Businesses generate cash by making sales. In order to make a sale, a business has to create a demand, create a product or service, find a customer and then convince them to make a purchase. In many cases, the purchase a customer makes includes the ability to make payment at a future time, which is commonly known as a credit term. And while offering credit terms to customers is a great way to entice them to make purchases, it severely restricts the amount of cash a business has access to in order to repeat the cycle. That’s where invoice factoring companies come into play. When a company decides to sell invoices, to generate cash flow, they will want to work with a reputable and established factor. The invoices to be sold should be fairly current invoices, but with terms that are 10-90 days out. The factoring company will negotiate an advance rate, 70-90% is typical, and a factoring rate. Invoice factoring companies play a vital role in assisting companies with the cash flow they need to smoothly run their business.
Invoice factoring companies specialize in bridging the gap of extraneous invoice terms that extend well past 30 days. The invoice is the asset that is promised or sold to the factoring company. The business gets a large percent of the value of the invoices up front. Businesses who take advantage of working with a factoring company get an instant flow of money, and can use that capital immediately to build the business instead of waiting for payments.
Working with an invoice factoring company is an excellent way to maintain a steady and reliable flow of cash. Sometimes there is a bare patch while you are waiting on accounts to come due, and expansion may be possible in those times if you have access to capital and can bid on new jobs. You don’t want to pass on growth and expansion simply because your accounts receivable take time to pay.
Dealing with a factoring company can eliminate that scenario. If you have a steady stream of invoices but your operating cash seesaws back and forth, consider factoring those invoices.
For more information please call 1-800-405-6035 or click here, and one of our factoring specialists will follow-up with you.