Finance Growth without a Loan
Small to mid-size businesses are continually faced with waiting 30 to 60 days to get paid on their invoices, which really puts a strain on their cash flow.
Where large companies can usually
afford to wait it out, small and mid-size businesses can’t. This can
have a serious affect on managements’ ability to pay the company
bill or meet payroll. A cash flow shortfall can also affect the
business’ ability to fulfill orders because the cash is tied up in
unpaid invoices.
How can you get business cash without a
loan?
Invoice factoring, also known as
accounts receivable factoring, is a financial tool that allows
businesses to capitalize on the power of their outstanding invoices.
This form of financing is a valuable mechanism to turn your invoices
into immediate cash, enabling you to fund your business operations.
It is not very well known, but invoices from strong credit worthy
commercial clients are excellent collateral, especially for factors.
Most banks will not accept accounts receivable as collateral, but
invoice factoring firms are more than willing to provide you with
financing based on them. In most cases, a factoring provider can
provide funds when a commercial bank cannot.
Why use Invoice Factoring?
The reason many businesses make this
move is to ensure the continuous flow of cash to the business
without sacrificing equity or incurring debt. Essentially,
businesses that use factoring are focusing on having most of the
money now rather than all of it later. It can take time to collect
on an invoice, so when a company finances its accounts receivable,
they are getting their money faster and without the hassle of the
collection process.
In today’s struggling economy, freeing
up working capital through factoring can prove to be vital. Access
to immediate cash can be invested into new equipment, used to pay
bills, or used toward payroll. Of course, the alternative is to
chase the customer for the invoice payment and defer everything else
while the money is tied up in the collection process.
Related Articles:
Improving Cash Flow in Tough Times
Solutions for Small Business Bankers
Small Business Optimism
Small Businesses Can Face Economic Downturns With Confidence
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