Tight Credit? Try Factoring

People go into business for all kinds of reasons, and many of them get quite an education once they've begun the process, learning everything from employee relations to budgeting to crisis management literally on the fly.

Some become successful entrepreneurs, like the Steve Jobs and Bill Gates of our generation, while others succumb to the overwhelming pressure of being one's own boss and knuckle under, going back into the workforce.

The primary reason for small business failure is almost always either lack of sufficient start-up capital or lack of credit for continuing operations or expansion. In times like these, in which access to credit is key and very difficult to obtain, factoring accounts receivable remains one of the most underused and misunderstood mechanisms for maintaining cash flow and stability during stressful periods.

Smart companies have been employing factoring for many years. Essentially, factoring companies provide up-front capital against verifiable accounts receivable. This is especially effective for samll companies dealing as a supplier or vendor to larger firms, which often dictate terms of payment, usually net-30 or or net-60, causing, unwittingly, the small company to suffer a cash crush.

Factoring relieves the cash flow dilemma by providing financing against already completed, but unpaid, projects, and if used wisely, can save a business from failure or help one expand quicker than competitors.

Credit cards: Handle with Care

My lifetime experience with credit cards has been less than satisfactory. Much of the time I used credit cards for unnecessary purchases and later found myself with unwanted payments. Actually, having and using credit cards has negatively affected my credit rating because of a few missteps on my part and some rather dubious practices by the card-issuing companies which I disputed - to my detriment.

My sister, however, 6 years my junior, has fared much better, using credit cards with great discipline, carrying a small balance, using the cards for needed purchases and paying them off within the grace period at no interest. Thus has she achieved a stellar credit record over the years.

Obviously, how one uses credit and credit cards will in a large way determine one's credit rating, which carries great influence in today's highly-leveraged environment.

Credit ratings and records are used in everything from purchasing a vehicle, home, or establishing individual store revolving credit to employment and security screening. It's gotten to the point where three companies - Equifax, Experian and Trans-Union control our destinies to an unwanted degree.

If you are interested in furthering your understanding of credit cards check out Credit Card News.

For information on proper use of credit cards, credit repair and more, see Credit Card Advice.