Tuesday, 19 November 2013

Getting Down to Business With Ready Cash

As I was browsing through NBC News, I found some significant news on the issues small businesses have been facing in the US. It’s indeed a long list ranging from tax burdens, strict federal policies, a poor lending market, political uncertainty and fiscal tiffs to shortage of skilled workers. The small business optimism index is stuck at a stalemate and is showing little signs of improvement. In this scenario, sustainability is in stake for these businesses where lack of capital has cropped up as a major crippling effect on growth. So, business owners need to find a way out to get over the cash crunch. Here, accounts receivable financing or factoring could be an effective solution.

If you are considering taking up an alternate funding option, then it is ideal for your business’ financial health to opt for financing that won’t put additional burden on it. To grow your business, it needs to be stable and have a consistent cash flow to pay the bills and invest in new projects. In this context, you can evaluate your business plan and analyze whether account receivable financing fits your needs. A note to remember is that the more recent your invoices are, the more financing you will get out of them.

So, factoring invoices with 15, 30 or 45 days will have variances in terms of the funding amount. You can get an advance amount, which will be the major portion of the total invoice amount (up to 90%). Usually there is a 2.5% to 7.0% discount fee payable for the factoring services. Factoring uses up your business assets (invoices) to get debt free financing.  Until your business is stabilized, A/R funding is a great way to increase your business’ line of credit. From thereon, you will never have to face the anxiety of paying off the expenses or turn a customer away because you don’t have the cash to fund it.

1 comment:

  1. To make sure that you always make good on your payroll promise, have back-pocket plans in place for times of cash flow lows. That can include things like a business line of credit, factoring your freight bills, load advances or a factoring line of credit. Source: http://www.accutraccapital.com/