Even extremely successful businesses sometimes face problems with cash flow. This makes it imperative to stabilize and boost cash flow so companies can continue to prosper and grow. One effective way of accomplishing this is invoice financing. Here are some tips on how you can use this method to grow your business.
Surviving Difficulties with Cash Flow
Some companies encounter demands of clients to extend payment terms to 90 or even 120 days. This means that they will not be paid after delivering products or completing services for three to four months. Few businesses can afford to go without getting paid for such an extended period. In the meantime, they still have to meet payroll obligations, cover rent and utilities, purchase inventory, pay their suppliers, and have funds on hand to take advantage of special opportunities.
Challenges Seasonal Businesses Face
During peak seasons, seasonal businesses require extra income so they can keep up with consumer demand by hiring additional personnel and purchasing more inventory. Traditional banks generally offer loans only to companies whose incomes are consistent and predictable, so seasonal businesses must look to other means of funding such as invoice financing to meet their needs.
How Invoice Financing Works
Once your company is approved to work with an invoice financier, you receive an advance on your unpaid accounts receivables of up to 80 to 90 percent. After your customers pay their bills, you receive the balance of their payments minus a fee to the financier that you have agreed upon in advance.
Benefits of Invoice Financing
One advantage of invoice financing is that you can obtain the funding that your company needs quickly. You can qualify even if your business does not have a significant credit history, because the financier is more concerned with the creditworthiness of your clients. Additionally, since the invoice financier handles the collection of payments from your customers, you can focus on running your business.
For more advice on strengthening cash flow with invoice financing, contact Spearing Capital & Consulting, Inc.