Alternative funding can take many different forms, which stands to reason because there are many different scenarios which small businesses can be involved with, and many different lending needs. In addition, one of the great areas of specialty and differentiation between alternative funding companies and traditional funding companies is that alternative funding can often be based on collateral which is overlooked or disregarded entirely by a traditional funding company.
Because of the diversity of these potential collateral forms, many different types of alternative funding services can be made available, each of which might be tailored to the specific circumstances of the borrowing small business. Below is an overview of some of the alternative funding services American Prudential Capital provides, and we like to think of these as different ways that we can help you and your small business.
Acquisition funding is used for the purchase of a small business and sometimes for heavy equipment. This often calls for creative financing, since hard collateral may be lacking. An alternative funding company like American Prudential Capital is often willing to work with a small business, to figure out a creative financing solution to make the deal work.
Sometimes, companies simply lack the funds to be able to grow in response to increased customer demand and are not generally considered good risks by traditional funding companies, like banks and credit unions. Alternative funding companies like ourselves can be more flexible, however, and with some kind of non-traditional collateral, growth funding can be provided to sound small businesses.
Invoice factoring is a type of alternative funding in which a small business sells its account receivable invoices at a discount to a factoring company like our own. The small business receives a cash amount, and the collection of the actual invoice amount then falls to the factor company. A small profit is made by the factor company because it charges a fee for its service, the small business receives immediate cash, and the customer is relatively unaffected, merely changing the company it pays to.
Invoice funding is somewhat different than invoice factoring in that the small business retains ownership of the invoices it has issued to its customers, rather than selling them to a factoring company. The small business still receives a cash advance against the value of those invoices from an alternative funding company, for an amount less than the total value of the invoices themselves. Then the amount of the cash advance is repaid within an agreed-upon time frame.
PO financing is a service often used by wholesalers who receive large purchase orders from clients, and it can allow those orders to be fulfilled when an alternative funding company provides the funds to pay the supplier. Once the end customer pays the invoice for the purchase order goods, that money is used to repay the financed purchase order. The wholesaler creates goodwill with clients, and the alternative funding company earns a fee for the PO financing.
Brand-new companies often lack the funds, the credit history, and the collateral to qualify for traditional bank loans or loans from the Small Business Administration. Startups are not necessarily ruled out by alternative funding companies though, and if some form of non-traditional collateral can be established, even startups can be funded so they can begin operations.
Working Capital Funding
Working capital funding can be arranged in several ways, one of which is by the invoice factoring method described above. Since working capital is critical for small business daily operations, this kind of financing often needs to be arranged quickly to avoid unnecessary financial stress on the company.
We can help you too
There are many different ways we can help small businesses, and we are happy to do so, since we feel small businesses are one of the reasons this country has become great, and will continue to be a great nation. We strongly encourage you to call us, email us, or to fill out our Funding Application form, so we can discuss with you how we might be of service to you and your small business.