Financing growing businesses, especially in the small business sector, has always been problematic. While business models and the way companies operate have changed and moved forward, traditional bank financing has remained in place. A loan is always useful for companies , but other forms of financing should not be forgotten.

A business loan is undeniably a useful tool for business development, however, it is important to distinguish situations in which another type of financing might be more useful for a business. Usually, companies' first choice is to apply for a loan at a commercial bank. However, applying for bank loans usually takes a very long time. The procedures are long and impose a heavy administrative burden on the company. Banks often require several years of company data, as well as management documents and cash flow projections. Also, banks expect some collateral, real estate or some other personal assets from the entrepreneur. And even then, a positive decision and successful funding are not guaranteed. Banks review applications in internal credit committees, which may decide that companies are too risky for financing, or may reject if the company represents an industry that the bank has already over-lent and has reached its limit in the bank's loan portfolio. And to receive a negative answer, the entrepreneur has to wait several weeks.

Business consultants often inform that a loan is not always the most suitable way of financing working capital. If the company gets a new, important order, the money is needed for the business immediately and spending time on a loan application at the bank is not worth it. Likewise, getting stuck in a repayment period of 12 months or longer to finance an order will incur recurring costs.

In such situations, your company does not need to take on additional liabilities, but rather turn balance sheet assets, such as invoices, into working capital. Invoice financing offers a much more flexible short-term financing mechanism. Invoice financing, or factoring, can help a company get frozen funds faster for invoices that have been issued but are waiting weeks or even months for payment. Using invoice purchase , offered by both commercial banks and alternative financiers, companies can immediately receive up to 100% of the invoice value.

Using outstanding invoices, which show the company's future revenue, provides for needs that need to be met now. On the other hand, in the case of a loan, the amount of money will be paid out once and will have to be returned to the financier over a longer period of time.