Get Help Determining if Factoring Services Are Right For Your Business
Written by US Funding on February 4, 2016
As the owner of a small business or start-up company, you might face a situation one day that requires you to increase your cash flow immediately. While some businesses automatically turn to bank loans for financial help, this may not be the best option for you. This is especially true if you already know you would prefer not to be indebted to a bank or that you don’t have the kind of credit history or assets that banks use to make their qualification decisions. Fortunately, US Funding offers factoring services to their clients as an alternative method for receiving quick assistance with financing.
Factoring involves selling your accounts receivable for a certain percentage, allowing you the benefit of getting paid on outstanding invoices right away instead of letting them sit for 30, 60, or 90 days while your bills continue to pile up. Below are a few questions to think about that will help you determine if factoring services would be the right path for your business to take.
How Big is Your Cash Flow Problem?
One of the first things to consider is what exactly you need the money for. Factoring services are generally used when a company already knows they have a certain amount of money guaranteed to come to them but they can no longer wait until the invoices are paid. Factoring will cover normal everyday expenses that are necessary for running a business, such as payroll, utilities, rent, and inventory. The key to factoring services, is for businesses to be compensated enough to fix their immediate cash flow needs without getting into further debt as is possible with a loan.
What Kind of Industry Does Your Business Operate In?
Though almost any kind of business could take advantage of factoring services, those that tend to really benefit most are B2B companies. US Funding finds that if your business is in an industry like staffing, freight transportation, manufacturing, or marketing, to name a few and provide products and services to another business, factoring can work out great. Businesses who are selling to customers must keep in mind there is the potential for a return of merchandise, which would cause a collection issue.
Do You Usually Have a Problem Getting Clients to Pay?
Since factoring companies take over the responsibility of collecting payment on your invoices, they will want to be confident in your clients’ ability to pay. So even though your credit history won’t influence whether or not you are eligible for factoring services, your clients’ history will. If you know you have reliable clients that don’t have any problems paying their bills on time, your chance of getting approved and receiving a higher cash advance is more certain.
Is There a Need For Someone to Take Over Your Accounts Receivable?
Many start-ups utilize factoring services because they simply don’t have anyone on staff to handle their accounts receivable. A company familiar with factoring will be able to fill in for a nonexistent accounting department if necessary, keeping track of all your accounts and payments.
Factoring services are becoming more and more popular among small businesses that are looking for a solution to increase their capital in hardly any time at all. US Funding is happy to speak more with you to see if factoring services will fulfill your company’s financial need