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.
Getting loans for businesses has become increasingly difficult in recent times, and it is anticipated to be even harder to get in the days to come. The volatile economy, slumping profit margins and a stiff credit market are making loans scarcer than before. Specifically, if you are a small business owner, you must be realizing how banks are showing indifference while approving loan requests. The latest Federal Reserve Policies are affecting the banks’ lending decisions, and giving out loans to small businesses is not profitable for the banks anymore. Due to this reason, these businesses are likely to bear an additional cash burden due to less availability of loans or lines of credit. To resolve this situation immediately, you can turn to the most viable option called accounts receivable factoring, through which you can easily meet the short term business obligations.
You need to keep in mind that the devaluation of currency, as well as vulnerability in the stock and credit markets will get worse, resulting in tighter credit standards, and non-availability of traditional loans. On the other hand, your customers may be asking for credit extensions beyond the usual 15, 30, 45 or 60 days credit terms. If you agree to their request, it will further delay payments against the invoices. In the interim, small business owners like you have to look for a steady funding option for a constant cash flow without taking on further debt. A/R factoring or invoice discounting can provide your business a much needed source of cash flow for regular business expenses or implementing an expansion plan.
A/R Financing is a great option for business owners to improve cash flow by financing their invoices less a discount fee. You can receive cash in advance of up to 90% of the invoice value that is due from your customers, and meet operational overhead. At a glance, you can get the following benefits from having this instant cash flow:
•Fulfill your working capital needs.
•Meet payroll expenses.
•Extend further credit to your customers.
•Fuel business growth by hiring new staff or implementing new business strategies.
•Clear tax burdens.
Considering the current stalemate in the lending market, you can’t actually rely on banks for financing. A/R factoring can boost working capital reserves to help your business grow continuously without facing any roadblocks. For invoice factoring, you don’t need to have a spotless credit history. Factoring companies approve funds on the basis of your customers’ creditworthiness, not on your business’ or personal credit. If you are still struggling to obtain the conventional forms of financing, then opt for factoring services and see how it can turn things around for you.