The Covid pandemic has hit the small business sector hard. Fortunately, the Payroll Protection Program (PPP) helped many small businesses survive. However, in some cases that may not be enough for those businesses to thrive in the new normal. They will have to reimagine how they do business and that is going to take money. If you’re struggling to boost your business cash flow and transition your business to meet consumer’s needs, you might want to consider invoice factoring.
For many businesses, accounts receivable is their largest asset. Waiting for those invoices to come due and be paid is a bit of a ‘look but don’t touch’ scenario. Wouldn’t it be great if you could use the cash tied up in those invoices as soon as they were issued? With invoice factoring, you can.
Invoice factoring, also referred to as debt factoring or factoring, is the process of selling unpaid invoices and turning them into the cash you need now. Alternative finance companies who offer invoice factoring services typically pay 75 to 85 percent of an invoice’s face value upfront. The balance minus a small fee is paid once the factoring company receives payment from your customer. Factoring can be a great business cash flow solution.
Inadequate cash flow is among the most common reasons businesses fail. While it can make meeting the demands of daily operations difficult, it can make business growth impossible. Sufficient business cash flow is key for a business to thrive under normal circumstances. When facing the challenge of an economic downturn such as the one resulting from the COVID pandemic, it is absolutely essential.
The pandemic has impacted almost every aspect of our daily lives and caused many businesses to change the way they meet customers’ needs. Changing the way you do business can mean new equipment, new business processes, and additional employee training. For many businesses, it meant entering or expanding offerings in the eCommerce marketplace. To keep your doors open and remain competitive, you need to make these changes quickly.
Invoice factoring allows you to turn your accounts receivable into cash without waiting for them to be paid. Not only will this provide the influx of business cashflow you need but other benefits as well.
With invoice factoring, there is no long wait to receive funding. By selling your unpaid invoices, you can receive the cash you need in a matter of days. This will allow you to quickly make the changes necessary to transition your business and thrive in the new normal.
The last thing a business owner wants to do when facing an economic downturn is to take on any additional debt. Invoice factoring is not a loan but simply an advance in money already owed to you. You’re aren’t taking on long-term loan payments or adding any long-term debt to your balance sheet.
With invoice factoring, there are no worries if your credit history is less than perfect. Once you sell your invoices, they are no longer owed to you but to the factoring provider. Before agreeing to purchase the invoices, the provider will be looking into your customers’ credit history, not yours. For this reason, it’s important to submit only invoices issued to customers in good standing and with a reliable payment history.
CapFlow Funding Group is dedicated to providing the business cash flow you need to not only survive but thrive despite the pandemic. We will work with you to find the best funding solution for your business.
While CapFlow Funding Group specializes in factoring and merchant cash advances, we can also connect our clients with other alternative financing options that may be better suited to their business needs. We service many different industries with a variety of funding needs. Contact us today and find out how invoice factoring can help grow your small business.
Ever wish your customers would pay their invoices early? Small business factoring is a great way to leverage funds from invoices that are not yet due. By selling your unpaid invoices to a factoring company, you can improve your cash flow and allow you to take advantage of unexpected opportunities like larger orders of new business. But what happens once you sell those invoices?
Once the factoring company purchases your invoices, you are no longer responsible for collecting on them. The invoices are now owed to the factoring company and they will handle collections.To notify your customers of this, they will receive a Notice of Assignment from the factoring company.
The Notice of Assignment serves as an introduction of the factoring company to your customers, It’s a critical part of the small business factoring process and addresses four important issues.
A Notice of Assignment is used for both recourse and nonrecourse small business factoring. It is crucial that the business owner understands the difference between them. With recourse factoring, if the customer fails to make payment, the responsibility falls on the business owner. With non-recourse factoring, the terms can vary but typically the bulk of the responsibility falls on the factoring company.
Because the risk for the factoring company is higher, the fees for non-recourse factoring will be higher as well.
When partnering with a factoring company, both the business owner and the customer will receive a copy of the Notice of Assignment. It is important for each party to review the notice thoroughly. There are a couple of reasons for this.
First of all, it is not uncommon for the customer to call the business owner once they receive the notice. That conversation will go smoother if the business owner is fully aware of what information the notice contains and can confidently address any concerns the customer may have.
Secondly, it provides both parties with a clear understanding of how the invoice is to be paid and the potential consequences of a misdirected payment. If the customer doesn’t follow the directions outlined in the Notice of Assignment and pays the business owner directly, the invoice will technically be unpaid. The notice will provide instructions for the business owner on how to forward that payment to the factoring company. Both parties should be aware that there may be fees owed to the factoring company for a misdirected payment.
Should neither party pay the invoice, the Notice of Assignment will also serve as evidence in legal action taken by the factoring company. While this is not a common occurrence, it reinforces the importance of the notice.
Capflow Funding Group specializes in invoice factoring for both small and large businesses. When you partner with us, we will make sure you completely understand the terms of your factoring agreement. Not sure invoice factoring is the right funding option for your business? We also offer merchant cash advances and work with trusted partners to provide a variety of other funding options. We provide services to many different industries with a variety of different funding needs. Contact us today and find out how invoice factoring can help grow your small business.
