When Your Bank Says No
Here's a guide to some increasingly popular sources of alternative financing

If you're a fast-growing company looking to raise money to expand, you may find yourself squeezed out of the tight credit markets. If you've tried -- and failed --with your current bank, the local community bank, and nonbank lenders, then it might be time to consider these options:

RECEIVABLES FINANCING/FACTORING: Popular among companies with large invoices, factoring allows you to sell accounts receivables to a Factorer for a cash advance. "This is really an opportune time to factor," says Scott McArron, president of Dallas-based Evergreen Funding Corporation, a company that provides accounts-receivables financing to small and midsize companies. "With the economy slowing, banks are curtailing lending and, when they do that, small business is always the first to get hurt." Factoring allows you to leverage your large invoices to gain immediate access to cash. "If you have $100,000 in equity but are a rapidly growing company, you may have $700,000 in receivables that you can't tap from a traditional lender," McArron says. "Fast growth creates an inordinate need for working capital. If you're growing fast though, your receivables base is growing faster than your cash flow and, until growth levels off, you can never catch up." Typically, a Factorer will advance between 50% and 80% of the amount of the invoice. ADVANTAGES: You'll receive the cash within 48 hours, and you're not limited by your balance sheet. As long as you have receivables from reliable and well financed customers, you can usually raise the cash. Factoring companies will sometimes manage your receivables and collect on them for a fee.

By Naween A. Mangi
*contents adjusted