Determining the Need for Receivable Factoring for Your Business

It’s a well-known fact that accounts receivable factoring is a viable option when your business is sitting on invoices and in need of working capital. How do you know if factoring is really a smart move for your particular business? While accounts receivable financing from Universal Funding is a great option for many, it’s important that you first determine if it is suitable for your particular business. You will want to consider your cash flow, the size of your business, and the cost.

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Consider Your Cash Flow

Contrary to previous belief, you do not need to be struggling to make business ends meet to need receivable factoring services. Your business could be thriving and you still might want to sell your invoices. Many Fortune 500 companies do this instead of using a large in-house A/R department. Factoring is a great way to keep the cash flowing in, but you need to get approval first. If your customers meet the criteria and your cash flow is acceptable, factoring could be a great option.

Consider the Size of Your Business

 Accounts receivable financing is probably a better solution once your business meets a minimum size. If you only have $5000 in outstanding A/R, for example, you might not necessarily need factoring services. Universal Funding works with businesses that gross a minimum of $300,000 per year. We can accommodate companies needing anywhere for $25,000 per month to $5 million dollars per month. Once you generate enough revenue and reach a certain size, factoring becomes an attractive solution to managing invoices with payment terms or slow paying customers.

Consider the Cost 

Although you are selling invoices to the factoring company, there is often a fee involved. The cost or factoring rate is based on the health of your customers’ businesses, the state of the industry you work in, and the monthly amount you intend to factor. Universal Funding will be able to work out a customized solution tailored to meet your specific business needs. You can consider the cost as one of the expenses of doing business. But the cost can also be counterbalanced by having cash on hand to reduce late fees, taking advantage of quick pay or early pay discounts and to take advantage of buying in bulk.

Finding the Best Solution

You ultimately need to decide what the best financial solution is for your business. You can contact Universal Funding for an analysis. Learn more about accounts receivable factoring by completing our online rate form and one of our reps will walk you through our process and propose a rate specific to your business.

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