Managing cash flow is one of the most important functions of any business manager. There is no financial opportunity that cannot be undone by insufficient cash flow. Traditionally, one of the more popular forms of dealing with cash flow shortages is a short-term bank loan. The SBA (Small Business Association) was formulated specifically stimulating the creation of new companies and enhancing the growth of existing companies. Unfortunately, modern banking practices have put a serious dent in the approval rate of bank loans. Frustrated company owners approach banks with documented, low-risk opportunities and are turned away. This is when factoring companies can help declined business get the financing they need.
Many business owners consider their accounts receivable and the associated net terms as a “locked value.” They would no more consider getting an advance on those funds than they would cashing in their retirement early. However, thanks to factoring providers, companies can leverage the future monies due on their accounts receivable. In this way, they can give themselves an advance on the money that they will eventually collect from their customers.
How Do I Account For This Cash Flow?
Smart business owners know that they money that is advanced from the net terms will not be available in the future. How do they account for this change in the cash flow? The answer is that factoring companies can maintain the factoring cycle for as long as the business provides goods or services to credit worthy customers. In this way, the providers can perpetually advance the revenue cycle.
An even better value is that factoring companies do not just advance the revenue cycle, they modulate it. Factoring clients provide invoices to their providers at will. This means that the provider will advance the revenue cycle at critical market window events, then relax the cycle during cash cow periods. In other words, the factoring providers help tame a volatile cash flow.
How Do I Take Advantage of Factoring?
At Universal Funding Corporation, we are happy to show you the benefits of factoring. Please contact us with our rate form today. We are certain we can give you important information pertaining to you company’s cash flow.