Tag: Startups

Factoring for Startups: A Viable Alternative to Venture Capital
“If you’re starting a business and you take out a loan, you’re a moron,” Shark Tank investor and long-term entrepreneur Mark Cuban says. While his words may come across as harsh or even crass, he goes on to make a fair point: “There are so many uncertainties involved with starting a business, yet the one certainly that you’ll have to have, is paying back your loan.” This is an area that trips up many startup founders and even causes people to pull money out of their own pockets to fund their business. But, there are ways to fund your new business without using personal funds and without taking out a loan. Two primary options are venture capital (VC) and factoring for startups. Below, we’ll walk you through how they work and why factoring is often the more suitable alternative.

Why Business Financing is Vital for Startups and New Businesses

Virtually all businesses require external capital at some point. However, because startups aren’t running at full speed just yet and their revenue has not stabilized, their capital needs are often much greater than established businesses.

Finance a Startup: Covering Initial Operating Costs

Two in five startups that fail simply ran out of cash, CNBC reports. While it’s easy to say this comes down to poor financial management, costs such as product development, marketing and advertising, and administrative expenses can add up. Many startups tap into funding solutions to cover everyday expenses until revenue picks up.

Using Business Financing to Scale a Startup Business

Once the business takes off, the next step is scaling. While this naturally involves increasing expenses related to raw materials or equipment that require capital, startups often find themselves in need of larger facilities and technology to help manage rapid growth. In these cases, business growth funding allows the startup to scale without cutting corners.

Bridge Cash Flow Gaps and Build a Cushion

Cash flow solutions are often vital for startups and established businesses alike, especially those that serve other businesses. This happens when the business invoices customers after work or goods are delivered, then waits weeks or months for an invoice to be paid.

Attract and Retain Top Talent

Startups have to work especially hard to attract and retain talent. While some do this by offering shares of the company, others seal the deal with competitive salaries, hiring bonuses, and perks. This, paired with the costs of finding and onboarding talent, can add to the financial load.

Venture Capital Explained

VC is a type of funding that fuels startups with high growth potential. Around $171 billion is awarded in VC each year, Statista reports. However, funding is down in recent years, with the U.S. showing nearly a 30 percent decline, according to InvestmentNews. Industries like tech, healthcare, and renewable energy, where rapid scaling and large returns are expected, tend to get the most attention from venture capitalists.

Unlike loans or other financing options, VC does not require repayment. Instead, investors provide capital in exchange for equity. In other words, they own a portion of your business. However, this also means they’re usually bringing expertise, mentorship, and connections to your startup in addition to cash.

How Venture Capital Works

VC is very different from other alternative funding solutions, and the full process can take anywhere from around three to six months.

1. Pitch

Startups usually pitch their business to VC firms or angel investors. You’ll need to present a clear value proposition, a detailed business plan, and evidence of market demand and growth potential.

2. Due Diligence

If the VC firm is interested, they’ll dig into your business. This includes analyzing your financials, performing market research, evaluating your team, and doing competitor analysis.

3. Investment

Once they’re satisfied, the firm will provide funding in exchange for equity. There’s usually some negotiation during this stage.

The funding is often released in stages, referred to as rounds, that are tied to milestones. Common rounds include:
- Seed Funding: Generally speaking, seed funding should last your business 12 to 24 months and helps you get your business off the ground. An average deal will be in the neighborhood of $3.5 million and the investor will receive anywhere between 15 and 35 percent of your company’s equity in exchange.
- Series A, B, and C: Subsequent rounds, including Series A, B, and C, each provide a business with anywhere from 12 to 18 months of cash. These phases are designed to help the business scale operations, enter new markets, or develop new products. Deals can provide the business with anywhere from around $20 million to $60 million or more, with each round taking anywhere from roughly ten to 30 percent of the company’s equity.
4. Active Involvement

VC firms often take an active role in your company. They may be involved in decisions, help you scale, build partnerships, and even help you navigate exits like IPOs and acquisitions.

How Startup Business Owners Can Qualify for Venture Capital

Roughly 98 to 99 percent of businesses that request venture capital are denied, Forbes reports. This is because VCs have rigid requirements like those outlined below.
- A Disruptive Idea: Your product or service must solve a significant problem or address an unmet market need.
- Scalability: Your business must be poised for rapid growth. VCs also want startups that can scale exponentially, not just incrementally.
- A Strong Team: Your leadership team’s experience, resilience, and vision are critical. VCs invest as much in people as they do in ideas.
- Traction: While early-stage startups can secure funding, VCs often want proof of traction, such as customer growth, revenue, or partnerships.
Benefits of Venture Capital for Startups

There are a few benefits that set VC apart from other types of funding.
- Large Sums of Money: VCs can provide millions of dollars, enabling businesses to grow rapidly and enter markets.
- Strategic Expertise: VCs often have industry expertise and provide mentorship, which can help shorten the learning curve and help you avoid issues.
- Networking Opportunities: VCs can connect you with other investors, customers, and business partners, which can facilitate growth.
- No Immediate Debt: Since VC funding isn’t a loan, there are no monthly payments or interest to worry about.
Drawbacks of Venture Capital for Startups

Despite the benefits, VC comes at a cost.
- Loss of Control: Giving up equity means investors have a say in major decisions. Some VCs even require a seat on your board of directors.
- High Expectations: VCs prioritize rapid growth and high returns. This can make startup founders feel pressured to scale faster than they’re ready and force them to make decisions that prioritize investor return on investment (ROI) over long-term sustainability or values.
- Rigorous Qualifications: The application process is lengthy and competitive. Many startups spend months pitching without success.
- Equity Dilution: The more funding rounds you go through, the smaller your ownership stake becomes. If your company eventually sells, your payout may be significantly reduced.
Invoice Factoring Explained

Invoice factoring is a type of funding that’s popular with businesses that serve other businesses, especially those that invoice and offer lengthy payment terms. The total U.S. market size is valued at roughly $172 billion annually, according to Grand View Research.

Like venture capital, factoring does not require the business to take on debt. However, instead of giving up equity in exchange for capital, you sell your unpaid invoices to a factoring company for immediate cash.

How Invoice Factoring Works

The factoring process is simple and straightforward. Depending on your level of preparedness and the factoring company you choose, your business can be approved and receive cash in just a day or two.

1. Submit Your Invoice

You provide your factoring company with an unpaid client invoice. The factor then assesses its value and the creditworthiness of your client.

2. Receive Your Advance

Once approved, the factor sends you money immediately. This advance is usually between 70 and 90 percent of the invoice’s value, though it can be more or less depending on factors like your industry and the creditworthiness of the client. The remaining balance is held as a reserve.

3. Receive Your Reserve

Your client pays the factoring company when the invoice is due based on the terms you’ve set with your client. Once the invoice is paid, you receive the reserve, minus a small fee for the service.

How to Qualify for Factoring

One of the best things about factoring is that it’s relatively easy to qualify for compared to traditional loans or venture capital. Let’s review what factoring companies typically look for.
- Creditworthy Clients: Since repayment depends on your clients, factoring companies focus on their ability to pay invoices on time rather than your credit score.
- Invoice Validity: The invoices you factor must be legitimate and free of disputes.
- Industry Fit: Factoring is especially common in industries like trucking, manufacturing, and staffing, where payment delays are common.
- Consistent Revenue: Startups can qualify, though you’ll usually need to have been in business for a few months and have steady invoicing.
Benefits of Factoring for Startups

The unique way that factoring works means it comes with a wealth of benefits for startups.
- Easy Approval: Factoring doesn’t require stellar credit or years of financial history.
- Fast Cash Flow: Factoring typically pays out in one or two business days. However, when you partner with a factoring company like Charter Capital, you can qualify for same-day funding. This makes it ideal for businesses with urgent cash flow needs.
- No Debt: Because factoring is not a loan, it doesn’t add to your liabilities or hurt your credit score.
- Flexible Terms: Use factoring as a one-time solution or on an ongoing basis. You can factor invoices as needed.
Drawbacks of Factoring for Startups

While factoring has many benefits, there are some things businesses should be aware of before signing up.
- Cost: A typical factoring fee can be anywhere from one to five percent of an invoice’s value. While this is a small amount, it’s important to approach it responsibly and ensure you’re receiving ROI.
- Client Interaction: Your factoring company will likely have contact with your clients when verifying invoices and collecting. Be sure to partner with a factor that has a good reputation and a strong sense of professionalism.
- Limited to Invoiced Businesses: Factoring is only an option for companies that invoice clients for services or products after delivery.
- Client Risk: If your clients have poor payment habits, the factoring company may offer terms that reflect the increased risk or decline to factor their invoices.
Key Differences Between Invoice Factoring vs. Venture Capital

When it comes to funding your startup, both VC and factoring offer unique advantages. Let’s take a look at how they stack up.

Ownership and Control

VC requires you to give up a portion of your equity, which means sharing decisions with investors. Factoring does not. If maintaining control of your business is important to you, factoring is the better solution.

Factoring vs. Bank Loan: Which Provides Faster Funding?

From pitch to funding, it takes months to see cash from VC. Conversely, factoring can provide funds right away. If your startup needs funding now or within the next 90 days, factoring comes out on top.

Eligibility and Requirements

VC firms are very selective and look for rapid growth potential. Factoring companies focus on your clients’ ability to repay their invoices. If you’re in a consumer industry or poised for exponential growth, VC might work for you. If you operate a B2B business, factoring will be more accessible.

Cost

While VC doesn’t require repayment, it still comes at a cost—equity in your business. Conversely, factoring comes with a small fee. It’s a transparent and manageable cost that doesn’t impact your long-term profitability. If keeping profits within your business matters more than raising large sums, factoring offers better value.

Purpose of Funding

VC is ideal for large-scale, high-risk initiatives like R&D, market expansion, or launching a disruptive new product. Factoring is designed to address cash flow issues. It’s well-suited for things like payroll, purchasing inventory, or managing day-to-day expenses while you wait for clients to pay.

Long-Term Impact on Your Business

While VC can bring mentorship and networking opportunities, the pressure to grow quickly and deliver high returns can lead to risky decisions that may harm your business in the long run. Factoring, on the other hand, provides funding without influencing your strategy. You can grow at your own pace without external pressure.

Understanding Factoring Rates: What Startups Need to Know

Factoring rates determine how much factoring companies charge when purchasing outstanding invoices from a business. These rates typically range from one to five percent of the invoice amount, depending on factors such as invoice value, industry risk, and client creditworthiness. Unlike a startup business loan, which requires scheduled repayments, invoice factoring for startup companies provides immediate cash flow without adding debt.

There are two primary types of factoring agreements: recourse factoring and non-recourse factoring. With recourse factoring, the business is responsible if a client doesn’t pay their invoice, whereas in non-recourse factoring, the factoring company assumes the risk—but at a higher cost. Startups should weigh the benefits of non-recourse factoring agreements against their higher factoring rates to determine the best fit for their needs.

Beyond the percentage of the invoice value deducted as a fee, some factoring companies charge additional costs for same-day funding, credit checks, and transaction processing. Comparing multiple factoring partners helps startups secure lower factoring fees while ensuring a factoring agreement that aligns with their business funding needs.

Unlike a loan or line of credit, invoice factoring provides fast access to cash by unlocking funds tied up in unpaid invoices, allowing startups to reinvest in operations and growth. Understanding the cost of factoring ensures startups can use invoice factoring effectively as a financing solution without unexpected expenses.

Find the Best Startup Factoring Solution for Your Business

If your startup requires funding and traditional financing, and VC don’t align with your needs, factoring may be the accessible solution you’re looking for. With decades of experience supporting growing businesses and competitive rates, Charter Capital can help you bridge cash flow gaps and build a stronger company without taking on debt. To explore the fit more, request a complimentary rate quote.
February 3, 2025
6 Common Challenges Startup Businesses Face
About a million small businesses launch every year, according to the U.S. Small Business Administration (SBA). More than three-quarters make it to the two-year mark, but certainly not without grit and the ability to overcome the multitude of startup challenges entrepreneurs face. Whether you’re already wrestling with issues or want to prepare yourself for some of the biggest challenges in the startup journey, you’ll walk away with the insights you need here.

1. Cashflow

Poor financial management is one of the leading reasons why startups fail. According to research presented by the National Federation of Independent Business, Inc (NFIB), eight out of ten business failures can be traced back to poor cash flow management. To be clear, this is distinct from profitability. New businesses can be profitable and still fail due to cash flow issues by doing things like failing to collect on invoices in a timely manner or overspending based on their available working capital.

Good bookkeeping is paramount here, particularly if you’re making good predictions about your cash flow. However, you still may find yourself in a bind if you face unexpected expenses or a large invoice goes unpaid for an extended period. Founders can also struggle during periods of rapid growth simply because you’re funding the cost of more orders, additional payroll expenses, and greater overhead with the limited resources you amassed before leveling up.

It’s imperative to have multiple funding solutions to fall back on when this happens. It’s also wise to think beyond traditional lending, as just 44 percent of small businesses that apply for loans, lines of credit, and merchant cash advances receive full funding per the latest Small Business Credit Survey. Consider applying for invoice factoring. It works by giving you immediate payment on your B2B invoices and has much higher approval rates. Plus, you can typically choose which invoices you want to factor, so you can set it up and not use it until you need a cash injection.

2. Partnership Decisions

Nearly 87 percent of nonemployer and 13 percent of small employer small businesses are sole proprietorships, meaning there’s a single person at the helm. Running a sole proprietorship may seem ideal if you’re not keen on involving someone in your business decisions or sharing the profits, but there are advantages to bringing someone else on board. For example, teams with more than one founder outperformed solo founders by 163 percent, according to First Round research. Seed valuations are also 25 percent less for solo founders, which can be a major sticking point if you’re trying to entice potential investors or making a case for other forms of funding.

If you’ve already worked successfully with someone in the past, choosing a partner is easy, provided that person is eager to work with you again. If not, you still have options.
- Connect with other entrepreneurs through local organizations to see if you can find someone who complements your skillset.
- Explore working with investors who have experience and connections in areas you don’t.
- Hire employees who might serve as cofounders and give them the opportunity to demonstrate their skills before bringing them on as an equal.
3. Hiring Suitable Employees

Hiring good employees is one of the biggest business challenges startups face. Unless you’re starting with a major chunk of cash, employee pay is typically going to be lower, there won’t be a swanky benefit package, and work/ life balance is often an issue. Adding to this, the most qualified candidates are all too familiar with the failure rates of startups, which can make them wary of even entertaining a conversation.

Thankfully, you can overcome many of these challenges by highlighting what you can offer good candidates, such as rapid career growth and positive company culture. You may also want to include perks like stock options or flexible schedules.

It’s also worth noting that your earliest people will need to wear many hats and serve specific purposes. Spend time evaluating your business plans and the types of people and skills you’ll need to get to where you want to go, then hire strategically to ensure each person is a good fit for your needs.

4. Fierce Competition

There’s undoubtedly fierce competition in every industry and learning how to deal with yours is key to business success. As a small business owner, it’s easy to get caught up in what each competitor is doing too. You may see one on social media and want to develop a following like they have or invest in product development to outdo someone else’s latest feature.

The thing is, you can’t outdo everyone at everything. Each competitor has distinct advantages that have helped them get where they are. Instead of focusing on what they’re doing well, look more at opportunities they’re missing or areas in which your startup has an advantage over them.

5. Finding Customers

Finding customers fast is key for startup businesses. Your survival hinges on it. But, what can you do when you don’t have a massive advertising budget like your competitors?

For starters, get familiar with your target market. Do research to find out who might use your products or services, what might motivate them to buy, and what stands in the way of them making a purchase. To start, you may want to focus on a group your competitors are overlooking or that you can make a unique case for.

You can also attract new customers through an educational blog. Share helpful information on topics your audience cares about on platforms like Facebook and LinkedIn depending on where your target audience congregates. Research shows it’s equally important for a CEO to have an online presence too. Not only does it build bridges with employees, but will help humanize the brand and it will help with PR concerns, per Forbes research. In other words, just being active online will help address many of the common challenges you face and it’s easy to do.

Ask for feedback as you grow your customer base as well. That way, you’ll learn more about what your prospects are looking for and identify ways to boost loyalty too.

6. Time Management

New startups are demanding and there’s only one you. Plus, you need time for sleep, family, and personal interests. Around 30 percent of entrepreneurs suffer from depression and 50 percent of those who hit that stage wind up with burnout, according to Entrepreneur magazine. Effective time management means giving yourself what you need to feel good and help your business down the path of success too. If you’re coping with small business problems, carving out the necessary time for things like sleep may fall low on the priority scale compared to something like making payroll, but when you manage your time effectively, you don’t have to choose. Consider these quick tips:
- Delegate as much as reasonably possible.
- Let go of the idea of perfection.
- Outsource specialty work, such as bookkeeping and legal contracts.
- Break up your longer projects into small tasks that you can accomplish in one sitting.
- Create a schedule that allows ample time for tasks and stick to it.
Address Your Financial Startup Challenges with Factoring

Find yourself short on working capital due to increased sales, certain times of the month, or during slow periods? Invoice factoring may be the easy-qualify, no-debt solution you’re looking for. Learn more and request a free Charter Capital rate quote now.
October 27, 2021
Top 8 Reasons Why Startups Fail
It’s often thrown around that 90 percent of startups fail. Where does this number come from? Is it legit? And, more importantly, if it is, what can you do to avoid being one of them?

How Many Startups Fail

Sadly, this startup failure rate is accurate. Researchers from UC Berkeley & Stanford came together to create the Startup Genome Report a few years back, which revealed that 90 percent of startups do indeed fail, and it’s most often the result of “self-destruction” rather than competitive issues. While the scale may shift in that regard during difficult economic times, the data is clear. Self-awareness and education can go a long way in creating a stable and profitable company. Below, we’ll go over some of the biggest reasons for startups failure, so you can arm yourself with the tools necessary for success.

Why Startups Fail

1) Good Idea, Bad Business

Many small business owners and startup founders start out with a fantastic idea they’re sure is going to take the world by storm but what they envision people wanting during product development and what people genuinely desire aren’t always the same. After postmortems with 101 startups, CB Insights found that 19 percent of companies failed because their products were not user-friendly.

This is theoretically an easy fix if you’re actively requesting feedback from early customers and taking what they have to say to heart. However, 14 percent of failed businesses don’t hear their customers out, and seven percent don’t even try to pivot when they need to. A further ten percent don’t pivot well.

“Startups that pivot once or twice raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all,” say Startup Genome Report researchers.

The bottom line: Listen intently to your customers and be ready to pivot and compromise to meet their needs.

2) Expanding Too Quickly

It’s easy to think of expansion in terms of adding more shops or products, but the Startup Genome Report lists several areas in which businesses may expand too rapidly.
- Customer- Spending too much on customer acquisition and/or overcompensating on lack of demand with marketing and press.
- Product- Building a product that doesn’t solve a problem, focusing on scalability before product-market fit, and/or adding features that are desired, but not needed.
- Team- Hiring too many people, bringing in the wrong mix of people/ levels, and/or having more than one level of hierarchy to start.
- Financials- Not having enough cash on hand to handle expansion and/ or having too much cash, which can result in undisciplined spending.
- Business Model- Not having a business model, focusing on profit too early, failing to pivot, and/ or failing to examine goals and progress.
The bottom line: Map out your own business plan ahead of time with clear benchmarks and metrics to meet. Schedule regular progress audits.

3) Lack of Market Demand

It’s easier to have a disconnect between product and consumer than one might think. “We had no customers because no one was really interested in the model we were pitching. Doctors want more patients, not an efficient office,” reported a patient communicator in a CB Insights postmortem. In all, their analysts found that 42 percent of startup failures involve a lack of market demand.

The bottom line: Get to know your audience before launch and identify their pain points. Don’t ever assume you know what they are.

4) Poor Marketing

Many startups are so passionate about their product or service that they expect word-of-mouth marketing to create sales. The reality is, their audience may never even learn they exist. Others recognize the importance of marketing, but don’t have the systems and people in place to effectively handle marketing strategy, eventually hitting a wall they can’t overcome. Per CB Insights, issues like these contribute to 14 percent of startup failures.

The bottom line: Have someone with marketing expertise on your team even at the early stages to help identify your target audience and how to reach them.

5) Lack of Passion

There is no denying entrepreneurs are a passionate group, but this passion can become all-consuming and kill work-life balance. Harvard Business Review reports that virtually all entrepreneurs say they experience some degree of burnout, and a full quarter define it as “moderate burnout.” As burnout sets in, passion dies down and so does the small business.

Other times, business pivots take the startup in a direction the founder never expected. As the creator of a blog commenting system explained to CB Insights, “We didn’t really care about journalism, and weren’t even avid news readers.” This light-bulb moment occurred only after the product was launched, leaving the team to run a new business they had no interest in.

Issues like these are present in nine percent of failures, per the postmortems.

The bottom line: Pace yourself and be ready to move in new directions or bring on people who are passionate about what you do if it shifts.

6) Poor Management Team

Nearly a quarter of startups fail because they don’t have the right team, while 13 percent fail because of disharmony among the team and/ or investors, per CB Insights research. All too often, this comes down to the management—people placed in managerial roles who may not have the skills and experience to manage teams but do so because startup culture requires team members to wear many hats. Unfortunately, bad management spreads poor morale and damaging practices, which can infect the entire company.

The bottom line: Ensure your managers have the skills and experience necessary to lead a team. Invest in training if you’re promoting from within or bring on external help if your existing team is unprepared for the role.

7) Not Placing Enough Emphasis on Customers

Ignoring your customers and what they have to say is a huge contributor to startup failure. User feedback is a vital part of the startup journey and should be prioritized throughout your business journey. Whether the feedback you receive is good or bad, you should always take it seriously. Good feedback tells you what you should keep doing within your business, and bad feedback gives you insight into what needs to change within your business. By keeping an eye on what attracts customers to your business and what deters them, and adjusting your business strategy accordingly, you can improve your potential client base and create a network of loyal, repeat customers.

The importance of customers is not just about retaining and attracting new clients. Another common reason for startup failure is that business owners assume that, because they build an interesting website and have a good product or service, customers will come flocking. They forget to take into consideration the trust cost of acquiring the customer (CAC). Contrary to what many people assume, the cost of customer acquisition is actually higher than the lifetime value of that customer (LTV). You need to figure out a realistic CAC and then determine an actionable strategy to ensure that you acquire your customers for less money than they will generate.

8) Running Out of Cash

Close to one-third of businesses run out of cash, CB Insights analysts say. Some of this boils down to not having enough cash to begin with or failing to recognize the high costs of business development, but other times, it’s simply mismanagement of cash or struggling with cash flow issues, like slow-paying customers.

The bottom line: Secure the funding you need in advance and have a backup plan to bridge the gap in case cash issues emerge.

Get the Cashflow Your Startup Business Needs

Whether your startup is light on working capital, is coping with growing pains, or needs funds to pivot, Charter Capital can help and contribute towards a profitable business. By leveraging invoice factoring, your company can get paid for its outstanding B2B invoices instantly—no more waiting on customers to pay their bills. Learn more about how invoice factoring works or contact us for a complimentary rate quote.
September 28, 2020
Texas’ Strong Economy, Pro-Business Attitude Make It a Top State for Truckers

Keep on truckin’. That’s the message the Lone Star State sends over-the-road owner-operators looking to make it big in the transportation and logistics business.

In 2016, more than 3,000 trucking industry professionals throughout the U.S. were surveyed to determine the best and worst states to own and drive a truck. The survey revealed Tennessee as the nation’s best for truckers, with California “raking the leaves” at the back end of the convoy.

The survey factored several items to determine its rankings. These included cost of overnight parking, fees/regulations, if location in the U.S. mattered, and how friendly states were to drivers. Texas finished a solid fourth in the best state’s derby. Were there to be another survey, it’s likely the state could finish higher thanks to the state’s “put the hammer down” pro-business attitude and economy.

Texas benefits from a strong economic base that often booms when times are good and weathers slow times better than the rest of the nation. This creates and sustains demand for consumer and industrial goods and products, goods and products that must be transported over the road. Small trucking companies have plenty of opportunities to compete for these loads, even outfits new to the market. In addition, Texas is home to three of the nation’s largest cities and one of America’s biggest ports. It’s no surprise that Texas cities ranked among the Top 10 in several freight transportation categories in a 2018 trucking survey by DAT Solutions.

The Lone Star State also has a business-friendly agenda. This means fewer laws and regulations that add to costs, sap cash reserves and make doing business harder. These include complex labor and environmental laws that can be burdensome for trucking companies of all sizes, but smaller ones in particular.

In 2018, Texas won CNBC’s annual Top State for Business in America award. It was the fourth time Texas has won top prize in the award’s 12-year existence. Texas Gov. Greg Abbott explains:

“When given the freedom to aspire, Texans risk their own capital and invest in themselves and others by opening businesses large and small. And success is contagious. New business formation in Texas is at a five-year high. Start-ups are growing here right alongside Fortune 500 companies and more than 2.6 million small businesses. It’s no surprise that Texas is ranked by CEOs as the best state for doing business, now for the 14th year in a row. As one Texas entrepreneur puts it: ‘If you like big ideas … build your business in Texas.’”

Meanwhile, Texas placed third in a similar Forbes magazine survey of best states for business.

Texas’ low business taxes and lack of an income tax make it an attractive place to open a business of any size. It’s a top state in terms of access to the capital a business like a trucking outfit needs to expand and grow.

Texas is a big place with tens of thousands of miles of highways. The state has invested heavily in infrastructure and roads in both rural and urban areas. Better and less congested roads make a trucker’s job easier.

Whether you’re eastbound and down, westbound or any other direction, Texas should rank high on your list of places to locate a trucking firm.

Once you’ve set up shop in the Lone Star State, you may find you need to add employees, buy new equipment or improve your cash flow. If so, consider invoice factoring. Invoice factoring allows you to “sell” your accounts receivable invoices to a factoring company. The factoring company pays you upfront for outstanding invoices, giving you the cash you need today to run your business, and eliminating the worry and hassle of slow pay collections, leaving you free to run your business. Invoice factoring is a convenient alternative to a traditional bank loan or fee-laden online loans and risky crowdfunding. Each of these sources require a long-term contract. Factoring, however, gives you the money you need when you need it with no long-term obligations. You can also get cash quicker through invoice factoring – usually within a day or two. If you would like to learn more about how invoice factoring works and how it can put your cash flow into the fast lane, simply call toll-free 1-877-960-1818 or email [email protected].

May 6, 2019
Trying to Build a Successful Small Business? Look Past Niches and Fill Gaps Instead

Trying to Build a Successful Small Business?

Like the countless number of stars in the night sky or grains of sand on a beach, there is an infinite number of ways to build a small business. The challenge for you, the business owner, is to identify the strategy, compile a business plan that best fits your personality and company, and follow it through to a successful conclusion.

One of the most popular and well-known strategies for start-ups, of course, is to find an unfilled niche in the marketplace and make it your specialty. Many successful entrepreneurs have followed this path to profits and success. But it’s not the only strategy out there. Today, we’re going to look at another strategy you may want to pursue.

Even the best and brightest small business owners seldom achieve success all on their own. Somewhere along the line, they had some kind of help or a business partnership that enabled them to overcome a difficult challenge or allowed them to make a breakthrough that enabled them to be the successful business owners they are today. For instance, many growing businesses struggle with slow-paying customers, and that leaves a cash flow gap which makes it difficult to cover daily needs and scale. At Charter Capital, we help businesses fill that gap by accelerating cash flow through invoice factoring with tailored services for specific industries. Our oilfield factoring services, for instance, help oil and gas service companies. Of course, funding is not the only challenge businesses face. Every company, no matter the size, has a gap they need assistance with. One way to guide your small business to ultimate success is to make it your mission to identify that gap and develop new ideas to fill it for your target market.

Bill Gates, the co-founder of Microsoft, is certainly one of the most successful small business entrepreneurs of all time. His company has products found on virtually every computer and electronic device in the world and his innovation is world-renowned. But as big as the company is today, it started quite small. What started it on the road to its current level of dominance is the strategy it used to get going. Gates didn’t start out with Windows 10 or MS Office. No, he started by filling larger organizations’ gaps. Gates built relationships with these larger computing companies, learned they had areas where they needed help, gained their trust and provided a valued service and expertise. In Gates’ particular case, it was providing software for computing giant IBM that was an important factor for building his personal success.

At the time, IBM was THE world’s computing giant. There was IBM, and then there was everyone else. To think that IBM had any kind of computing or programming need that they couldn’t fill on their own seemed laughable. Yet Gates, who was essentially a nobody at the time, took the chance, asked the questions and built the crucial trust-based relationships that enabled him and his fledgling Microsoft to be the company that would fill the gaps in IBM’s personal computer business. Without taking advantage of that opportunity and those relationships, the world of computing might look far different today.

To achieve success and build a profitable business, then, is to constantly be thinking of partnerships. Think of partnerships not that can just benefit you, but of partnerships where both sides can aid one another and learn valuable lessons from each other. Yes, Gates received valuable work, contacts, assets and references he later turned into a multi-billion-dollar corporation. But Gates also learned things from IBM and, in turn, IBM learned some things from him. Their partnership was a two-way street. When you have a relationship and a partnership like that, no gap is too large to overcome for you and your team member to run a successful business.

March 26, 2019
Three Things That Can Hinder Business Growth

Selling to other businesses on credit terms?

Is this hurting your cash flow and hindering your company growth?

Achieving and maintaining an effective and flexible cash flow is essential to the success of your business – particularly if you sell on credit terms. But, all too often you can find yourself facing a long wait for payment – an unwelcome strain on your cash flow – while chasing payment, which wastes valuable time and resources that could be more profitably employed elsewhere.

Our invoice factoring services can help you fund, manage, and protect your invoices, unlocking the power of your accounts receivable and freeing up valuable time, resources, and cash.

Many companies have realized the benefits of factoring their invoices in order to establish a long-term positive cash flow solution for their business. Factoring is nothing more than selling the invoices at a discount to a third party (Charter Capital) in exchange for immediate payment. In return, companies can heal their cash flow pains almost overnight, enabling them to put more money back into their business, maintaining their operation and capital for growth.

Improving Business Growth Through Strategic Resource Management

In today’s competitive market, small business owners and entrepreneurs must navigate numerous challenges that can hinder business growth. It’s not just about managing cash flow or implementing the right business plan; it’s also about understanding every aspect of the business, from customer research to strategic planning. By focusing on efficient resource management, businesses can gain valuable insights into their target market, allowing them to make informed decisions that align with their business goals. Effective use of business resources, coupled with a keen eye on market trends and customer needs, enables small businesses to evolve their business models, ensuring sustainable growth. Strategic planning goes a long way in identifying potential competitors and clients, while also pinpointing the ideal customer profile. This approach not only maximizes profitability but also ensures that every entrepreneur is ready to take their business to the next stage of growth. Whether you’re just starting out or looking to expand, focusing on the right strategies, hiring the right people, and maintaining alignment with your company’s growth objectives are crucial steps toward building a successful business.

If you would like to know more about how our services could help your business, please contact us at1-877-960-1818

April 25, 2018
Small Business Street Smarts

Small businesses often fail to grow for lack of funds to cover short term working capital needs, not because business is bad! The biggest challenge faced by most small businesses is how to fund the growth that makes owning your own business a worthwhile endeavor. Once a business is up and running, cash flow issues, funding growth, dealing with the natural ebb and flow of the sales cycle, become the daily issues that can potentially undermine the financial future of the business. Traditionally, start-ups use a small business loan, as seed capital, which remains an ideal, low risk approach. Private investment is another common, but more costly, route for small business to take in business capital. Regardless of the merits to either source of funds, when does it make sense for small business to use alternative sources of funding, like Invoice Factoring?

There are many reasons why traditional bank financing may not be a good option for you. The loan application process can be long and cumbersome. The delay from the time of submission of the application to loan disbursement can be substantial as well, putting extra constraints on your ability to timely pay your operating costs. In some cases, you may not be creditworthy, or you may have used up your available credit limit, or you may have too much trade and other debt built up in your business.

In the case of private investment, capital cash injection is given in exchange for equity in the business. This type of investment can take various forms, but it will ultimately end in diminished equity in the company that you worked so hard to build. While more often used by large corporations, the costs associated with private investment are more seriously felt by small businesses, especially in situations where there is only one or very few owners involved. Private investment usually demands ownership rights which dilutes the value of ownership shares and usually creates a situation where the private investor has a preferred status relative to the original owner and priority in terms of getting repaid. Additionally, it usually results in a lack of control over the decision making processes relative to the demands of the investor and the capital invested. These hidden costs need serious consideration.

So, how do you finance an unexpected opportunity to double your sales? Given any opportunity to meaningfully increase your sales, how do you manage, especially when you know that your customers will expect customary payment terms? Making application for a new or expanded bank line of credit can result in long and protracted negotiations. If the banker decides your desire or ambition to grow is too aggressive or financially risky, then where do you turn? If you have no or limited availability to draw on a traditional line of credit, then you will most likely miss the opportunity to increase your sales. The time it would take to acquire capital from a private investor is certain to be even more protracted and costly. Well, this is a good example of when you should consider an alternative funding source like “Factoring”. Factoring is the financing industry term used to describe the sale of accounts receivable (open invoices) at a discount from their face value. It may not sound common, but over $1 trillion in sales is factored worldwide annually. In the United States, there are many independent finance companies that offer Factoring. Some banks even have Factoring divisions. In modern times, Factoring has become a champion of small business and an ideal alternative to a bank loan or private investor funds.

Factoring involves the sale of accounts receivable at a discount. Essentially, you sell your receivables (open invoices that are due to you from your customers) to a “Factor”, who discounts the value of them and pays you in advance of actually collecting payment on the receivables. The discount taken by the Factor generally ranges from 1%-3% for invoices collected in the normal course of business. Essentially, the Factor is providing you with funds, not on the basis of your creditworthiness, but on that that of your customers. So, even though your borrowing profile may not be ideal for a bank lender, as long as your customers are creditworthy, you can leverage that to establish a factoring line and obtain funds from a Factor.

For example, you may be a start-up, hotshot delivery service, but your customer could be Baker Hughes who may take 40 plus days to pay your invoices! You may not be a good prospect for a bank loan, but you may be an ideal prospect for factoring! AND, here’s the wonder of factoring, you do not take on the burden of bank debt, nor do you dilute your equity. Yes, you incur an expense in the form of a discount fee, but the expense does not come out of your pocket upfront and should be viewed as a cost of doing business. The simple truth is that factoring allows you to fulfill your main goal of getting financing in a timely manner and enables you to take advantage of a growth opportunity that you otherwise would lose. The same line of reasoning works for generating cash to support your ongoing business operations. Like most businesses, the majority of your cash is tied up in receivables (open invoices). Regardless of whether your need for funds is for payroll or inventory or other critical operating cost, factoring is an ideal way to get funds to cover it.

Establishing a factoring relationship with a Factor should be relatively simple. Remember, the Factor is mainly concerned about the credit worthiness of your customer accounts. So, in comparison to the underwriting process that a commercial bank is obligated to undertake when considering a loan, relatively little or no emphasis is placed by a Factor on approving you for a factoring line. Generally, you are required to authorize the Factor to take a priority security interest in your receivables. In considering factoring, if you have inadvertently pledged your receivables to a bank in connection with a loan for inventory or equipment, then all that would be required would be that the bank release its security interest in the receivables.

I think what you will find most surprising is that factoring is highly endorsed by financial professionals, including banks. Business clients have many needs, and good advice, be it from lawyers, accountants or bankers, should be enlightening. The disclaimer offered by most is that Factoring is more costly than traditional bank financing. This is true due to the effort expended by the Factor to ensure the receivables are collectable. Although, factoring may be more expensive, it is generally considered a short-term (6 months to 2 years) funding solution for small businesses. Factoring essentially enables a business to grow and buy time until it qualifies for traditional bank financing. Traditional bank financing and private investment are the irreplaceable cornerstones of corporate finance. The challenge is getting to the point where you can truly benefit from their value. Regardless of business size, from small to large, factoring should be considered as an alternative to private investor funds and traditional bank financing.

June 10, 2014