Can invoice factoring / purchase order financing and venture capital be compared?
Believe it or not, they can! Fort starters, VC capital can be very crucial when starting a business. However, many entrepreneurs go for second or third rounds of financing, when a factoring financing line could have done the trick nicely. And without giving away equity.
Yes, I know that what I am about to say is controversial. C'est la vie, I guess. However, for factoring and po financing to work you must:
1. Have a product in the market - with sales
2. Sell to commercial customers
3. Have high profit margins (30% or more)
4. Sell to credit worthy customers (e.g. D&B rated)
If you do, invoice factoring and PO financing can provide you with financing that is only limited by the amount of product/services that you can sell. It can literally fuel, explosive business growth.
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