If you are a company experiencing a growth spurt, chances are that you are tight with cash and working capital. You have the sales, you have the infrastructure to deliver the goods. But, you are having a hard time financing and carrying your accounts receivable. You are probably looking for alternative ways and means to infuse working capital into your business. There are many financing options available to you depending upon the business you are in, including:

• Bank line of credit
• Accounts receivable financing
• Small Business Administration (SBA) loan
• Purchase financing
• Inventory financing

Of course the best and most economical way to proceed would be through a bank loan. If your business has a track record of growth and profits for the prior two years, you could qualify for a bank loan. The amount of the loan is dependent upon the capitalization of your company. However, as we are all aware, a growing company is often undercapitalized and/or not in business long enough for traditional banking to be a viable alternative.

1. Generally as a small startup company it is too expensive and uneconomical to run your own credit department. As a result of this you sign up with a factor who acts as your credit department. They guarantee the accounts receivable they approve. When you receive a order you call up your factor and if the company is credit worthy the factor will approve the order. For this service the charge ranges between 0.75% and 3% depending upon your volume and the average amounts of your invoices. In addition to this, you may borrow money against these receivables ranging from about 70% to 85%, depending upon dilution, other charge backs and experience with your customers. Interest charges range from 2% to 3.5% above prime rate.
   
   
2. You could get accounts receivable financing through a factor without them guaranteeing your accounts receivable. But for this, the financing fees a generally higher.

If you are a small business you may qualify for this program guaranteed by the federal government. This will depend upon your capitalization and needs.