Boost Growth with Small Business Factoring

Many small businesses are launched without enough operating capital. Between unsteady sales and customers paying more slowly than planned, entrepreneurs are often left without enough capital to sustain daily operations.

Business owners who extend credit to customers often run out of money to continue operations due to intermittent sales declines. Failing to do adequate long-term planning or rapid growth can lead to time spans without enough capital to continue daily operations.

Owners should know that net 30 day invoice terms will not mean customers will fully adhere to these terms. Good paying customers may pay within 40 to 50 days, while slower paying customers may take up to 75 days.

Start-up businesses offering credit terms can plan effectively by acquiring 120 days of working capital before beginning services. Working capital will include four months of cash for payroll, inventory, and other fixed expenses. A good four-month projection can be calculated based on the total cost of goods and fixed expenses along with planned sales.

Adequate planning can counterbalance decreased cash flow, but another good alternative called invoice factoring exists. Businesses experiencing growth while providing services to credit worthy customers can use this financing method.

Some additional benefits of small business factoring include:

• Factors advance cash quickly. Accounts can be set in 3 to 5 business days, and funds on future invoices can reach your account within 24 hours of submission.
• Factoring firms purchase your invoices and can advance up to 90 percent of their value.
• Factoring fees are determined by your industry and the value and volume of your invoices.
• Financing decisions are based primarily on your customers’ credit scores.

Small business factoring can be done most efficiently when businesses are free of liens, however, factoring companies can negotiate with banks to release assets for other forms of financing.

Small business factoring can help foster your company’s growth by supplying you with enough working capital to make payroll, meet operating expenses, and pay vendors early to receive discounts.