Do you really have a viable business if you cannot perform your service or make a product? The problem comes up when a business is looking for invoice financing but they do not actually have invoices yet. They often say I’m in a Catch-22. I need some capital to work on this order but can’t get it until I finish. But without money I can’t finish the order.
This is a classic example of an undercapitalized venture. Every new business needs to have enough capital to get started. Furthermore they need continuing ongoing funds to sustain and grow the business. Unfortunately factoring accounts receivable is not the right tool to get a start-up started from scratch. Get some customers, finish an order, then we can talk.
Depending on what your business is, you might need one or a combination of the following; borrowing from friends and family, seed or angle investment capital, credit arrangements with suppliers, SBA small business loan, or a small line of credit from a bank where the owner signs personally for the repayment (see up coming post for issues related to the U.C.C.).
Most of the time businesses fail due to lack of capital. Money is absolutely critical for all companies, insuring your access to it will reward you with success.