| Is Accounts Receivable Factoring Right for Your Business?
There can be no doubt that in the current economic climate, many businesses are beginning to feel the pinch. The first indication of financial problems within the business is usually some form of cash flow situation. For several decades many successful business ventures have relied upon accounts receivable factoring to relieve this pressure but, is account receivable factoring right for your business?
Take a look at these few bullet points below, if your business can answer yes to one or more of these questions, then accounts receivable factoring could possibly help your financial situation.
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Is your business finding it increasingly difficult to meet monthly overheads such as paying staff, rents or bills?
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Does your business need to expand, yet the capital is not available to facilitate this?
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Is your business struggling to maintain adequate stock levels, or pay suppliers on time?
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Are your customers taking longer and longer to pay, tying up increasing amounts of funding in unpaid sales invoices?
A positive answer to any of these questions is likely to indicate that your current business venture is undergoing a period of cash flow problems. There are several ways in which you can alleviate this pressure, although only one of them comes with a negligible financial cost. An unfortunate misconception of business owners, when faced with cash flow problems is that they need to find some form of external financing in the form of a business loan to keep their business ticking over. Although a business loan can be a good way to inject capital into the venture, there is a far better way to free up more working capital.
Accounts receivable factoring is an effective, inexpensive way of injecting short-term funding into your company, and ensuring that cash flow is controlled more tightly in the future. By selling on your outstanding invoices to the factoring company, accounts receivable factoring returns monies that are tied up with debtors to the working capital pool.
Additionally, accounts receivable factoring is easier to obtain than a business loan, due to the fact your company will be selling a financial asset, not applying for credit. If we were to compare the cost of discounting invoices to a factoring firm, against the typical interest rates apply to business loans, than we would find that accounts receivable factoring is also a far more cost effective way of procuring funding.
Overall, accounts receivable factoring is a great way to ensure that when you sell a product or service, you receive the income quickly. |
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