More small businesses are looking to alternative funding sources as banks limit funding in preparation for a recession.
HOUSTON, TEXAS, May 23, 2023 – Leading invoice funding company Charter Capital says invoice factoring demand is rising as banks tighten lending requirements. Additional coverage of the topic can be found in “When to Consider an Invoice Factoring Service Instead of a Bank,” which is now live on charcap.com.
Small businesses often have a difficult time qualifying for traditional funding. Harvard researchers say this because banks typically have the same overhead administering a small loan as they do for a larger loan, and larger loans deliver greater profit. Even strong potential borrowers may be turned away in the best of times.
Rising interest rates and a slowing economy further slowed lending as banks began to focus even more on quality and reduced risk over quantity, Reuters reports. In the wake of the recent Silicon Valley Bank and Signature Bank collapses, industry specialists now say a credit crunch is in full swing. Financial institutions are mindfully reducing lending in an effort to keep more cash on hand as a safeguard in the event of bank runs.
“Small businesses are impacted by the credit crunch more than others because they were already dealing with limited access to capital,” explains Joel Rosenthal, Co-founder and Executive Manager at Charter Capital. “Even those that would have qualified for traditional funding a year ago may not qualify today.”
Rosenthal says that the credit crunch is creating more interest in alternative funding options like invoice factoring, which has an easier qualification process and typically works much faster. For instance, a business can get approved in days rather than weeks or months. Payment can be made to the business on the same day an invoice is submitted too.
“Because factoring is a debt-free funding solution, it’s also appealing for businesses that are trying to minimize their debt ratio or avoid taking on more payments,” Rosenthal adds. “Businesses are leveraging factoring to shore up their own finances and prepare for banking issues caused by the uncertain economy too.”
Those interested in learning more about invoice factoring or requesting a complimentary quote may do so by calling 1-877-960-1818 or visiting charcap.com.
The Financial Crisis and Its Impact on Small Businesses
The financial crisis of 2023 has brought significant challenges to the United States economy, affecting various sectors, especially small businesses. As banks tighten lending requirements in preparation for the recession, small businesses are seeking alternative funding sources to sustain their operations.
Understanding the Credit Crunch and Inflation Rates
The current credit crunch has been triggered by a massive shift in the financial position of commercial banks. Rising interest rates and inflationary pressures have put downward pressure on lending, leading banks to prioritize reduced risk and high-quality borrowers over quantity.
Invoice Factoring – A Major Contributor to Business Investment
In this challenging economic climate, invoice factoring remains a major financial instrument for businesses. By converting accounts receivables into immediate cash, invoice factoring helps businesses manage debt costs and maintain their financial positions effectively.
The Role of Federal Funds Rate and Exchange Rates
The fluctuations in the federal funds rate, exchange rates, and average rate have also impacted small businesses’ access to capital. As the rate increases, borrowing becomes costlier, putting additional pressure on companies already dealing with mandatory spending and primary deficits.
The Benefits of Invoice Factoring for Business Growth
Amid the economic uncertainty, invoice factoring offers numerous advantages to businesses. Its quick approval process and freedom from debt make it an attractive option for companies looking to secure funds for business investment and navigate the financial deficit.
About Charter Capital
The ongoing financial crisis and the consequent credit crunch are increasing the rates at which small businesses seek alternative funding solutions like invoice factoring. Headquartered in Houston, Texas, Charter Capital, with over 20 years of experience, continues to provide flexible funding options, including financial instruments and financial products, to businesses across various industries. Competitive rates, a fast approval process, and same-day funding help businesses across various industries secure the working capital necessary to manage daily needs and grow. To learn more about how invoice factoring can benefit your business and to explore different annual rate options, visit charcap.com or call 1-855-602-0841.