Cash flow shortages are a major concern for small businesses even when their businesses are growing. It's because such companies get busy completing new orders, though they get payments after 15, 30, 45 or more days from their customers. It results in lack of working capital to meet current operating costs. This kind of situation is particularly difficult for micro businesses since they usually don't have sufficient cash reserve to tide over the rough weather. In this context, factoring for small business can provide immediate funds offering innovative and flexible solutions to cash shortages.
Conventional lending institutes like banks are reluctant these days to approve loans to small businesses for the following reasons:
• Low or fluctuating profit margins.
• Limited working capital and cash reserves.
• Frequently changing collaterals which are highly volatile.
So, when the banks close their doors, how can a factoring company help businesses during a tight cash situation? It is a rather simple process. You will just have to sell your company's outstanding invoices less a discount fee on their face value. You can sell a single invoice or multiple invoices for this purpose. In return, your company will receive cash from the factoring company in 4 days without having to wait for payment from your customers. The factoring company takes responsibility to collect the outstanding amount from the customers usually 30 or 45 days after invoices are sold and gets back the amount it paid to your company. The entire process is done in a seamless manner without affecting your relationship with your customers.
Once you get cash from the factoring company, you can use the money to fulfill the following operational needs:
• Meeting payroll expenses.
• Paying rent on factory and machinery.
• Buying inventory.
• Investing on upgraded technology for better efficiency.
• Capitalizing on growth opportunities.
• Implementing expansion plans.
You can see how accounts receivable factoring companies help small businesses filling the ongoing cash flow gaps that typically occur when they sell products or services to their customers and actually receive payment. The funds received from the factoring company are used to manage short term obligations that effectively ease a temporary cash-strapped situation.
Factoring companies provide a great benefit to businesses by paying upfront cash advances of up to 90% on the invoices. Due to this, businesses get breathing space and can focus on getting more customers, as well as the freedom to manage and grow their business.
The following are the things you should be looking for in a factoring company:
• The reputation of the factoring company and its work ethics;
• The simplicity of the application process, and the time the factoring company takes to approve the funding request;
• The guidance and support received from the factoring firm;
• Turnaround time between the approval of request and receiving the cash in advance.
• The flexibility offered by the factoring company and its keenness to build a long term business relation.
Once you decide to take up factoring services for A/R financing, you need to choose the right firm carefully. Here, you are looking for a solution for your business' ongoing working capital issues, and the right factoring firm will take care of all your funding worries and get your business the desired stability that it needs.
Conventional lending institutes like banks are reluctant these days to approve loans to small businesses for the following reasons:
• Low or fluctuating profit margins.
• Limited working capital and cash reserves.
• Frequently changing collaterals which are highly volatile.
So, when the banks close their doors, how can a factoring company help businesses during a tight cash situation? It is a rather simple process. You will just have to sell your company's outstanding invoices less a discount fee on their face value. You can sell a single invoice or multiple invoices for this purpose. In return, your company will receive cash from the factoring company in 4 days without having to wait for payment from your customers. The factoring company takes responsibility to collect the outstanding amount from the customers usually 30 or 45 days after invoices are sold and gets back the amount it paid to your company. The entire process is done in a seamless manner without affecting your relationship with your customers.
Once you get cash from the factoring company, you can use the money to fulfill the following operational needs:
• Meeting payroll expenses.
• Paying rent on factory and machinery.
• Buying inventory.
• Investing on upgraded technology for better efficiency.
• Capitalizing on growth opportunities.
• Implementing expansion plans.
You can see how accounts receivable factoring companies help small businesses filling the ongoing cash flow gaps that typically occur when they sell products or services to their customers and actually receive payment. The funds received from the factoring company are used to manage short term obligations that effectively ease a temporary cash-strapped situation.
Factoring companies provide a great benefit to businesses by paying upfront cash advances of up to 90% on the invoices. Due to this, businesses get breathing space and can focus on getting more customers, as well as the freedom to manage and grow their business.
The following are the things you should be looking for in a factoring company:
• The reputation of the factoring company and its work ethics;
• The simplicity of the application process, and the time the factoring company takes to approve the funding request;
• The guidance and support received from the factoring firm;
• Turnaround time between the approval of request and receiving the cash in advance.
• The flexibility offered by the factoring company and its keenness to build a long term business relation.
Once you decide to take up factoring services for A/R financing, you need to choose the right firm carefully. Here, you are looking for a solution for your business' ongoing working capital issues, and the right factoring firm will take care of all your funding worries and get your business the desired stability that it needs.