As 2012 comes to a close, we are fast approaching the holiday season. Everyone’s getting ready to do their holiday shopping, gearing up to devour all that great holiday food and watch football while regretting all that great holiday food they devoured.

If you’re like me, you’re probably also reflecting on the past year. You’re probably also taking a moment to give thanks to the many blessings life has to offer, whether it is health, family, friends or the Dallas Cowboys on Thanksgiving Day.

If you’re a small business owner, you’re probably reflecting on the past year of business. Hopefully you’re a small business owner who does well at planning, with your company consistently generating revenue and with expenses well managed. Ideally you have a good cash position and are retaining earnings. Great business planning like this means you know what bills are due, you are prepared to make payroll and pay your vendors on time. In other words, you really don’t have a whole lot to worry about because your business is a well-oiled cash flow machine. 

This is truly something to be thankful for because so many small business owners struggle with cash flow, making payroll or keeping vendors current.

Even if your business is a well-oiled machine and you always plan ahead for contingencies, you should still have a backup plan in the case of a financial emergency. Face it, sometimes things come up that exceed the most stable cash position. You may have an unexpectedly large order requiring you to purchase more inventory, or a piece of machinery breaks down. These things eat up your cash.

This is where you turn to short-term small business financing. There are several types of small business loans to consider including merchant loans, asset based loans and factoring lines. 

What Is Factoring?

To simply put it, factoring is a form of commercial financing where you sell the business invoices of your creditworthy customers to a third party known as a factor at a specified advance rate (typically around 80%). By financing receivables, you don’t have to wait 30, 60, or even 90 days to be paid, improving cash flow and planning potential. While there are fees to pay for factoring, they are a small price to pay to make sure your cash flow needs are met. 

I have been in the commercial finance industry for over six years and I have seen how factoring lines have helped improve the cash flow for many companies in many industries.

Benefits Of Factoring

A few benefits associated with factoring lines include:

• They are easy and relatively quick to establish.
• In some cases you don’t have to factor every invoice. If you have a large order that may have extended terms, you may just want to consider factoring the invoice for that order.
• Everything is done online and is virtually paperless.
• Factoring is considered short-term financing. It won’t leave you indebted to a lending institution for an extended length of time.

I hope all of the business owners out there who read this give some thought to factoring. Receivables financing really is a great way to ensure your cash needs are met and in the long run makes your cash flow planning much easier.

Fast A/R Funding specializes in helping small businesses bridge the cash flow gap with factoring. Download our informative “Factoring 101” guide, or call 888.833.2286 to speak with one of our small business finance consultants.