The process of financing receivables has become a common practice in many industries, particularly for companies that have a long payment period but require cash in the interim to meet daily operational expenses, such as purchasing supplies or disbursing payroll. It is also a great option for companies that have seasonal fluctuations in cash flow and need some help to make it through the “lean” months to get to the more profitable times of the year.
If you are wondering whether this could be a viable option for your company, here are some characteristics and situations when factoring makes sense.
Your Company Has a Long Net Payment Schedule
If you send out invoices on Net 30, Net 60, or Net 90 days or longer payment schedules, it’s is a long time to wait to receive that cash. Often your customers are also trying to maximize their own cash flow and will wait as long as possible to send in the check. Rather than waiting, factoring can help you access most of that cash right away while your customers delay sending in payment.
You Sell Goods or Services Long Before You Invoice
Companies that provide manufacturing often must purchase raw materials and pay employees to make a product long before they sell the product and receive payment. In the meantime you still need the cash to keep your operations running, which is where factoring comes in.
You Need Additional Capital for Expansion
Even if your company isn’t one that works on projects for months or years before payment, sometimes having cash up front can help you realize your dreams of expanding your business or taking on a new client or a big order that you otherwise would not be able to fulfill.
You Want to Take Advantage of Sales & Bulk Discounts
If your suppliers offer bulk purchase discounts, or have seasonal sales, factoring can help you take advantage of these deals so you can cut costs and boost profits.
Many companies can benefit from the advantages of financing receivables. Call Universal Funding today, or fill out our simple online rate form to find out if it’s the right move for you.