There are some lenders in the contract financing industry that work with small businesses that need working capital and have contracts with customers. These lenders will advance the payments on contracts to give the small businesses the funds they need for daily operations before the clients start paying the contracts.
Most of the time, small businesses will consider contract financing if they enter into a contract larger than they typically do and need the capital to fulfill the contract. While also making sure their other business obligations are handled. Contract financing is different than other types of financing because is specifically to help small businesses that need an advance on the contract before service is completed. But not before the work on the product is complete.
Other Forms of Working Capital Financing
There are a few other forms of working capital financing, including the following:
Accounts Receivable Financing
This is a type of financing involving assets. It allows the company to use their receivables as collateral to get the financing they need.
Purchase Order Financing
This is a short-term agreement for financing in which the lender loans capital to a business that requires funds to fulfill customer purchase orders.
This is a financing option specifically for manufacturers that require capital to expand their facilities to produce more goods.
Recently, likely since the industry is expanding, we have seen a flood of lenders that are working with software companies on contract financing. Those companies that have already developed a product and are in a locked-in contract seem to be the ideal candidate for contract financing.
Do you believe that contract financing may be a good option for your business? If so, contact 18 Sierra Financial to learn more. Then, have an attorney look over any forthcoming contracts before signing. There may be some small clauses you could include to make you more likely to qualify for this type of financing in the future.