Understanding Financial Alternatives

There are a number of options available to small and mid-sized businesses to finance their business including factoring, bank financing, and asset-based lending. Regardless which option you choose, it's important to evaluate and choose a solution that will enable your business to grow. Consider the following five criteria to help you determine which financing options will best match your needs.

Affordability	Banks, asset-based lenders and factors can tack on fees, hidden charges and penalties above and beyond the initial cost. Make sure you fully understand the total cost of financing.
Control	Customer notification, monthly minimums, restrictive pricing, rigid terms are often required – giving you very little control over the process. When your company assets are used for cash you should have some say in the matter.
Risk	Avoid options that require personal guarantees, all-asset liens and restrictive covenants. Determine what level of risk you are willing to take.
Flexibility	Rigid borrowing terms, fixed credit and concentration limits, and long-term contracts make traditional financing sources inflexible. A financing option should be one that grows with your business.
Timing	Many traditional financing options require long lead times before you're approved and cash is disbursed. A 30-90-day wait for funds could mean the difference between success and failure. If you need cash quickly you should not have to pay more or take on more risk.

Financing options are not a one size fits all. What may be good for one business, may not be a fit for another. Understanding the options available to you is only the first step.