Many businesses offer superlative products and services but experience uneven cash flow. Even if your profit margins are great, cash flow problems can negatively impact your business. One solution to this dilemma involves selling your unpaid accounts receivables to a company that provides factoring services.
Here are some reasons why this strategy might be the right move for your company.
Receive Funds Quickly
Applying for a loan or line of credit from a traditional bank is a complex and time-consuming process, whereas the application procedure for accounts receivable financing is very quick and straightforward. Once your application is approved, within a matter of days the factoring company sends you the first installment of about 80 percent of the amount of the invoices. After your clients pay their bills, you receive the remaining 20 percent from which the factoring fee has been subtracted.
Improve Cash Flow
When you factor your accounts receivables as an ongoing process, your cash flow remains strong and steady, and you always have funds on hand to take care of necessary expenses. Factoring also provides you with the working capital to spur further growth. You can purchase inventory, upgrade equipment, hire more employees, or expand into new territories. As your sales increase, so does the amount of funds available to you without the need for a further application process.
Offer Term Payments
Many important clients insist that you offer 30 to 60 day payment terms as standard and non-negotiable parts of their contracts. Getting paid late can hinder your cash flow and prevent you from acquiring new customers and financing business growth. However, selling your receivables gives you the money you need to handle your expenses and remain productive even if you allow delayed payments. Predictable cash flow gives you the confidence to plan ahead.
For more advice on selling your company’s receivables to improve cash flow, get in touch with Steadfast Funding Partners.