Starting a small business takes a lot of belief in yourself. Many things can go wrong. You may be able to sell your goods and/or services, but getting the cash to make your products and maintain your business is a whole another game. Learning to effectively use accounts receivable factoring (also called invoice factoring) might help you launch a small business.
In the beginning of a new business, a small company tries to sell and/or service everything that they can. If they are successful, it’s not uncommon that the new small business has sold and/or serviced more than their on-hand cash can handle. Unfortunately, new customers have to be told that they’ll have to wait. Customers, quite often, don’t like this and they’ll move on. They will find a different supplier. Business is lost.
What usually happens is that the small business will seek out more funds by requesting a loan from a bank. This is when a hard reality sets in. Banks will most often refuse a loan to a new business. They want to see a long, credit line. They want to see historical records of a strong, client base. No historicals… no loan.
So, What Is the Solution For a New, Small Business?
Accounts receivable factoring is a solution that is often over-looked!
If you have a B2B business and have sold your product and/or services and you are now waiting on your invoices to be paid, you can sell these accounts receivable (invoices) to a 3rd party. You can get cash almost instantly. And, the factoring company will normally charge you only a small fee.
When you sell your invoices to a factoring company, they will assume possession of your invoices, and they will make collections. They pay you the majority of the value of the invoice up front. After collections are made, they will take a small fee and reimburse you the balance.
This keeps your business from applying for, waiting, and assuming a debt. This is a debt that would need to show on your balance sheet. Accounts receivable factoring avoids all this. You have sold your invoices so your balance sheets don’t have to show a debt!
Learning to use accounts receivable factoring is really important for a small business. There are two critical concepts to this practice: speed and a consistent source of cash. Your credit history is not that important to a factoring company… the credit history of those who owe you money is what’s important. Once a factoring company has started doing business with you, your business can normally get money within 24 hours. And, it is repetitious
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It’s your money. Use it the way you want. Buy raw materials, use it for payroll, make capital investments.
Factoring Provides Protection from Bad Debt
This is something that you always had to worry about… were the people you were selling to good, paying customers. As part of your business, you had to set up an effective way to screen your customers. If you are using a factoring company, they will do this for you. They will set up systems to assure that the customers you sell to are capable of paying their debt.
This relieves your company of a lot of responsibility. Also, you won’t waste a lot of time trying to sell to someone who is likely not to pay.
Factoring Provides Additional Office Support
Besides providing additional funds, factoring companies will start doing a lot of the time-consuming activities that are regularly done in the office. Credit checks and collecting on outstanding invoices will be done by the factoring company. These activities take many long hours and will now be done by professionals who specialize in these types of activities
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Don’t hesitate to ask your factoring company what other activities can they do and help you with.
Factoring Helps a Small Business Grow
Large orders, additional sales, and providing extra services lead to growth opportunities. Doing these types of things can be difficult for new, small businesses. However, accounts receivable factoring levels out cash flows and provides that additional capital when needed. Growing a small business becomes easier.
Choose Caps Funding for Your Accounts Receivable Factoring
Caps Funding, LLC is an accounts receivable factoring company in the heart of the old South. Its' home office is in Columbia, South Carolina. It has been in business since the early 1990's. Caps Funding has funded and helped grow a lot of small businesses. If you have questions, you can call them. Call Charles at (803) 429-3686. He can answer your questions and help solve your business problems. Or, if you had rather, you can email him.