The Pros and Cons of Term Contracts

As is the case with any contractual relationship, there are advantages and disadvantages to working with term contracts.

Advantages

In many cases, offering payment terms to your customers can be a real benefit to your business. Some of the advantages that a term contract can bring include:

  • New Clients
  • Larger Orders
  • Healthy Growth

pros-and-cons

Ultimately, all of the advantages that come from providing payment terms with your customers point to the trust you have established in that relationship. You can grow your business by offering 30, 60, and even 90 day terms. It gives your customers time to make money on the goods and services you have provided before making payment back to you and is becoming more common practice if not a standard.

Disadvantages

However, that’s not to say that your contractual relationship will always have positive effects. Oftentimes, companies that offer payment terms that extend beyond 15 days later discover that cash flow can be compromised. Remember that when you offer terms you usually have a large expense that you pay up front to provide the goods or services and won’t see payment for several weeks. When you create new term agreements make sure to stagger client invoice dates so that you are not waiting for all clients to pay by the end of the month.

In the end, there’s no easy answer to whether or not you should consider term payments with your accounts. Rather than turning away new business because the new client prefers a term agreement, you can take on the business without struggling with cash flow. How you achieve this is by using the services of a factoring company. They will provide you with a large percentage of your outstanding invoices and wait out the terms.

Enjoy Our Personalized Service

The size, stage, and service scope of your company, as well as your immediate financial needs are all elements that should weigh heavily on your decision to enter into a factoring relationship with a factoring provider, as well. Here at Universal Funding, we’ll help you consider these options in an effort to choose the right level of service for you. Our specialty is in offering our clients custom financing solutions. To get determine if this is a good solution to build your business, simply fill out our simple online rate form and one of our representatives will contact you with more information.

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