Pulsing in every business owner’s mind is the thought of growing the business. How do you find more people interested in your product
or service? How to you reach them? Do you
have the personnel to handle the increased volume? And, most importantly, do you have the financial resources to accommodate an increase in new business?

Funding is a key component in any business. Startups and small businesses alike often find it difficult to get the cash they need to grow their business. Banks aren’t interested in offering you any kind of short-term business loans because your business is too new to meet their underwriting criteria or you’re too small of a fish to bother with.

Seeking outside investment is equally challenging. The equity road is a rocky one. There’s no such thing as a benevolent investor. When you receive outside investment, you not only lose a piece of your company, you now have investors to please. The last thing you need is another spinning plate to balance as you try to keep your business on the right track.

Enter The Factoring Loan
The factoring loan is a financial product that is specifically designed for small, growing businesses. Factoring allows you to get cash as soon as you invoice. This resolves the primary cause behind cash flow issues in growing businesses.

Think about your balance sheet for a moment. Focus on cash and accounts receivable. When you make a sale, cash gets used to provide the product or service. You then bill your customer and accounts receivable increases.

When business is booming, this cycle repeats to the point where cash is nil and accounts receivable is at a record high. This makes your revenue numbers look great, but you have no cash. Don’t try to use accounts receivable to pay your employees: it won’t work!

You have to convert your accounts receivable back into cash. This typically happens when your customers pay their invoice. The problem is, when waiting for customers to pay, your cash is tied up for 30 days or more.

A factoring loan lets you turn your accounts receivable into cash as soon as you invoice.

The Mechanics Of Factoring Of Accounts Receivable
To finance your accounts receivable, you enter an agreement with a finance company called a factor. Under this agreement, you assign a receivable to the factor and the factor advances a certain percentage against the dollar amount of the invoice.

For example, you assign a $10,000 invoice to the factor. The factor advances 80% against the invoice, so you receive $8,000. When the invoice is paid, the factor sends you the balance of the invoice minus their fee.

How big of a difference would it make in your business if you could convert 80% of your accounts receivable into cash today?

A Healthy Bank Account Equals A Healthy Business
Improved cash flow from a factoring loan opens new opportunities for your business. When cash isn’t an issue, you are able to hire new talent, pursue new business development, improve efficiency and take advantage of opportunities as they come.

How much better would your business be if you could:

• Take advantage of early-pay discounts.
• Ramp up your marketing just prior to the busy season.
• Buy supplies or inventory in bulk at a discount.
• Make year-end purchases as a part of your tax planning.

You have enough on your plate as a business owner. The last thing you need is additional stress caused by cash flow issues. When your finances are in good shape, you are in a better position to make the right decisions for your company.

Don’t let cash flow issues hold your business back. Be proactive and get the proper funding in place so that you and your business thrive.

Now that you know the mechanics of accounts receivable factoring, find the right factor for your business. Download our FREE Tip Sheet Factoring Companies – Choose The Right One NOW or call 888.833.2286 to speak with a Cash Flow Consultant.