customers and the quality of your product. In short, if you have a high-quality operation, then you have access to high-quality working capital funding.

Is Invoice Factoring Fast Working Capital Financing?

Eagle Business Credit, a top-rated factoring company, offers accounts receivable funding in as little as 24 hours. Your business is paid for delivered goods or services as soon as the next day. With the amount of small business working capital funding reliant on the volume of your sales, there is no need to reapply for more funding. Further, the funding grows with your business.

Is Invoice Factoring Expensive Working Capital Financing?

The cost of invoice factoring is determined by the days sales outstanding, the invoice amount, and various other factors. Typically, the factoring fee is between 1% and 4% of the invoice amount. The cost of factoring is easily outweighed by the opportunity to increase sales created for your business. This makes invoice factoring an awesome small business working capital financing strategy to sustain rapid business growth.