There are a lot of highly successful businesses that just can’t get a traditional bank loan. There was an article in the NY Times today about a distillery in Brooklyn that only recently was able to get a $400,000 loan despite having their product sold in pretty much every liquor store in Manhattan.
Small businesses and new businesses often can’t get a traditional loan because they don’t have enough business history. Banks look for at a minimum 3 years of history, and of those three years, they expect you to be profitable. For startups, that just isn’t the case. In almost all cases, no startup is profitable in the first year, and it’s only when they’re on the edge of profitability that they need the loans to grow that they’re turned down by the banks.
I just came across a really cool company that helps startups finance their business growth using their invoices. For a lot of my companies, I don’t get paid by my advertisers for at least 60 days, which means I have to go upwards of 60 days before I get cash back in my company to keep it running.
This 60 day period can be crucial for my business because it slows down my progress by two months. Using a company like CBAC Funding, I could get a loan against my invoices, and use the cash to keep investing and growing my company.
From their site, here’s how it works:
- Seller logs into their CBAC account and enters additional information.
- Buyers bid on sellers account receivables.
- Seller chooses winning bidder.
- CBAC Funding releases sellers contact information to winning buyer.
- Buyer contacts seller, making advance payment usually within 1 business day.
- After customer pays outstanding invoice to buyer, seller receives remaining amount minus the discount fee.
This may not be ideal for everyone, but I wanted to highlight this company because it’s something I’ve considered for my companies and suggest you checkout similar companies if you are a startup like myself that needs to fuel its growth.