How to get over your Cash Crunch in Four Days!

Sometime in September last year, I remember watching a news report on Fox Business News. There was a gloomy discussion about the funding issues faced by  small businesses. A survey was conducted by a leading financial institute, which says that these businesses were struggling to keep sufficient cash reserves in almost all the levels. Their customers were also demanding longer payment terms. The survey also confirmed that 78% of the small businesses actually gave payment extensions to their customers. If your business is stuck in a similar rut, you may be better off taking a different route to overcome it. You can get over this financial crunch with the help of accounts receivable financing which is convenient and straight forward, sometimes in as little as four days.

Giving payment extensions to customers means, your outstanding receivables will no be paid until the end of the usual invoice terms like 15, 30, 45, 60 days after a sale. Additionally as you are aware in a tight economy customers take even longer to pay as they also see you as a financing source for their cashflow situation.

Almost a year down the line, the situation has not got any better. The credit environment is still tight, and small businesses are still trying to cope with this by trying to find a way out of their working capital cash crunch. But there is still hope. If necessity is the mother of invention, then adversity leads to innovation.

Selling your invoices as an alternative funding method will help you through this cash crisis phase, and eventually make your business thrive. These invoices can easily get you the funding you need through Invoice Discounting with any factoring company. You may have less than perfect credit credit history, or you may be a start-up, but these may not be obstacles, since a factoring company is mainly concerned with your customers’ credit worthiness,  than it is about yours.

Now, you need not wait for your invoices to be paid by your slow paying customers, just turn to a factoring company and get the cash in as little as four days. Sometimes in subsequent transactions some companies are able to fund in 24 hours. There are even some companies that charge no fees with the exception of the discount fee. This is a nice feature, as I am sure you know finance companies in general have a habit of charging extra fees on everything or any situation.

So yes you can get much needed cash in as little as four days by using the technique of Invoice Discounting or accounts receivable financing to stabilize your financial situation and grow your business even during this slow economy and tight credit market. So, move on from a reeling business to rolling your business!

No One to Turn to for Cash? Go for Factoring

Are you looking to broaden the activity-based management to fine tune your business’ resources and operations? Are you unable to get ahead since you are having a cash flow shortage? This is a typical ‘cash strapped’ situation that small businesses often face. An organization’s current cash flow reflects its financial health as well as determines its short-term capability, including paying employees’ salaries, bills for office maintenance and other operational expenses.  If your business is stuck in a similar situation, you can find a way out by using your business’assets. There are factoring companies that provide accounts receivable financingfor small business to bail them out. The assets are your invoices, against which your customers will pay after the given terms like 15, 30, 45 days, etc. are completed. These assets, and can be sold to get quick cash.

The companies that buy the invoices are called factors. A factor will give out an advance of the invoice amount, usually ranging from 40% to 90%, and the amount will be paid immediately after verifying the credit worthiness of the billed customer. For example a factor advances 70% of a credit qualified invoice to a client, when the customer pays the invoice in full for example in 30 days,  the factoring company remits the balance amount of 30% less the 5% discount fee to the client,  Discount fees usually range between 2.5% to 7%. The turnaround time of a factoring firm is pretty quick (4 days if applying for the first time) and 24 hours on subsequent transactions, whereas a bank will take a long time just to evaluate your application. Most importantly, getting cash through factoring is not the same as taking out a loan; rather it’s like selling your assets to a third party that is responsible for funding directly to your business.

Also, while applying for a bank loan, you may get concerned about your credit history. Banks are hardly approving loan applications from small businesses due to stringent government regulations on lending. While buying your invoices, a factoring firm won’t be worried, even if you have a limited or blemished  credit history. They always more interested in  your customer’s credit worthiness.

Billions of dollars are transacted in accounts receivable through the factoring companies every year. Most of the industries such as manufacturing, telecommunication, construction, wholesale business, logistics etc. are financed by various factoring companies. Some organizations utilize account receivable financing to meet their cash flow needs as a stop-gap measure. Other small businesses prefer factoring to banks to avoid the hassles, paper work and delay in processing.

Small businesses that intend to expand their businesses overseas may find financing through factoring more useful than taking a loan from a bank. Professional factoring firms have extensive experience in dealing with the suppliers or purchasers abroad. So, using factor services could ease the rigor of the international business endeavors by removing the obstacles related to cash flow needs.

The Cash Dry situation of your Business is now a Thing of the Past

Are you tired of juggling your business’ cash flow balances which never seems enough and are always dwindling? In addition to that, the doom and gloom of a slow economy and a tight lending market makes it a double whammy. As small business owner, you need regular cash to keep it afloat. If your regular bank has shown no interest in increasing your lines of credit, then you better take up another route to bring back working capital into your business. For that, you need to choose account receivable financingthat will get your business the cash it badly needs.

You can qualify for A/R financing or invoice discounting even if your business has little to no credit history, negative net worth or a thin margin of profit. A factoring company is more concerned about your customers’ credit worthiness than yours. But in the similar situation, a bank may outright reject your application and that could put your business plans in jeopardy. To get cash, you just have to relinquish your business’ invoices by selling them to a trusted factoring company, which will validate the invoices from your customers and pay you an advance up to 90% of the invoice value. A discount fee (from 2.5% to 7%) gets deducted from the total amount as a charge.

While taking up finance through invoice discounting, you may have a genuine concern about how this could affect your relationships with your customers. You need not worry about that since the factoring company will communicate with your customers in an appropriate way and get validations from them on the invoices. Your positive relationships with the customers will not get affected by this process.

Prior to this process starts, the factoring company will collect the following information from you:

  • Your company’s Name.
  • Type of Business
  • Your Contact Information
  • Information on Your Customers.

The company will also ask for the aging report containing information that reflects the receivable amounts from your customers and the time period (typically 15, 30, 45 days etc.) to pay against the invoices. Post-verification of the invoices, the factoring firm will get back to you within 24 hours, and you can get the advance payment in 4 days after all other due diligence is undertaken. It will be enough to vanquish your cash flow worries.