Hiscox USA recently released the results of their Small Business Survey, part of which details the four biggest mistakes small business owners report making during the startup phase. Not surprisingly, two of the four have to do with small business financing. A full 32% of small business owners reported that underestimating their monthly expenses was their biggest error, while 18% said they failed to secure enough small business financing.
Business knowledge related to small business financing is also essential for a successful startup. Hiscox’s survey notes that 26% of small business owners felt they did not know enough about small business financing and credit, while 33% reported feeling they lacked the proper knowledge about how taxes would impact their business.
To secure the proper financing, small business owners often turn first to their local banks or credit unions, only to find that small business loans are highly dependent on personal credit and assets as well as business history. Additionally, even as the American economy shows improvement, most small lenders are still keeping tight reigns on their small business loans. For most startup companies, this is a major stumbling block.
Proper access to small business financing, however, is not limited to local lending institutions. In fact, small banks can be unstable in today’s market, creating additional risk for borrowers. For today’s entrepreneurs who find they have underestimated operating costs or small business loan needs, accounts receivable factoring is an ideal solution.
Accounts receivable factoring through a reliable firm, particularly one aligned with the International Factoring Association (IFA) and Factors Against Fraud (FAF, www.factorsagainstfraud.com), is an excellent method of small business financing that can help startups bridge the gap while they learn the ropes. For more information on whether accounts receivable factoring may be right for you, consult your financial advisor.
