Most discussions of startup financing revolve around things like bootstrapping, angel investing, and equity funding. All those things serve a purpose when companies are first getting off the ground. But there are two dynamic tools young companies can rely on to keep things going as they grow beyond initial funding.
Those two tools for startup financing are net-30 accounts and invoice finance. Here at Thales Financial, invoice finance is our specialty. We would be more than happy to discuss how you can apply invoice finance to your situation. If we can help, we will.
Financing Without Business Credit
Startups face a genuine financing problem tied to an insufficient credit history. Let’s face it, lenders are not eager to loan money to young companies without a sufficient track record of credit worthiness. But the other side of that coin is this: without anyone willing to extend credit, startups cannot build a good credit history.
Young people have the same problem in the consumer credit game. It is hard for them to get mortgages and car loans without sufficient credit history. But how can they build a credit history if no one will give them credit? Fortunately, there are tools younger consumers can use. There are also tools available to startups.
Arrange Net-30 Accounts When Possible
One of the best tools to build business credit is the net-30 account. A net-30 account is essentially a revolving line of credit provided by a vendor. The principle is pretty simple: Company A buys supplies from Company B. Company B allows Company A 30 days to pay without interest or penalties.
As long as Company A pays its invoices on time, things continue without a hitch. The company’s credit history and score are gradually built over time. Of course, this is contingent upon Company B reporting its net-30 accounts to credit bureaus. Many of them do.
A fringe benefit of establishing net-30 accounts is maintaining better control of cash flow. A startup doesn’t have to endanger its cash position by double dipping – using existing cash to both buy supplies and run the business while it waits for its own customers to pay.
Arrange Invoice Financing for Short-Term Needs
The other tool we have been speaking about is invoice financing. Again, it is what Thales Financial specializes in. Invoice financing is a form of short-term financing accomplished by selling invoices to a factoring company. As a factoring company, we buy invoices from our clients.
Selling invoices to us gives companies access to immediate cash for short-term needs. The cash can be used in whatever way management sees fit. It can be used to buy new supplies, settle existing invoices, facilitate expansion, etc. There really are no limits.
There are lots of reasons to consider invoice financing as a short-term funding option, not the least of which is speed. Invoice financing can be arranged fairly quickly compared to traditional bank loans. This is a big plus for startups that find themselves facing cash flow problems they were not expecting. As long as they have outstanding invoices they can sell, they are in good shape.
Utilize Both to Fund Your Startup
If you are behind the wheel of a startup, you are familiar with startup financing hassles. It is part of the game. We encourage you to take advantage of both net-30 accounts and invoice factoring. Combining the two could help you fund your startup for as long as it takes to meet your short- and long-term growth goals. And even after your company is pushing out big profits, net-30 accounts and invoice factoring are handy tools to keep around.