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Invoice Factoring: Alternative Funding Option in Today’s Economy

Phil Cohen

Navigating the Current Economy

In a recent study, the Commerce Department showed the U.S. economy has slowed down since March, at just a 1.1% annual pace.

Given the last few years, it’s not surprising that the current global economy is facing more unprecedented challenges, like economic slowdowns, supply chain disruptions, inflation, and more.

The economic slowdown is evident in the Federal Reserve’s aggressive attempt to tame inflation with interest rate hikes, with nine occurring over the last year. “The surge in borrowing costs is expected to send the economy into a recession sometime this year,” AP News reports.

With a potential recession looming over the U.S., businesses and consumers alike are feeling the impact. If you’re a business owner, maintaining a healthy cash flow in these uncertain times has become the top priority, no matter your business size.

The Impact of the Current Economy

A recession isn’t something new to the U.S. economy or businesses. In fact, before 2020, the U.S. has been through 13 recessions since the Great Depression. Though the current economic landscape looks a little bleak, there is still opportunity for steady growth if you’re a business owner.  In fact, many startups have been founded during a recession.

A recession isn’t something new to the U.S. economy or businesses. Though the current economic landscape looks a little bleak, there is still opportunity for steady growth if you’re a business owner.  In fact, many startups have been founded during a recession.

How Does a Recession Impact a Business?

A recession can hurt both small and large businesses. A decline in sales, employee layoffs, and bankruptcies are all things that can impact a business during an economic downturn. Larger companies may have a bigger cushion to soften the impact and avoid delinquency or bankruptcy.

During an economic downturn, one of the biggest impacts on businesses is the decline in employees. In the last recession of 2008/2009, drops in employment hit both large and small businesses, but small businesses had a harder impact. The New York Fed reports that “Jobs declined 10.4 percent in establishments with fewer than fifty employees, compared with 7.5 percent in businesses with fifty-plus, while overall employment decreased 8.4 percent.”

How Invoice Factoring is Supporting Business Growth and Stability

Small businesses are more vulnerable than larger businesses during a recession, mostly because they don’t have the cash reserve or assets that could be used as collateral during an economic downturn. However, a small business can still thrive, even in a bad economy.

Alternative funding sources for small businesses can have a positive impact when navigating an uncertain economy. Invoice factoring is a great option for startups or small businesses who are more at risk during a recession. Instead of being denied a traditional bank loan or taking on more debt, invoice factoring can help keep small business afloat by utilizing their unpaid invoices as collateral. As a small business owner, you can factor your unpaid invoices and get an immediate advance on your cash to keep making payroll, take on larger projects, and grow your business.

Benefits of Invoice Factoring in the Current Economy

Invoice factoring is increasingly becoming a more viable alternative to traditional financing in today’s economy. Unlike a traditional bank loan, invoice factoring has a quick application process, fast funding, and is a debt-free form of financing.

Invoice factoring is an alternative financial option where businesses sell their outstanding invoices to a third-party factoring company in exchange for an immediate advancement on their cash. This process allows the business to access the working capital they need and help bridge the gap between issuing an invoice and waiting to get paid.

During a recession, the demand for funds typically increases. This is becoming increasingly important in today’s economic environment with delayed payments and tighter credit situations with traditional banks.

So whether you’re a startup business or you’ve been around for decades, invoice factoring can be an effective solution to your cash flow restraints in times of uncertainty.

Why Work With Factor Finders?

Factor Finders is essentially a factoring broker. We’re the middleman between your business and an invoice factoring company. We have extensive industry relationships and work with some of the best factoring companies across the United States. We do the searching for you, matching you with an invoice factoring company that specializes in your industry and meets your specific needs of your business.

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Phil Cohen

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