How Women-Owned Businesses Are Using Alternative Financing to Take On the Big Boys

 

 

Female business owners have made huge strides in the world of commerce. There is obviously still some ground to make up, but as more entrepreneurial women achieve success, the equality gap will continue to narrow. To help women-owned companies keep pace with the old guard, alternative financing sources are offering a number of lending options that cater to women and the businesses they run.

Factoring Accounts Receivable

It’s already an uphill battle for female businesses owners, so waiting on payments for services rendered is not something most women have time for. The disruption in cash flow can lead to all sorts of problems, none of them the fault of the person who runs the company. For this reason, selling accounts receivable to a factoring company can be a great option for any business with steady clientele but unsteady payments. Most forms of alternative financing are loans that come with interest rates and down payments, whereas factoring your company’s invoices is really just selling a closed account to another company. You’ll give up a portion of the total transaction amount, but the money will come to you months earlier than it otherwise would and without the hassle of bothering¬†customers about collections.

It’s possible that selling your accounts receivable will get you into trouble if you have a client that’s extremely delinquent in his or her payment, so women who use this type of financing should be confident in the creditworthiness of their clients before they reach out to a factoring company. As long as everyone is on the up and up, this is a great way to keep your money moving and not get locked into long-term interest payments.

Merchant Cash Advance

An MCA is another substitute for a standard bank loan that helps women stay competitive. It’s not all that different from selling invoices, except that your business will be selling future receivables. As long as your revenue is steady, you can factor your credit card sales. A lender will advance the money and then take a percentage of your company’s daily credit card sales until the loan is entirely repaid. This type of financing can come with high interest rates, but the terms will vary depending on the amount advanced and profitability of your business.

Women who run their own companies are still fighting to get the recognition they deserve, though the business world is taking notice. Alternative financing sources are becoming more accessible and dependable and female business owners are taking advantage of that.

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