The WHO WHAT AND WHEN of Invoice Factoring
One of the greatest challenges faced by small businesses owners is finding the right source of business capital. Unfortunately, many small businesses don’t have a clear idea of where they are financially until they’re faced with an immediate, and often unexpected need for cash. Some of the most common reasons small businesses find themselves in this situation include:• The opportunity to take vendor discounts
• The need to purchase new equipment
• The need to hire additional personnel
In past articles, we’ve discussed the benefits of invoice factoring compared to other funding methods including traditional bank loans and lines of credit. If invoice factoring makes sense for your particular situation, the next step is finding the right factoring company, and this is where the Who, What and When becomes important to improving and maintaining cash flow.
Who is the best invoice factoring company for my business?
When searching for the right invoice factoring company for your specific cash flow needs, be sure to consider the number of years the company has been in business. Invoice factoring companies with more than 10 years in the business generally offer a good program. Companies with 20 plus years are doing something right and it indicates they likely have a very solid reputation. Look for an invoice factoring company with an experienced, tenured management team and sales force. Get to know the people you will be working with because it DOES make a difference. Relationships are key – especially when dealing with what can be the stressful task of funding your business and keeping a positive cash flow. Look for reviews from clients and see what makes a particular invoice factoring company stand out.
What invoice factoring program is right for my business?
Most invoice factoring companies have similar programs but it’s how they work with the business owner that really makes a difference. Many invoice factoring companies have industry expertise in special areas such as trucking, medical and staffing that could be beneficial for those business owners. When selecting a invoice factoring partner focus on companies familiar with what you do. American Receivable works with each of their clients individually to find the best funding options for their specific business and cash flow needs.
When should you work with an factoring company?
If inadequate cash flow is preventing you from meeting your obligations on time or keeping your business from growing, it may be time to consider invoice factoring. Most companies experience cash flow problems due to slow-paying customers from time to time, but if it has become the norm instead of the exception, invoice factoring could be the answer to your cash flow problems. Most businesses usually become eligible for more traditional financing after factoring their invoices for a while and can build up credit, length of time in business, and adequate cash flow to meet their needs. Invoice factoring can be a short or long-term solution for managing cash flow, however, some business owners like the ease of invoice factoring and stay with it longer term.
Invoice factoring is based on the customers of the business and their ability to pay, not the credit of the business or business owner. Selling your invoices as a solution for cash flow problems allows your business to grow without incurring debt.
Do you think this is a good option for your business?
Call American Receivable today!