What’s stopping you from growing the business you’ve recently established? If you’re like most startups, then the answer might be financing. The good news that there are plenty of information technology financing options for IT solutions and Cloud Service Providers (CSPs).
Depending on the lender you work with, you can even receive funding for your startup within 72 hours. After that, you can receive funds on demand. There has never been a more opportune time to grow your IT business than now. The current thriving business environment is built upon investments in the latest technologies. These include software, services, and software as a service (SaaS). This means that businesses specializing in IT solutions are at an advantage, because our world is becoming more digital by the day.
IT Services That Benefit from Information Technology Financing
Information technology financing can benefit CSPs and IT consultants, offering the following IT solutions:
You offer cloud-enabled or cloud-based projects to other businesses that are aiming to beef up their in-house IT. These include setting up firewalls, virtual routers, and management software. Clients can also choose between public and private clouds, or a combination of both.
Hard or Soft Infotech
This type of IT solution is pretty straightforward. Fortune 1000 companies are looking for professional assistance in installing hardware, software, and networking components in their workplace.
Business App Development
Now that the world is going mobile, companies are now looking into developing their own apps. A mobile app will encourage customers to engage and interact more with their brand. If you’re well-versed in app development and maintenance, then this solution is up your alley.
Businesses with certain specializations are much sought-after for their solutions. These include network upgrades, data management, hardware or software development, and business management. If you are offering any of these solutions, then financing can be beneficial for you.
In a market where IT businesses are competitive, it’s best to offer services that best fit your skills and strengths. That way, you can have more confidence in selling your solutions to clients and companies.
Information Technology Financing: Using Invoice Factoring or Discounting
When it comes to technology financing, you might immediately think of business loans. Loans are available for startups like yours, such as SBA loans. This type of loan requires you to follow a comprehensive list of requirements though. Not to mention, it might take a few months before you actually receive the funds you need to grow your business. After receiving the funds, you will also have to be aware of the loan terms while paying the loan.
Information Technology Financing Through Invoice factoring
Invoice factoring is another financing option, and a popular one among CSPs. Factoring is not a loan: rather, you’ll be selling your invoices to a financing company. You will sell these invoices at a discounted rate to receive 70% to 85% of the total invoice value. You can then use this amount to grow your business.
Take not that the financing company will own these invoices. It will be paid for directly by your clients once they’re due.
This discounted price, also known as the factoring fee, can be between one and five percent. It will all depend on the amount of your invoice, along with your client’s creditworthiness. Your sales volume is also considered when selling your invoices.
Unlike loans, factoring allows you to get approved much easier and get cash much faster. You don’t need to worry about collaterals and other requirements typical of a loan. Keep in mind that some factoring companies might charge high fees. This is typical in exchange for their services.
Your clients’ credit scores will also play a role. And whether you’ll receive funds will depend on their creditworthiness. More importantly, some financing companies directly collect your invoices from clients. This means that you may lose control over them.
Invoice discounting is another financing option. It works very much like factoring, but with several notable differences.
First ,with invoice factoring, you can choose which invoices to sell, and you can determine when to sell them. With invoice financing, you obtain a loan against a basket of invoices. In other words, the invoice financing company is indifferent to the individual invoices you finance.
Another difference is in the amount the financing company offers. Typically a loan against invoices (i.e. financing), is about 60-70% of the total amount of invoices. This is lower than with factoring, which can go as high as 95% but usually starts at 80%.
Yet another difference with invoice discounting is that you as the business collects the payment, not the lender. With factoring, the factoring company collects the payment from your customers instead. You can opt for financing instead of factoring, if you do not want your clients to be aware of the arrangement.
Receiving the funds for either type of financing options can happen within 72 hours. This is ideal for startups if they want to start new projects right away to grow their business. There are lenders who also take the credit risk for low credit-worthy clients. This is on a case-to-case basis though.
Choose the financing option you think is best for your startup. For more information, get help from the funding experts here at LendingBuilder.