The business community has had to endure a major reduction in the traditional sources of acquiring capital investments and this is a direct consequence of the policy changes implemented by the banks and other commercial lending entities.
Fearful that their investments will be lost due to the current economic climate, they have actively sought to be much more cautious and wary about what the types of business that they are prepared to lend the money to.
This has directly hindered the overall growth and recovery of the economy, because even if the business owner does agree to the rather draconian terms set by the banks, the business owner has to sacrifice a considerable amount of the business to gain access to the capital.
Either the assets of the business will need to be set as collateral, which means that if the business defaults on the terms of the loan the assets are seized and then auctioned off, or the business must sell equity.
Ultimately then, business owners across the country and indeed, the entire world, are faced with the grim prospect of trading potential long term profits of the business for a short term gain.
Oftentimes, this trade is far from a balanced or equitable one, and so it is hardly surprising that many business owners feel somewhat hard done by.
As a direct consequence of all of this then, one source of business finance that previously was not relied upon very much, but which is quickly growing in credibility and popularity is commercial finance factoring.
With this method of business financing, the business will effectively sell their invoices to a factoring agency who, upon the receipt of the invoices will then forward a portion of the money owed on them.
The benefit here for the business is that commercial finance factoring will directly aid them with cash flow and liquidity problems that they maybe currently enduring, meaning that if money is a little tight by virtue of some customers being tardy with settling their accounts, this will not compromise the business as a whole.
Furthermore, with commercial finance factoring, the business will also be in a position to acquire money without actually having to do so at the prejudice of the business as a whole, or to other creditors whether actual or potential.
Specifically, the business that seeks to use factoring as a means of raising money will be able to use this method of finance raising without having to worry that they have alienated the bank.
Whereas commercial lenders will be alarmed and concerned at the fact that the business already has outstanding loans and assets secured as collateral, this is not a concern at all for factoring agencies.
Therefore, in the event that the factoring agency does not provide the company with a sufficient amount of money to aid them properly, the business can then resort to other methods, such as venture capitalists and bank loans to supplement the shortfall if, and when required.