Wednesday, August 5, 2009

Using Factoring Can Save Your Business

By Gregory Gorahm

For a number of small businesses, factoring has become a way to give them much needed liquidity, which can indeed be a blessing. In this way, they can make much-needed purchases and even make payroll when they have to, even if money is tight.

Accessing liquid funds is probably the most important aspect to this type of funds acquisition, which is factoring. Without cash flow, you as a business cannot survive. This is in fact a fact of life when it comes to running your own business. You have to have access to cash liquidity, and if you don't, you can become insolvent very quickly. Once this happens, you may risk having your business collapse.

Of course, many people say you can simply borrow as a way to get out of such problems, but it may not be a solution for many. That's because a lot of businesses may have exhausted the borrowing power they have, so that they can no longer get financing of this type. And because of this, their access to cash seems to be completely cut off. However, invoice factoring is a new concept that may offer a business the opportunity to maintain cash flow and therefore remain operational.

How does it work? It's really pretty simple, and a lot simpler than many people realize it is. A company sells cash receivable receipts to an invoice factoring service for a fee. With this step, they can receive immediate payment, and they get immediate liquidity. There are very few hoops to jump through or hassles involved with this type of program. Simply, one can sell off the sheets and make payments.

Here is a basic example of how factoring works. An accounts receivable sheet may state that a company is owed $500 from a customer. The customer general settles payments on the first of every month. This customer is completely reliable and always pays on the 1st. However, the first may be two weeks away. As a result, the business will go to a factoring service and sell the invoice for $485 cash. Then, when the first arrive, the factoring company will receive the full $500 payment on the invoice. Yes, it is as simple as that and the business receives an immediate liquid payment. Certainly, this is not a bad deal for a company in need of quick cash flow infusions.

The numbers of benefits that can be acquired from this type of program are quite vast and varied. The most obvious is the ability to acquire liquid cash when financing options are limited or non-existent. And, also, the fact that the money can be infused without interest or excessive fees is another significant plus. When a company needs cash it needs it free and clear. It does not need to be weighted down by fees. Factoring eliminates these fees.

It's also quite helpful that you get your cash very quickly with invoice factoring services. There's no lengthy application to go through, and you can get your payments rather quickly. This means that cash inclusions can be both easier and less of a hassle than with other types of services.

So if you're a company that's dealing with cash flow problems, take a look at the benefits invoice-factoring services can give you. They can give you the cash flow you need for business operations, and give it to you expediently and helpfully. Simply, invoice factoring services can give you value that simply can't be overstated.

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