Sometimes money can be tight for your business, and it’s not necessarily because you are bad at managing your cash flow. For many companies it’s the result of several elements, including:
- Long payment cycles from the original sale of goods or services to eventual receipt of cash
- Slow-paying or non-paying customers
- Unexpected operational expenses that significantly reduce available cash
- The need to purchase raw materials or inventory to meet orders and sales
If you find your company in these situations, you can sell invoices for improved cash flow without increasing your debt load or taking a significant hit to your bottom line. The process is quite simple, and is utilized by many different businesses in a variety of industries today.
Top Reason Companies Choose to Sell Invoices
Growing a business and meeting daily operational expenses requires cash on hand, but for many companies maintaining the right cash flow is difficult when your customers want credit terms such as net 30, 45, 60, or even 90+ days for payment. Allowing your customers the ability to extend their payment for up to three months can increase your ability to make larger sales and take on bigger clients, but it can also put a dent in the availability of working capital while you wait for payment. Many companies that get credit terms will wait until the last minute to make the payment in an effort to optimize their own cash flow situation.
The main reason that companies choose to sell their accounts receivable is simple: reducing the amount of time between the sale of goods and compensation. This means you can now take on new orders without waiting for your existing payments to come through, or invest in a strategy to grow your company.
Additional benefits of financing receivables include:
- Flexible financing terms
- No need to go through the rigorous and lengthy bank loan application and approval process
- Qualification is based on existing sales and creditworthiness of your customers
- No need to put up collateral other than the existing invoice you plan to sell
- You do not create debt
Preparing to Sell Your Receivables
The process for selling receivables is straightforward. First, identify the accounts you want to sell and contact a factoring company. In many cases, the factoring company will review your customers’ credit to determine whether they can purchase the invoice(s). The factoring company gives you a significant portion up front of the invoice(s)–generally from 80 to 95 percent of the total invoice amount. Once the customer pays the invoice, you will receive the remaining balance minus any fees you owe to the factoring company. It’s that simple.
Get a Quote Today
To find out how much your existing invoices could be worth, contact Universal Funding to get a quote. Call us at 800-405-6035 or fill out our simple online rate form to get started today.