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Cash FlowCash Flow Financing and Other Alternative Funding Streams for...

Cash Flow Financing and Other Alternative Funding Streams for Small Businesses

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If you are operating a start-up or even an established small business, you know that one of the greatest challenges is finding financing or maintaining cash flow. As a well-known current ad campaign cleverly points out, banks and other traditional lenders tend to turn a blind eye or deaf ear to small businesses.

Yet for the entrepreneur, there are sources for alternative funding out there that can get you the startup capital you need, or help a new business survive its “growing pains”

One such source of so-called “cash flow financing” is an account receivables factoring company. A factoring company is a financial lender that can show your small business how to leverage your account receivables into cash. Let’s face it, every small business has cash flow issues, and an account receivables factoring company can be a good source to turn to when times are tough. For example, if you need to make payroll, expand, invest in new equipment or raise capital quickly for any purpose, you can do so based on the value of your uncollected receivables.

Basically, factoring involves a transaction between your business and the account receivables factoring company in which you “sell” your open invoices, generating immediate income instead of needing to wait for the net term of that invoice. In most cases, an accounts receivables factoring company can wire funds to your business in less than 24 hours once the purchase of the invoice has been made. Besides the fast availability of funds, factoring has the other advantages of no interest, no loan payments, or losing any of the equity in your company. Account receivables factoring is simply a process of converting your invoices into cash.

Small businesses, especially those that are woman or minority owned should consider business enterprise financing. Business enterprise financing refers to the number of programs that are available to small enterprises, small business and or micro-enterprises. There are many government sponsored grant and loan programs and other sources of business enterprise financing available to start or expand a small business or enterprise. Many of these programs are specifically designed to help women and or minorities obtain business enterprise financing. Two good resources to start your search for business enterprise financing are the Association for Enterprise Opportunity and the CFED (formerly the Corporation for Enterprise Development).

Other sources for business enterprise financing can be found by looking into these government resources:

  • The Commerce Business Daily which lists government-awarded contracts, some of which are to be subcontracted to minority firms
  • The U.S. Department of Housing and Urban Development is always on the lookout for minority-owned businesses. Entrepreneurs and those seeing business enterprise financing who qualify and are subcontracting to a majority firm that is revitalizing an urban neighborhood under the Community Development Block Grant program can also use the Section 108 Loan Guarantee Program. These loans may be used for construction costs and equipment purchases.

And of course, there is the SBA (Small Business Administration).  SBA programs include the 7(a) loan guarantee program. In most cases, up to 75% of a small business loan, or up to $75,000, is guaranteed by the government to a bank or other commercial lender. SBA Express loans are available for those firms that need cash fast and have little time for documentation. Most of these loans can be turned around within 36 hours.

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