Small Business Owners – Factoring Can Help Your Finances

If you are one of the more than 25 million small businesses in the US today, then you are now or have or will face of these problems. If you are one of those businesses who doesn’t have any more room on your line of credit, or if you can’t even get one, what do you do?

Accounts receivable factoring can provide an easy way out of all of these. When you use factoring, you are not borrowing money; you are selling an asset. You don‘t increase your debt and you get liquid cash fast!

Payroll
Granting payment terms is an accommodation to customers that often leads to more business. However, matching payment terms to payroll needs is often impossible. This is one of the most common reasons for a company to factor.

Taxes (usually payroll)
Factoring advances can help speed up cash flow and provide immediate cash to help catch up on delinquent taxes and arrearages

New Business
Many small businesses owners do not solicit or decline business from potential new customers that pay in 30 days or longer due to their cash flow restraints. Having factoring in place, gives business owners a powerful tool with which to become more aggressive in their marketing efforts to win new, larger accounts.

Taking supplier discounts and early payment discounts
With a factoring arrangement in place, the business owner can approach its suppliers to grant price reductions for early payments or volume purchases. In many cases, the price reductions may offset or even be greater than the factoring fees.

Inventory purchases and expansion
Factoring doesn’t address this directly, but clearly having freed up working capital can provide more flexibility when volume purchases of new inventory are required or desirable.

Providing working capital in cases of bankruptcy
Factoring is one of the few financial resources available to businesses operating in Chapter 11 bankruptcy, because they are buyers, rather than lenders, helping to enhance cash flow.

Owner buyouts and partnership breakups
When a business must be divided, factoring can provide the surviving partner the liquidity to buy an equity position

Natural disasters
Factoring can bring cash quickly to bear on unforeseen circumstances ranging from floods and hurricanes to “sticky” divorces.

If any of these problems above sound familiar or have you scratching your head for a solution, then an accounts receivable factoring can be just a click away..

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