Could Accounts Receivable Factoring Replace Loans?

A year ago, loan volumes dropped to about one half of their previous levels as small business lending collapsed. There was a sudden freeze in the secondary market, where banks sell off bundled batches of loans. Soon after the financial world went into crisis, prompting banks turn away anyone seeking a small business loan.

The Treasury Department and Small Business Administration (SBA) have been focusing on how to revive this secondary market since January 2009, but in the end, it looks like the market came back to life on its own by May when secondary market sales jumped to $324.6 million, staying in this range ever since.
For small business borrowers, a revitalized secondary market is a big step forward, but business owners looking for loans are still finding it difficult.

One way that small business owners of the future might profit is to stay away from loans altogether, and instead rely on a solid strategy of factoring their invoices. Also known as accounts receivable factoring, this age old business practice benefits businesses that do not get paid for 30 to 60 or 90 days by advancing up to 90 percent against invoices. IFG looks at the creditworthiness of the client’s customers and can fund within as little as 24 hours. IFG does not expect to buy 100 percent of a company’s receivables, and there are no minimum or maximum sales volume requirements.

16 thoughts on “Could Accounts Receivable Factoring Replace Loans?

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