The assumption that business’ use factoring is that they have poor credit or have defaulted on loans or, perhaps, have been late on payments in the past, sometimes that’s all true. The more likely reason is factoring provides flexibility and growth. Banks and the SBA most times won’t give the size credit line that most small business need to run a growing business. The SBA as well as banks, have strict guidelines, formulas, covenants and restrictions to determine how much you qualify for. Length of time in business and consistent profitability is also another factor. The old joke goes, banks only hand out umbrellas when the sun is shining. Additionally if you don’t have secondary collateral to back up your loan request you are not going to get that final approval.

Banks fear growth. Banks are afraid of businesses that grow rapidly 10,20,30% without the necessary equity and banks are not in the equity business. The SBA on the other hand might be comfortable with growth, but they can lock you in a strict term loan agreement that may preventing you from getting your future need for capital. If you continue to grow after you have used your SBA credit, getting out of an SBA loan and refinance can be burdensome and costly with prepayment penalties and fees.

Factoring has been and important form of financing global trade for centuries and has been dominated by closely held companies owned by entrepreneurs that don’t have to adhere to the same conservative guidelines banks must use. At AeroFund, like most factoring companies, we look at the underlying collateral of the accounts receivables to determine how much money we can loan. Your time in business or credit is not a determination if you will get a loan. Factors are not frightened by growth, personal credit, or past performance, factor’s love growth, you grow, we grow. Factors look at your business and your sales the same as you do. If a customer wants to buy the goods or services offered and they are creditworthy and have the ability to pay, you, as well as we want to do business with them.