Almost every business experiences intervals when the cash that’s available isn’t adequate to cover expenses. Whether to meet payroll, repair or replace essential equipment or capture time-sensitive opportunities, ready capital is critical to keep operations running smoothly. Companies in need of working capital are increasingly turning to factoring to bridge cash flow gaps. In the process, they are learning the multiple advantages of this strategic funding tool. Here are five reasons any business—including yours—should consider factoring.
Factoring provides access to a steady cash flow, ensuring all overhead, suppliers, salaries, taxes and other expenses—whether fixed or incremental—can be paid on time. Timely payments provide the “well-greased tracks” a business needs for running smoothly, and on schedule. Liquidity prevents delays or interruptions to business operations. People and processes maintain their rhythms. Because factoring is flexible, and can be applied to any business purpose, production and delivery of services can be scaled to meet fluctuating demand. Funds from factoring can be invested in labor-saving technology, used to modernize equipment, hire additional staff or make other moves that enhance operational efficiencies. Factoring provides added protection for a business by serving as a cushion against the unexpected, so that financial obligations can be meet, even in turbulent times. This solvency enhances a company’s standing with its stakeholder community, and often places the company in a position to negotiate more favorable terms with suppliers. Employees, suppliers and all other stakeholders are more content and productive when they have confidence in the company’s ability to pay.
Speed – Time can be everything
With factoring, there’s no waiting. In today’s fast-paced world, time is money, and businesses are looking for innovation and time-saving convenience. Many lending institutions are still slow to leave their paper-based world when it comes to business lending. The average application process for a bank loan can consume up to 24 hours of a business owner’s time, and the applicant must wait from 30 to 90 days for a decision. In contract, factoring takes minimal time to apply. With ExpoCredit, for example, everything is executed online via a downloadable application. Documentation is streamlined, and approvals are communicated quickly, usually within 24 to 48 hours.
There are plenty of paths to raising capital, and they all come with a toll gate. Certain routes to cash require upfront fees and annual fees plus interest costs. Small business loans, which have been difficult to secure since 2008, entail closing fees and other expenses in addition to annual interest charges. If you choose a bank line of credit, expect to pay all of the fees just listed as well as annualized fees on any money not withdrawn. Merchant Cash Advances are even more expensive, with annual percentage rates from 60% to 200%. Factoring is a more value-based option. Unpaid invoices are purchased by the Factoring firm, so there’s no out-of-pocket expense. Importantly, there are no personal guarantees required (you are not personally liable). As factoring becomes more mainstream, with more firms entering the market, rates are becoming more competitive. While rates vary significantly, you can expect to pay from 1.5% to 2.5% per 30 days. Moreover, factoring can assist a business in vetting buyers to minimize risk. At the same time, the cash flow capabilities of factoring, which enable on time payments, can help a business negotiate and secure better terms with suppliers.
When your business needs money, Factoring is a fast and simple way to access it quickly. Money that’s locked in the invoice payment pipeline for 30, 60, 90 days or more, cannot be used to meet daily, weekly or monthly operational needs. Factoring “unlocks” those funds, providing a steady stream of working capital that can be used for any business purpose. As a small business owner you know how critical it is to have ready cash flow on hand to replenish inventory, meet payroll, fulfill a large order or capture a time-sensitive opportunity. Factoring is one of the only forms of funding that is accessible when you need it, and that can grow in tandem with your business. As your customers and invoices increase, so does the amount of funds you can access through factoring.
Factoring with ExpoCredit carries the added financial benefit of virtually outsourcing your accounts receivable tasks to free staff to focus on more strategic elements. ExpoCredit professionals handle the back room tasks for accounts receivable processes, including collections. This means less work (and less stress) for staff, with more time freed up to focus on the strategic elements of growing the business. Staff responsibility (and man hours) can be shifted from collections to production, to marketing and other income-generating activities.
For more information and to apply online, visit ExpoCredit online a www.expocredit.com