As part of the U.S. government’s stimulus package, the Small Business Administration (SBA) developed “America’s Recovery Capital” (ARC). The ARC loan program was designed to provide zero-interest loans to American small businesses negatively impacted by the recession. According to a recent CNNMoney.com article, “Since launching in early June, the ARC loan program has backed 2,715 loans totaling just over $88 million, with an average loan size of $32,425, according to the latest data from the Small Business Administration.”
While this is good news for some, most small business owners seeking funding are finding that the ARC program is slow, cumbersome, and extremely hard to qualify for. In an interview with CNNMoney.com, Chuck Blakeman, president of a Denver-based small business advisory firm states, “(ARC) was supposed to be able to be something for business owners in distress, but business owners in distress aren't going to be able to touch this loan. I sent in 301 pages of background information, and I have not yet heard back from Wells Fargo" -- a bank he has a 20-year relationship with.” In the same CNNMoney.com article, Mack Sullivan, owner of Due South Publishing, reports similar frustrations: “After months of searching, Sullivan found that a BB&T (BBT, Fortune 500) branch in Georgia … would accept his application -- with conditions. ‘I met with the local branch of BB&T last week and had a good meeting,’ said Sullivan. ‘They are participating, but with the provisos that you become a customer and, interestingly, have a loan with their bank other than the ARC loan,’ he said… (Sullivan) is still waiting for a final word on the status of his ARC loan, and hopes to hear within the next few weeks.”
Waiting weeks or months after providing hundreds of pages of paperwork is not feasible for struggling small businesses. And realistically, most American small businesses will not qualify for ARC loans based on the stringent guidelines. Applicants must meet the SBA’s requirements, which include demonstrating that the small business in question has been operating for “…at least two years and been profitable in at least one of the last two years. They also have to be experiencing clear financial hardship, as illustrated by a sharp drop in sales, staff, or working capital,” according to CNNMoney.com. SBA assistant administrator for communications, Jonathan Swain states, “The way I would characterize (ARC) is that it is one tool in the tool box. It is a very small loan program for a very targeted, very specific situation, as a result of the economy.”
The end result is that the SBA’s program is not accessible to most American small businesses. For those that actually do qualify, the process is cumbersome and lengthy. Small businesses are seeing customer demands increase, and, without the accessible small business financing necessary to meet those demands, those companies will continue to struggle and many will fail. Naturally, many entrepreneurs are looking elsewhere for their small business lending needs, and they’re finding that traditional lending sources are no longer the gold standard for small business financing.
Accounts receivable factoring services are accessible, affordable, safe, and fast, making them an ideal alternative for those who don’t qualify for ARC or are in the midst of the months-long approval and funding process. Once considered a short-term form of financial assistance, many small businesses are now using accounts receivable factoring services (commonly called “invoice factoring services”) for all of their financing needs. In particular, reputable companies providing online invoice factoring services, such as those affiliated with Factors Against Fraud and the International Factoring Association, are bridging the gap for American small businesses.
Invoice factoring is a simple process through which the small business sells its accounts receivable (outstanding invoices) to the factoring company at a slight discount. The factoring company provides funding, typically within a matter of days. Aside from the funding accessibility, small businesses enjoy several other benefits of choosing invoice factoring: no loans to repay, improved credit, accounts receivable management and billing services, access to advanced credit-screening processes for customers, and significant accounts receivable savings.
American entrepreneurs want fast, reliable, affordable small business financing, and in growing numbers, they’re now finding it through online accounts receivable factoring services.
Disclaimer: The information presented above is general and intended for educational purposes only. It is not a substitute for practical legal or accounting advice on any specific situation.
