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 Explained
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.
Business Cash Flow and the Pandemic
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.
Benefits of invoice factoring
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.
No Long-term Debt
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.
Perfect Credit Isn’t Necessary
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.
Improve Your Business Cash Flow Now
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.