If your business has a cash flow problem, it looks like everything you can do is play the market with ears and hope everything gets better, but financing and factoring receivables can provide the answers you need. This might sound like a term that is fully foreign to you, but it doesn’t have to. This is how it works.
1. Financing accounts receivable actually involves sales of your unpaid invoices with discounts to companies that will take the risk of unpaid invoices. Instead, the company gives you fast cash for whatever you need, whether it is to pay for your employees or order products so you can fill in the incoming big order.
2. The amount of money you will receive for your invoice is very dependent on how old they are. The current invoice is worth more than older. If you have an invoice that is more than three months old, you might not be able to find financing for them.
3. Financing Accounts receivable is a way to leave your collection, basically dialing it to other companies, which frees your own employees for more important activities such as selling or serving your customers. Even though in some cases, financial companies can allow you to manage your own collection because you know your customers better than anyone.
4. You get instant access to working capital, which is important because many companies have capital in the current inventory. If you need fast cash than inventory, this is one of the fastest ways to get it.
5. You do not need to compile a business plan or provide a tax statement to the financing company. All you need is a pile of unpaid invoices, which is then forwarded to the Factoring Company Invoice. In some cases there is additional information needed but especially the approval process surrounding the feasibility of your customers’ credit, so that financial or business history is irrelevant.
Of course you must always consider the option every time your company faces a financial crisis. Often you will need a creative path from your problem, and factoring is exactly like that. But sometimes you may need to see other creative financing methods. Before you dive into accounts receivable, you have to ask yourself whether you really need money, and if so, why do you need it? If it is to help your company survive or take advantage of a large agreement that requires working capital, then it must be worth the time you.
Then you also have to consider whether your business is actually ready to develop. If not, then you might want to wait a little before taking advantage of this creative financing method. There may be other creative alternatives that will work better for your specific situation. Before making any major financial decisions, you must check with someone who specializes in creative financing for businesses that have cash flow problems.