The success of any company solely depends on its cash flow. Unfortunately, small and growing companies experience cash flow problems because they are yet to establish themselves in the market and have very few loyal clients. Also, they must compete with the already established businesses by offering credit services to their limited customers to help retain them. When this happens, they often find themselves starved of cash and the reduced financial capability makes it difficult for them to meet their day to day financial obligations and take on new opportunities. To remain in business, they need a reliable factoring company which can provide cash when it is needed.
Well, obtaining credit is one of the options available to cash-starved businesses. However, this option is not available to all businesses; credit rating issues and the high-interest rates charged by financial institutions make it difficult for such small scale and medium sized businesses to obtain credit. So, what options do they have?
Invoice Factoring
A business that holds outstanding accounts receivable can take advantage of such an asset and use it to raise finances. The idea is to assign the right to collect such debts to a factoring firm which in turn releases a percentage of the collectible debt to the cash-strapped company for immediate use. The factoring company waits till when the debt is due for collection and recover their money from these debtors. The rates charged by the factoring companies are usually lower than conventional business loans. They can aid businesses that have their capital tied in accounts receivable. Carter funding corporation is one of the companies that many struggling businesses bank on for quick funding.
When Should Businesses Opt For Invoice Factoring?
Business receivable factoring is a new concept which has been around for about a decade now. It first found its way in the mainstream business during the 2008 financial crisis, which hit the world and almost crippled businesses. Small businesses found themselves with little cash for their day to day operations and resorted to factoring their accounts receivables to make ends meet. The idea was quickly accepted and thus; it has finally become the way of doing business during hard times. Also, it has now become a regular and accepted method of doing business for small and even well-established companies.
Start-ups find it convenient to use this method to curve a niche for themselves. In the first 60 days of doing business, they make sales on credit and take advantage of the services offered by business factoring companies to raise the much-needed money to help them remain in business. Invoices that take too long to mature can easily be sold to factoring companies and avail the cash for business use.
Business receivable factoring is also giving creditors an easy way of dealing with stubborn debtors. When a business realizes that it is becoming difficult to collect debts from its clients or in cases where debtors are not willing to pay because of one reason or the other, it becomes easier for the creditors to hand over the burden of collecting such a debt to a factoring company. It frees the firm and allows it to focus on the core of its business while handing over the burden of collecting debts to a more competent and moderately equipped factoring company. It allows them to plan and transact since they are sure of getting their cash in a matter of hours.
The other way that small and medium-sized businesses benefit from business factoring companies is in cases where they must fulfill a larger order or when they need to invest in equipment to enhance their efficiency and service delivery. They may opt to factor their account receivables to raise the money required to help them fulfill business needs. It allows them to take advantage of opportunities as they arise.
How Can Small Business Take Advantage Of Accounts Receivables?
When you talk to a specialist like Carter Funding Corporation, they will advise on the best option available for your type of business.
In some cases, small businesses have no choice other than relying on invoice factoring companies to keep them afloat. For instance in cases where small businesses find themselves boxed into a corner and are forced to extend credit facilities to customers whose creditworthiness is not known, working with an invoice factoring firm helps such businesses maintain their cash flow. They also gather a lot of information from the factoring companies, which helps them to make frugal decisions especially when it comes to determining clients that deserve credit services and those that do not.
If you are running a small or medium size business, consider working with a factoring company on a regular basis rather than waiting when your business encounters financial difficulties. This way you will not only manage to maintain a smooth cash flow, but you will also build a name for your business. It will help you gain knowledge about the customers you are dealing with, and you are better placed to determine whether they have the ability to pay for the goods or services they procure on credit.
Invoice factoring is a new idea that has quickly become the most used financial service in the modern business world. It serves as a credit insurance to small businesses since it helps to protect them from the possibility of bad debts. It is inexpensive and guarantees instant cash. Learning and familiarizing yourself with how the service can benefit your business can help you move your business to the next level. It is the newest method you can use to protect your businesses from bad debts and unpredictable business environment. Also, it stops the company from incurring unnecessary debts from financial institutions, which is the leading cause of financial difficulties and which can force your businesses into bankruptcy.
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