Business Development Center

Can’t afford to wait 30 to 60 days to get paid by your clients? If you are like most business owners, waiting to be paid can be very challenging. In some cases it can mean lost opportunities. It can mean that you don’t bid for big sales because you know you won’t be able to play the waiting game. At its worst, it can spell disaster. It can mean that you need to delay payroll. It may mean that you don’t pay rent or taxes. It may force you to shut down your business.

If you are like most business owners, your first reaction will be to call your banker. Unfortunately, banks will not lend money to businesses that are new, have no hard assets or don’t have three years worth of profitable financial statements. At this point, most business owners give up, thinking that they don’t have any other options. However, they do.

If your company sells products or services to large credit worthy companies, you could qualify for invoice factoring financing. Invoice factoring reduces the time it takes for you to get your money to one day. How quickly could you grow your business if your invoices were paid in 24 hours?

As opposed to bank loans, factoring companies do not require hard collateral. The only requirement is that you have invoices form credit worthy clients. Factoring companies work differently than banks. A factoring company will provide you with financing based specifically on your invoices. This means that if your invoicing grows, your financing also grows.

Factoring is very simple:

1. You generate invoices for your products or services

2. You submit the invoices to your clients and to the factoring company

3. The factoring company advances you up to 85% of the gross value of your invoices (the remaining is kept as a reserve to offset disputes)

4. Once the invoice is paid by your client, the factoring company releases the 15% reserve and charges their fee

Factoring financing is easy to qualify for and can virtually eliminate the 30 to 60 days it takes for your customers to pay. It provides you with the necessary working capital to grow your company and take new opportunities.

If you want to grow your micro-business (defined as a business with fewer than five employees), you might consider some of the findings of a survey by Statistics Canada.

1. The Findings

According to “Growth Determinants of Micro-Businesses in Canada” (Evangelia Papadaki and Bassima Chami, Small Business Policy Branch, Industry Canada), the survey by Statistics Canada revealed the following:

Micro-businesses get much of their advice from family, friends, customers and suppliers. Accountants are more commonly consulted for business advice than lawyers and bankers.

Completion of high school was cited as a factor for growth in the micro-business. Perhaps surprisingly, college or university education was discounted as a factor for success.

Age or sex of business owners did not affect business growth. Nor was being an immigrant a significant factor.

For growth, being willing to delegate, assume risk, and share ownership all seemed to be factors for success.

Expansion of the local market was more important for growth than the export market for the micro-business.

Growth micro-businesses innovate and engage in e-commerce activities.

2. The Opportunities

This is encouraging news for entrepreneurs. You don`t necessarily need a lot of money for professional advisors to grow your micro-business. Higher education is not a prerequisite for success. Age, sex or country of origin are not relevant factors for growing your micro-business.

If growth of your micro-business is your goal, you can`t do everything yourself. You must be willing to delegate (or perhaps even share ownership of your business with others). Innovation, a willingness to take risks, and use of the Internet are also important to your growth.

Are you willing to delegate, take risks, and partner with others? Are you innovative? Do you employ e-commerce in your business? Are you using the Internet to expand your local business?

If you can answer these questions affirmatively, then your micro-business is poised for growth.