Thursday, 17 October 2013

An Ally Who Can Show you the Money

The lending machines are holding back money. The green currencies are gradually vanishing from the business wallets. Sounds like a movie named ‘Nightmares on the Wall Street’? No, there is no such movie actually, but the nightmares could still be there. When the economy is stumbling and struggling to get up like a toddler, the government keeps imposing stringent policies, and the banks are denying loans, then how could we live in a make-believe utopian world? In this economic crunch, you need a friend or ally that will pull you out of this. Here we are talking about the invoice factoring companies to whom you can sell your account receivable invoices and get equal value of cash. This friend of yours will not bite a share of your equity fund, will not even pass over a financial liability to you by giving loan, and neither it will tie you up in a long term contract.

This piece is not being written to make you pessimistic; rather the purpose is to tell you about a helping hand that can pull you out if your business is in the middle of a financial mess. Due to weak revenue generation and lower level of profits by the businesses, banks have tightened up their lending policy and rejecting more loan applications than ever. In that case then, what about the cash flow your business needs to pay off the employees’ salary, buy inventory and incur other operating costs? Don’t worry though. It is still not that much of a reason to have sleepless night. And also, forget about the nightmares. You will business will still rock! A good factoring company is all you need.

For providing invoice factoring services, a factoring firm would just charge a discount fee. You might be wondering what about the invoice amount? You need not worry about that. Once you get the cash against your invoice, you need not pay it back like a loan. The outstanding receivables would then be the factoring company’s due, and they will collect it from your customers after they validate the invoice (s) once the terms like 15, 30, 45 days etc. get completed. So, in the whole process, you will get money by selling your assets (invoices) and not by taking any loan.

Now, during this reeling economy, even if you give extension to your customers on the invoices, you still can manage to tide over financial difficulties if emerges meanwhile. So, you need the ‘fair weather friends’ like the banks when you can have a reliable shoulder to carry you through? You can ask your ‘factoring’ friend using the famous ‘show me the money’ phrase as Tom Cruise did in Jerry Maguire.

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