While it seems that banks may be loosening the purse strings, for small businesses it seems that it may still be difficult to obtain financing. There are always a variety of reasons:

• Extreme seasonality or multiple
  operating cycles
• Out of trade territory
• Cash position on the balance sheet not being the best

We think this may be the case for the foreseeable future. For small business
owners out there who need cash flow assistance, this does not bode well. So now you need to look to other options.

Other ways to help you raise cash:

• Find an investor.
• Efficiently collect all of your receivables. This is easier said than done. No matter how efficiently you try to manage your receivables, there are just some businesses that won’t pay for 30, 60 or even 90 days. 
• Seek financing through a factoring company. 

What Is Factoring?
Factoring is where you sell your creditworthy receivables or business invoices to a third party known as a factoring company. Invoices are sold at a specified advance rate, which is typically around 80%. Once the invoice is paid, you get the remaining percentage back less any specified fees.

Factoring is a great way to close the gap between when an invoice is billed and the cash is collected. You eliminate the 30, 60 and even 90-day wait time to get paid.

If you’re someone who is a big planner, factoring helps you breathe easy. Your cash flow planning just became more manageable. 

Why Should I Choose Factoring?
We think if you’re a small business owner seeking cash flow financing, your best option is to seek financing through a factoring company. Here’s why:

• A line of credit through a factoring company is considered short-term financing, you are not indebted to a bank for a lengthy period of time.
• Obtaining a factoring line is relatively quick.
• Short-term loans don’t always have to cost an arm and a leg. Depending on the type of financing you go after, it doesn’t always break the bank (no pun intended).

Strategies To Make The Factoring Experience More Efficient:
Putting a factoring line in place is a great way to help organize your receivables and cash flow management. Once you have sold the invoice to the factoring company, you have the cash on hand. Here are a few things to make the process a little more efficient.

• Submit invoices from your most creditworthy customers.
• Make sure all of your contact information at the customer is up to date. This helps the factoring company. Most factoring companies have an extensive due diligence process that includes invoice verifications.
• Utilize accounting software. By doing so, your books and records are much more organized.
• If you offer quick pay discounts, either stop offering them or minimize them. By factoring receivables, you’re getting your hands on the cash you need. We recommend this because we’ve seen customers take the discount even when they are not paying in the required time frame. 

To run a business successfully, cash flow management is vital. Obtaining financing through a factoring company is a great way to help manage your cash flow. Best of luck!

Need a little more info on selecting the right factoring company? Download Factoring Companies: Choose The Right One. This free tip sheet describes how to pick the right factoring company for your firm.

You can always call 888.833.2286 to speak with a Cash Flow Consultant today!