Crowdfunding To P2B Crowdfactoring For SMB Cash Flow
You’re a small business, and you’ve just started to experience some real success in your enterprise. You’ve worked hard to develop a growing customer base, and you love that you have clients whom you can invoice for your work, which means you’re counting on some healthy receivables coming in as a reward for your efforts. That’s the problem. The cash is coming in, but in the meantime, you still have to make payroll, pay the rent and pay your vendors for the materials and technology you had to purchase to complete those jobs, and the flow just isn’t there to fill in the gap.
Cash flow: It’s the perennial issue with most small businesses, especially startups, and a major reason why they often fail. Chances are that you are maintaining those operating expenses through a revolving credit card balance, but your expenses have outstripped the maximum balance while you are still waiting for those invoices to be paid, or to be able to bill on those large contracts you’ve landed. The banks have become increasingly stingy with funding and you just don’t have the history to qualify for a line of credit; you’re not prepared to take on investors at this point; and you’re not willing to take the 20% hit that you’re likely to experience if you “sell” your receivables for cash value, although the prospect is starting to look pretty good.
Enter crowdfunding. Thanks to a whole new generation of crowdsourced lending, a new era of small business finance is upon us. Crowdfactoring, a niche within the crowdfunding market and is specifically designed to provide small businesses with cash flow based on their receivables.
Basically, small businesses apply to an online crowdfactoring platform, which generally require that a business have over a year of operations and verifiable receivables. Provided you meet the requirements, your business is given a line of credit at a reasonable rate and backed by its receivables. The platform then offers investment opportunities based on your loan to its micro-investor members, who receive a decent return on their money and the feeling that they have helped a small business to survive, contributed to economic growth and provided job opportunities.
Platforms in this arena include Bolstr and RealtyMogul, both of which were recently reviewed in the latest Online Banking Report (OBR). Both are specifically targeted at providing funding for startups and small businesses, and are subject to compliance with specific federal banking regulations, providing a safe reliable lending source for your growing company.
Crowdfunding, in all of its versions, is the face of the modern finance market and a way for you to help your startup get the same cash flow benefits as larger businesses have enjoyed for years.