If you own a small business or are planning to start one, it’s important to do your research and get familiar with current news, trends and statistics. Having accurate information can help you plan ahead and avoid common issues businesses run into, and set your business up for success.
Small Business Startups
Small business owners should be familiar with credit terms and financing options. The Small Business Administration (SBA) provides useful statistics on small businesses in the United States. Here are a couple interesting small business statistics:
- More than 600,000 small businesses are started in the US annually.
- Only 51% of small businesses survive beyond five years. 20% close within the first year.
- One of the main causes of business failure is a lack of funding.
Financing Options for Small Business
Funding a small business is a key concern for both startups and existing businesses. Many small businesses seek funding from banks and the Small Business Administration. Common hurdles for young businesses include qualifying for these types of loans and receiving funds in time.
- Only about 16% of businesses are funded by bank loans.
- At large banks, the approval rate for business loans, including SBA loans, is only around 25%. At small banks, the approval rate is higher, around 49%.
- It generally will take 6 months to get funded with a bank loan
Small Business Bad Debt and Late Payments
Many businesses, of course, struggled during the pandemic, which caused many late and missed invoice payments. Gartner Finance Research found that bad debt increased by 26% in 2020. A USMCA report revealed how bad debt and late payments affected businesses over the last two years.
- Close to half of all invoices were overdue.
- Late payments affected 47% of the total value of all B2B credit sales.
- 6% of invoices written off as uncollectible.
- 41% of businesses in the USMCA region, which includes the US, Mexico and Canada, saw a deterioration in customer payment practices.
Invoice Factoring as a Funding Alternative
As noted, the pandemic saw a steep increase in bad debt. However even during normal times, bad debt is always a risk for businesses who extend credit terms. Bad debt is accounts receivable that will not be collected and therefore, treated as a loss. One alternative to traditional bank loans which also provides bad debt protection is non-recourse invoice factoring. There are several important benefits to non-recourse invoice factoring.
- Helps businesses improve their cash flow to meet payroll, invest in inventory, equipment, marketing and other essential expenses.
- Lets you receive funding immediately. Loans take a long time for approval and processing. With invoice factoring, you can receive funds within 24 hours of approval and invoice verification.
- Easier to qualify for. Many newer and smaller businesses have difficulty getting loans because they lack a strong credit history or sufficient collateral. Invoice factoring is often easier to secure because factoring companies look at your customers’ credit rather than yours.
- Get funding without taking on debt. Factoring isn’t like a conventional loan, there is no debt to be repaid because it is based on your accounts receivable.
Riviera Finance is one of the leading providers of invoice factoring for businesses of all sizes in many industries such as transportation, temporary staffing, business services, utility construction, energy and many others. Riviera offers maximum cash advances to help businesses maximize cash flow and funding is non-recourse, reducing your growing business’ risk of bad debt. To learn more about invoice factoring, contact Riviera Finance.
