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How Does Factoring Improve Your Cash Flow?

With invoice factoring, you bill your customer as you normally do then you sell that invoice to a factoring company.  Factoring your invoices is good for businesses that are growing but experiencing interruptions in cash flow. Positive cash flow can be difficult for a business to maintain when you have to wait 30, 60 or 90 days for customers to pay.  Payroll and expenses won’t wait, and most customers refuse to pay faster than their extended terms. 

Let’s look at a cash flow example.  Suppose you own a healthcare staffing company.  Business is good you have 10 nurses working for you that you’ve placed at a local hospital that pays – but not quickly.  You have payroll, taxes, insurance and other overhead that must be paid way before your first invoice gets paid.  If only you could be paid quicker.  Let’s see how account receivable factoring can create positive cash flow.    At the end of the week you will go ahead and invoice the hospital for the hours worked by your nurses.  You then sell the invoice to your factoring company.  The factor then pays you an advance, somewhere between 85% to 90% of the invoice amount. Once the hospital pays the factor, the remainder is paid to you minus a small fee for factoring.

Stop Waiting For Slow Paying Customers

So instead of running out of cash while waiting to be paid by your customer, you now have a reliable source of cash every week!  As long as your nurses work shifts at the hospital, you will have your cash right away.  Now that you have positive cash flow it’s time to focus on growing your business.  It’s time to add more nurses at the hospital, and to add more healthcare facilities.   The more your business cash flow grows, the more your factoring grows with it. 

The good news is it is not difficult to qualify for factoring.  Your personal credit score is not important.  The credit worthiness of your customers is what matters.  As long as your customers have good credit and a strong history of paying their bills you will most likely qualify. 

Helping Small Business Grow For Over 40 Years

American Receivable has provided factoring for over 42 years to all types of businesses, including staffing companies, manufacturers, distributors, oil and gas service companies, IT, telecommunications, and service companies.  To receive your free quote call 1-800-297-6652 or complete our quick application form.