Hats off to the B2B software platforms that are innovating the industry with everything from alternative financing methods, like Fundera, to sourcing equipment and materials to jump start a new endeavor, like Kinnek.
In an industry that traditionally relied upon banks to obtain loans, and networking to obtain the best deals with suppliers, there are now quicker and more cost-effective options to not only get your business off the ground, but to support growth through particularly cash-strapped periods on your way to expansion.
Today, I’d like to talk about a specific type of alternative financing, called factoring. First off…
What is factoring?
Putting it simply, it’s selling one’s debts to a third-party, or a “factor.”
Give me an example:
Okay, say that you manufacture chairs. Not just any chair, but top of the line, environmentally friendly, ergonomically correct chairs. You’ve attracted the admiration of a large department store, and they want to start selling your chairs in all of their Western region outlets.
However, you currently have some outstanding invoices to other outlets that you’re awaiting fulfillment. Consequently, you don’t have enough working capital on hand to fulfill that large of an order, while still being able to (confidently) pay your employees.
There are B2B software platforms that specialize in helping businesses like yours grow in times of demand. These platforms help connect you with a partner that’s interested in purchasing your outstanding invoices, unlocking that trapped cash so that you can purchase the supplies you need to fulfill your large orders, as well as cover the salaries of your employees.
Factoring like this can help you maintain your healthy growth trajectory—continuing to expand your business in times of demand instead of pumping the brakes and putting your growth on hold.
That sounds interesting. Who can help me find alternative routes to business lending?
There are a variety of different services out there, but here are a few that offer factoring options, as well as small business loans and equipment loans to empower your business to grow and scale:
For more detail, here is a list of alternative lending platforms and brief descriptions of each.
Some of these platforms operate in a similar sense as to how Kayak finds you different airline ticketing options. You submit your invoices, and the platform sets you up with another company who is most likely to become a partner in your invoice factoring.
What’s the catch?
You need to evaluate the different invoice factoring terms, and determine which ones make the most sense for your business model. Are you selling your accounts receivable directly to the factors, and are they collecting on your invoices? Or are you collecting on your invoices, and making payments to a factor? These are all things that alternative lending platforms should be able to help you navigate and compare. The platform will also help you negotiate terms that are going to benefit both you and your factor.
How does Dwolla fit in?
Dwolla provides a flexible ACH API that can be baked into financial software to help facilitate things like bank transfers, user onboarding, account verification, and more. B2B software platforms find benefit in Dwolla’s no per-transaction pricing, as well as our dedicated developer and account support helping them get a fully-baked payment system integrated into their own infrastructure and to market as quickly as needed.
In other words, Dwolla’s API can be a crucial tool to helping financing platforms automate and control their bank transfer requirements within their own platform.
Alright, I’m ready to start options for growing my business faster.
Great! The internet is revolutionizing the way businesses grow and succeed, as well as the way platforms handle their payments. Are you on the leading edge? Research your financing options, along with traditional small business and commercial loans, and determine the right option for you and your business.
For platforms looking for a robust and flexible way to move money from B2B, B2C, C2B, or whatever else you can think of—give Dwolla a try.
If your B2B financing platform helps other businesses receive non-traditional methods of financing, like factoring, invoice financing, or dynamic discounting, look at Dwolla’s payment API to help with facilitating bank transfers, as well as managing customer and bank account verification.
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We'll help you design your ideal payments experience.
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