Among the most unpleasant challenges to owning and running a business is maintaining the cash flow you require to keep things running as usual, on a daily basis.
Companies facing cash-flow squeeze and slow-paying customers often result to selling their invoices or accounts receivable to deal with their business’s immediate money requirements. Tackling cash-flow challenges in this way is called factoring, and companies that specialize in the buying of invoices from small businesses are called factors.
Using factoring for your business has the advantage that you get money quickly, rather than having to wait for a slow customer to remit payment. Factoring companies usually deliver funds within 48 hours.
In addition to generating working capital, business owners can use factoring to get started or expand their establishment.
Whereas banks and other traditional lending institutions focus on the creditworthiness of a business in determining whether to approve a loan request, factors are swayed by the reliability of the business’s customers. This means that even business owners with low credit scores can sell their invoices and get funding.
Another similar way of generating the capital required to steady your cash flow is through a merchant cash advance, where instead of selling invoices, a merchant cash advance specialist such as First American Merchant hands you the money, which you then proceed to pay back through a percentage of your daily credit card sales
Many merchants choose to go the cash advance way rather than invoice factoring because they get to keep full control over their accounts receivable. Additionally, invoice factoring isn’t likely to be economical for a firm that sends out many small-denomination invoices because of the service fees a factor may charge for handling each individual invoice.
Today, billions of dollars flow through invoice factoring and merchant account companies, many of whom specialize in particular industries, including trucking, construction, hotel and motel, retail and health care.
Among entrepreneurs, these forms of acquiring funding have an upper hand over other forms such as banks, which often require more paperwork, or investors, who may demand a piece of the business.
Achieving steady and comfortable cash flow for your business requires a sound financial mind and a great deal of effort. However, invoice factoring and cash advance solutions can lend you the hand you desperately need to move forward.