Debt Free Financing for Your Invoices

The lending machines are holding back money. Green currency is gradually vanishing from the pockets of business owners. Just as the economy is stumbling and struggling to get back up, the government imposes more stringent policies. Since the banks unwilling to raise your line of credit, there’s no breathing easy in your current cash crunch.

This article is not intended to alarm you, but the purpose is to inform you of a potential alternative financing method if your business is stuck in the “cashflow mud”. Due to a slow economy, the financial crisis, weak business revenue and lower level of profits, banks have tightened up their lending policy, and now they are rejecting more loan applications than ever before. Businesses with good margins are also being treated the same way! What is a business owner supposed to do? Cash is needed to pay employee salaries, buy inventory and pay other operating expenses. Not to worry, no need for any more sleepless nights, your business will survive! A reliable factoring company is all you need to get you out of your financial mess.

Invoice factoring companies are finance companies that will buy your account receivable or invoices and therefore give you the much needed cash. The amount of cash you will receive will depend on the percentage of advance you take on the invoice face value. Advance rate percentages on invoices can range from 40% to 90%. Unlike investment finance companies or banks, an invoice factoring company will not take a share of your equity, nor will they tie you up in a long term contract.

For providing invoice factoring services, a factoring firm will charge you a small discount fee. Remember this is not a loan, once you get the cash against your invoice, there is no need to pay it back, like you would with a loan. Your customer satisfies the obligation to the factoring company by paying to them the full amount and according to the invoice terms in 15, 30, 45 days etc.

In summary this is an innovative way to obtain working capital funding by selling your assets or converting your invoices into much needed cash - and you didn’t even need to take out a loan.

A Single Solution to your Multiple Worries

While going through a business news website recently, found an interesting piece. It contained some information on instant financing and also had examples of some companies and their views. Once such example was about a small IT company that faced difficulties to arrange working capital it needed urgently for buying some computers and expanding their office space a little. Considering their past experience with banks, the company tried an alternate way. It contacted a factoring firm, sold a single invoice worth $40,000 with 30 day term, and received the same amount of cash after deducting a discount fee. This process is known as Spot Factoring or single invoice factoring. Getting finance at that time saved the IT Company from an awkward financial situation.

Instances like this are increasing rapidly since conventional financing has become elusive in recent times. At the same time there has not been sufficient and accurate information about alternate financing, especially for the small businesses. These businesses have been at the receiving end of all the strict financial policies enforced by the government and the banks. It looked like a death trap for the small businesses, but thanks to alternative financing methods like factoring - it has emerged as a true ally for these businesses.

Through spot factoring also a form of account receivable financing methods, you can reduce your receivable payment cycle by selling your account receivable invoice to a factoring company. The company will assume the responsibility to collect the invoice amount from your customer (s). There are other advantages of this factoring as there may not be any setup fees, minimum annual volume fees and typically no long term agreement in Spot Factoring.

More than anything else, factoring provides great flexibility and convenience in terms of when and how you need the funding. Also, a factoring company responses quickly, usually within a few days, where a bank will take months to reply and process your application. Also, relationship building with a factoring firm is much easier since their executives understand the clients’ needs and offer more flexibility. In emergency situations, they can even expedite the funding procedure to help their clients, whereas a bank will outright reject your request. If you still have any inhibition, you can just call a factoring company for an informal conversation or simply put your personal details on their website, and an executive will call you back. You need to clear all your doubts before making a move.