Business finance companies are lending institutions that are established for the specific purpose of extending financial loans to businesses that range from the small local business to international corporations. Various business finance companies may choose to focus on a particular type of business, or specialize in particular types of loans.
In general, a business finance company will often include rates of interest that are competitive and will include terms and conditions that are often ideal for particular situations that occur in the business world. One finance company may choose to focus more on providing seed capital to start up companies, or providing loans that assist an established business to launch a new subsidiary. A second finance lender may specialize in what is normally referred to as angel investing, which involves providing funds that allow a company going through a recovery period to weather hard times and become profitable again.
Today, there are a number of business finance companies that specialize in providing a revenue stream by factoring the monthly invoices of a company. With lenders of this type, the finance company is essentially purchasing the invoices from the original owner, and paying the client a percentage of the face value. Customers remit payment directly to the finance or factoring company, who then credits the face value, less a small percentage, to the account of the original owner. Once the total amount of the advance payment is covered in full, the factoring company releases the remaining portion of the collected revenue to the original owner of the invoices. This arrangement allows a company to have immediate access to the majority of the current amount of the monthly receivables, rather than having to wait anywhere from thirty to ninety days for customers to remit the payments.
Business finance companies, like any other financial lender, usually require background information, including documents that confirm the current financial status of the applicant and the ability to repay the loan. There is no guarantee of acceptance, although there are a number of business finance companies that cater to troubled businesses. Generally, business finance companies that focus on high-risk loans tend to charge a higher rate of interest, and also tend to not have as liberal terms and conditions as some other options. When investigating business finance companies as a means of securing funds for expansion or other business related purposes, business owners should always attempt to obtain the best terms possible before entering into an agreement with any finance company.
