Are you struggling to pay your small business’ rent each month because you simply don’t have enough cash on hand? Is it a challenge to meet payroll for the same reason? Do you never seem to have enough money available to invest in new supplies for your business?
If you answered any of these questions positively, it might be time to consider factoring receivables as a way to quickly boost your small business’ cash flow.
Factoring receivables, also known as invoice factoring, allows you to turn the money owed to you by your clients, the money that never seems to come in on time, into instant cash. It’s a way to make sure that your business is always liquid enough to pay your bills and keep your employees’ checks coming in on time.
It works like this: You sell your outstanding receivables or invoices to an outside factoring company for a discount, a bit less than the face value of the receivables. The factoring company makes a profit when it collects the full face value of the receivables. Your business, on the other hand, receives an instant infusion of cash.
It’s true that your business won’t receive as much money as it would have had you collected on the outstanding receivables yourself. But think of all the time and hassle that working with a factoring company can save you: In an invoice factoring relationship, the burden of collecting money from your clients is passed onto an outside company. This frees up your time for marketing your business, interviewing potential new employees and tweaking your line of products and services.
The next time you’re struggling to scrape together enough liquid cash to pay your landlord, cover your utility bill or fulfill your other financial obligations, think about calling up a factoring receivables company. It could be the boost that your small business needs.
