What are unique financial service arrangements that can benefit small businesses
Small businesses can benefit from using financial services through the addition of leverage to their business which allows them to expand operations and obtain cash flows to meet operating needs, to refinance existing debt arrangements, and to purchase large pieces of equipment that can allow them to expand their business. While this is true for small businesses, it is also true for any business out there. However, small businesses operate in a very different world from large businesses that have extensive amounts of capital available for investing or expansion. What are unique financial service arrangements that can benefit small businesses? This article will highlight some of these. Factoring is a unique arrangement that can benefit many small businesses above and beyond the benefits that big businesses derive from it. If you’re not sure where to start, Orion Business Capital, LLC is on of the best factoring companies; offering unsurpassed professional services.
With a factoring arrangement you effectively sell the rights to collect your receivable to a third party factoring company that will assume the collection risk in exchange for a small percentage of the receivable. Small businesses often have concentrated customer groups and the non payment or bankruptcy by one customer can lead to the small businesses demise. Large businesses are usually more diversified and not subject to the same restrictions and do not benefit from factoring to the same degree.
Some financing and insurance companies will provide small businesses with a financial guarantee in exchange for a deposit and monthly premium. This financial guarantee will insure that the customer who is a counter-party to an arrangement will be paid which will reduce the risk for that company doing business with the small business. This arrangement greatly benefits small businesses who would otherwise be limited in the customers and vendors who they could do business with. But the same arrangement wouldn’t provide much benefit to a larger company.
Finally, small businesses benefit from many small business loans such as lines of credit, asset based loans, and revolving credit lines significantly more than big businesses who will often directly issue bonds to the marketplace. Small businesses don’t have the same scope of operations where this is beneficial to do so and therefore use one of these other loan methods that are catered to the industry and borrowing needs of the company in question.
Small and large companies each have independent uses for financial service companies but how they use them can vary significantly from one another as shown above. Small businesses should of course narrow in on those financing solutions that meet their needs and educate themselves on the options available to them so that they can make the best choices possible for their financing needs.