Tips on Making Your Working Capital Grow
For business owners, having access to a steady financial source can be a big challenge. In fact, small businesses are not the only ones who face this dilemma. Even large companies and businesses that have been in the industry for a long time can still experience financial difficulties once in a while.
Where can you find the needed help in funding your business? How can you make your working capital grow? What is factoring and how can it help you?
Accounts Receivables Factoring – Why Be Interested?
Accounts Receivables Factoring is a business financing method where you sell your accounts receivables or invoices to a third party lender. The lender or the factoring company would provide you with the instant cash you need while taking over with the collection of your accounts receivables. How does it work?
For example, let’s say that you have an invoice amounting to $5,000. By selling these invoices to your factoring company, you can receive the $5,000 cash without waiting for your customer’s payment. Generally, the factoring company gives 80% cash from the total value of your invoice.
Afterwards, your customer is sent a notice that his/her debts are now payable to your factoring lender. As soon as you customer completes his/her payments, you can receive the other 20% from the invoices you have submitted.
The method of factoring is a recognized business financing strategy and has been used by both small and large businesses in the industry for a long time. For entrepreneurs that do not qualify for a bank loan or traditional loans, accounts receivables factoring is definitely the ideal solution.
Will Your Customers Agree?
Perhaps you may worry about what your client would feel about factoring. The fact is, many clients are already familiar with the concept of factoring but in case your customer is new to this arrangement, your factoring company would send a detailed letter of explanation on how receivables factoring is done. Your client would also be assured that factoring is a safe and legal financing option.
Can factoring really raise your working capital?
The great thing about accounts receivables factoring is that you can use the cash for any purpose you want – for purchasing stocks, ordering more supplies, paying your workers, hiring additional workers, launching projects, buying new equipment, delivering your customer orders, etc. Because you have the cash on hand, you can be assured that you won’t run out of budget even at when unexpected expenses arise.
Most importantly, financing your business through receivables factoring is fast and easy. You can expect your application to get approved within minutes and you can even get your cash within 24 hours. And because accounts receivables factoring is not a secured loan, you are not required to submit any property or asset to your lender. Your invoices are taken as guarantees for the cash you are provided. If you have good to excellent credit, factoring enables you to enjoy the lowest rates and the best deals from lenders.
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
Copyright 2008.
Related Article: Borrowing Money To Build Your Business
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