Keeping up with ongoing business expenses can be strenuous sometimes. You may not be able to pay these expenses on time as you wait on payments coming from your customers. Waiting for payments is not an ideal way of handling your cash reserve. Rather this could result in losing business, thus putting your business plans in jeopardy. Hence, the best solution to this continuous waiting is to generate steady cash flow by factoring your invoices through accounts receivable financing.
Regardless of the size and nature of your business, if the invoices are continually outstanding, it will be difficult to move your business forward. Both start-up and established businesses need to be cash ready to ensure growth, and no business wants to dilute its equity or incur a debt. Having sufficient cash flow is important to stay competitive in the market. Instead of waiting for the customers’ payments, you can convert your invoices into quick cash. For that purpose, accounts receivable financing is an ideal option for short term payment obligations.
One way to stay competitive in the options you offer, while avoiding these payment delays is by using account receivables financing. Account receivable financing is a form of asset-based lending which enables you to convert your accounts receivable into cash. Account receivable financing can be a great alternate financing option for your business to overcome cash crunches due to money tied up in outstanding invoices. This kind of financing not only helps the businesses to sustain itself, but also encourages that business owners develop and pursue new business strategies.
Usually it takes around four business days to sign up as a new client and receive funds, (and 24 hours for subsequent transactions) as an advance after verifying the invoices from the client’s customer (s). A factoring company can pay an advance amount up to 90% of the invoice value, and deducts a discount fee between 2.5% and 7.0%.
Following are the additional benefits that you can get through factoring:
• Can invest in buying equipment and hiring people.
• Spend on new marketing campaigns.
• Can provide more credit terms to your customers.
• Will be able to pay your suppliers on time.
Invoice discounting or factoring enables businesses to keep themselves current with operational obligations by reducing cash-strapped situations. It also improves the credit rating of the businesses.