With the current state of the stock market and the economic implications of the Coronavirus pandemic, many small businesses may soon be facing a financial crunch. In tough economic times, cash flow can dwindle, making it a struggle to keep your business operating. With traditional business loans difficult to obtain even when the economy is good, how can a small business supplement its cash flow? There are a variety of alternative funding options available. However, if your business invoices its clients and then has to wait for 30, 60 or even 90 days to receive payment, invoice factoring could be a great tool to add to your small business survival kit.
Invoice factoring is also referred to as account receivable financing. It can be a great way to leverage the value of those invoices and turn it into cash when you need it rather than waiting for your clients to pay when their invoices come due. It works like this. You sell your unpaid invoices to an invoice factoring company, commonly known as a factor. Once the invoices are approved by the factor, you receive an immediate payment of those invoices, minus a small factoring fee. Payment of the invoices is now owed to the factor and they will collect payment from your customers. It’s important to keep in mind, factoring can only be used for invoices to customers with good payment history. Overdue invoices can not be factored. Now you know how it works. Once you understand the benefits of invoice factoring you’ll see why it could be a small business survival kit necessity.
Having sufficient working capital to maintain daily operations during a downturn in the economy is crucial. However, the last thing a business owner wants to do in uncertain economic times is to take on additional debt. With invoice factoring, you are simply getting an advanced payment on money that is already owed to you.
With invoice factoring, collections of the invoices you sold to the factor are no longer your responsibility. Those invoices are now owned and owed to the factor, who will handle collections. That takes the task off your plate, freeing you up to devote your time to business responsibilities. At this point, you’re probably wondering what happens if one of your customers doesn’t pay their invoice. That depends on the type of invoice factoring you’ve chosen. Recourse factoring provides the factor with legal recourse to collect the fund from you. If you’re factoring large invoices and can’t afford to take the hit if one of your customers doesn’t pay, you may want to consider non-recourse factoring. With this type of factoring, you will not be liable if your customer does pay. However, the fee for non-recourse factoring will be higher. Your factoring provider will explain your options and help you decide which is best for your business.
You’ve worked hard to build your business credit history and maintain a good reputation with your creditors. Not only will invoice factoring can help you protect these but it will prevent you from falling behind on accounts payable. It will also allow you to avoid late fees or damaging your credit score. Selling your unpaid invoices can provide you with the cash you need, typically within a day or two or you won’t have to keep creditors waiting.
Every small business will experience a financial crunch at one time or another. Whether it’s a downturn in the economy or an unforeseen emergency, every business should have a plan to keep their doors open. Part of that plan needs to be a way to maintain your cash flow and invoice factoring can help with that.
You might want to consider adding invoice factoring from CapFlow Funding Group to your small business survival kit. Let’s talk. We specialize in factoring and will work with you to find the best funding solution to provide your business with immediate working capital. We service many different industries with a variety of different funding needs. Contact us today and find out how invoice factoring can help keep your business on track.
It’s that time of year again – tax season. If you’re a small business owner and you haven’t started getting everything together for your annual trip to your accountant, now is the time. While the due dates for small business tax returns vary depending on the type of business you own, deadlines for filing most 2019 business tax returns are fast approaching.
Keep in mind, the filing dates can change from year to year due to weekends and holidays. In some instances, there may be opportunities to file for a small business tax extension. It’s recommended you consult with your accountant if you think you may need an extension. Now that you know when to file, it’s time to gather and organize what you need to take to the accountant.
While tax season can be stressful, making sure you are well-prepared before meeting your accountant can make the process much easier. Below is a list of the necessities. If you’ve been using the same account year after year, they may already have some of this information on file. If this is your first visit to the accountant, make sure to bring this information with you.
When it comes to tax deductions, there are some specialized deductions that require very specific documentation.
Your accountant will need to have all your payroll information including copies of employee’sW-2s, W-3s, and 1099-MISCs. You will also want to provide them with health insurance payment and bonus information as these are considered business tax deductions.
There are several tax forms that require a COGS (cost of goods sold) closing balance for the year. Your account will need the current closing balance as well as the previous year’s to properly complete your small business tax forms.
Has your business purchased or sold any stocks or bonds during the year? Were there any owner investments or withdrawals? This includes any withdrawals made by the owner of a sole proprietorship or LLC as a form of salary. If there were, be sure to provide these records to your accountant.
It is strongly recommended once you have gathered all the documentation we’ve listed, you contact your accountant before your appointment to see if there is anything else they need. The better prepared you are, the easier tax season will be. If you struggled with the task of compiling all this information, it may be time to think about investing in software to streamline the process.
If you’ve considered this but lack enough working capital to make the investment, CapFlow Funding Group may be able to help. Our working capital solutions can quickly provide the funding you need to streamline your business. We work with business owners across various industries to find the best working capital solutions to their businesses on track. We are dedicated to providing the short-term working capital you need. Specializing in invoice factoring, we also offer merchant cash advances and work with trusted partners to make additional funding opportunities available. Our team will work tirelessly to see you through to success. Contact us today!
Mitigating risk is a constant challenge for small business owners. While survival rates for small businesses vary by industry, the threat of failure is often looming overhead. Some risks can easily take business owners by surprise, such as a natural disaster or an unexpected spike in inflation. Others are more common and, to some degree, controllable. The first step to avoiding business failure is identifying these key business risks. Understanding the risks small businesses typically face will make them easier to identify and address, improving your ability to avoid business failure.
Mistakes in hiring are one of the key business risks and can be crippling in a number of ways. First of all, hiring the wrong candidate will cause you to waste valuable resources. The payroll expenses and all the time spent training are lost once that individual exits your organization and you have to begin screening new applicants.
And it doesn’t end there. Depending on the conditions under which they left and your local labor laws, you could also end up paying unemployment benefits. Other potential risks go beyond turnover costs. Hiring the wrong candidate can disrupt company culture, decrease production, potentially cause a loss of clientele and revenue.
Underestimating the importance of a good business reputation is another one of the key business risks. As a business owner, it’s crucial to be aware of what is being said about your company online. Especially in this age of social media, not monitoring and responding to reviews can have a negative impact on your business. It is also important to ask customers for reviews.
In their recent blog reviewing 2019 online review statistics, QualtricsXM clearly demonstrated just how important online reviews and articles are for maintaining a good business reputation. Some of the most enlightening statistics are that 93% of consumers say online reviews impact their purchasing decisions and 89% of consumers read businesses’ responses to reviews. Additionally, businesses risk losing as many as 22% of customers when just one negative article is found by consumers considering purchasing their product. That percentage increases significantly to 59.2% if three negative articles pop up in a search query.
Not keeping your eye on the ball when it comes to your competition is among the most common key business risks. It is essential to understand your competition and never let your success fool you into believing they don’t matter. For every business move you make, whether it be a new product line or increasing your marketing efforts, you need to expect a competitive response. You need to anticipate what that response will be and have a plan in place to compensate for it.
Also, when developing a new business idea, keep in mind that someone among your competition may have already thought of it. Before investing too many of your resources into the idea, do some research. It’s possible your idea has already been put to the test by your competition and it failed. The takeaway is that you could identify where they went wrong and figure out how to circumvent it or simply pass on what could end up as a costly mistake.
Cyber threats are on the rise as hackers are constantly honing their skills and becoming more sophisticated. On top of that, businesses are collecting more personal data from their customers. Without implementing the proper cyber security systems, this combination could be a cocktail for disaster. A single security breach could cause the disruption of daily operations, diminish customer confidence, brand erosion and ultimately cause a business to close its doors permanently.
The business risks discussed are just a few of the many small businesses may face. However, these are some of the risks that it is possible to minimize with proper risk management. Implementing risk management is a vital investment in the success of your business. However, it can initially put a drain on your working capital leaving your business vulnerable.
CapFlow Funding Group offers working capital solutions to quickly provide the funding you need to grow and protect your business. We work with business owners across various industries to find the best working capital solutions to their businesses on track. We are dedicated to providing the short-term working capital you need. Specializing in invoice factoring, we also offer merchant cash advances and work with trusted partners to make additional funding opportunities available. Our team will work tirelessly to see you through to success. Contact us today!
As 2019 winds down, small business owners are making plans for the new year. For some, those plans are focused on business growth. Technology has significantly impacted the world around us, resulting in a rapid change in the business sector. While the plans you made for this past year and years before may have been effective, you’re going to have to reevaluate and revise them if you want next year to be a success. There are many factors to consider and it’s important to keep pace with today’s constantly evolving business landscape. Developing solid business growth strategies includes financial forecasting based on predictable revenue, strategic marketing, and putting solutions in place to handle unexpected obstacles and competitor activities.
It’s easy to get excited when looking forward to the future of your business. However, one of the best business growth strategies is not to tackle everything all at once. You should make a list of all your planned growth initiatives and prioritize them. This involves determining which initiatives you can realistically take on each year without overextending your annual budget.
If you look back at some of the businesses that have failed in recent years, attempting to scale up too quickly is often the culprit. Rapid growth requires additional inventory, staff and more, all of which will take a big bite out of the budget. If those investments in growth don’t deliver a return quickly, a business owner may find themselves without enough resources to support that growth. Instead of taking their business to the next level, they could end up shutting down.
Successful business growth strategies involve conducting thorough research before opening an additional location or launching a new product line. You need to analyze local and regional demographics, spending trends and future growth of the area. It is also important to assess the area and industry competition. Solid research will help you decide if your plan for growth is a good investment or if you need to explore different business growth strategies.
Today, almost everything in our lives is technology-driven and business marketing is no exception. Think about how quickly that technology evolves. The computer, phone or television you bought just a year ago is most likely already been replaced by a better model. Technology has changed the way business is conducted and you need to make sure your marketing strategy has evolved as well. While some traditional marketing methods such as print and television ads still work, they aren’t as effective as they were in the past.
Sticking with traditional advertising will cause you to miss a large part of your audience. In addition to online advertising, utilizing customer and demographic targeting technology offered by Facebook and Google will not only help you reach a larger audience, but it will also help you reach the right target audience for your products or services
An annual budget is not a ‘set it and forget it’ component of your business. You need to constantly monitor the cash flow in and out of your business. Before you even think about investing in business growth, you need to reserve sufficient funds to cover all of your expenses. This includes a contingency or emergency fund. Unexpected expenses can severely cripple a business and in some cases, result in the business closing down.
Properly managing your business finances is crucial to sustain and grow your business. There are a couple of ways to do this efficiently, allowing you to easily keep track of your finances. You can use professional business software to record incoming revenue and outgoing expenditures as well as generate profit and loss statements. These statements will provide vital information to run your business and remain within your budget. If financial management isn’t your strong suit, consider enlisting the services of a professional business accountant.
Almost every business will at some point find themselves in need of additional working capital, especially during the development of business growth strategies for the new year. Business growth can put a strain on the budget. However, that doesn’t mean you can’t move forward with it. Traditional banking institutions may have tightened the reins on small business loans since the financial crisis of 2008 but there are other options.
Alternative finance companies are providing multiple funding options, many with less stringent requirements and significantly less paperwork. Many business owners have been hesitant to take advantage of these alternatives to traditional business funding because they’re not the norm but, just like everything else business, financing has evolved. Many of these options are flexible and tailored to the specific needs of a growing business. By not utilizing them to help fund business growth you could be impeding your own progress.
Need a little help funding business growth in the new year? CapFlow Funding Group offers working capital solutions to provide the funding you need to grow your business. We work with business owners across various industries to find the best working capital solutions to their businesses on track. Our team will work tirelessly to see you through to success. Contact us today!
Business growth and stability – it’s what every small business owner strives to achieve and it takes capital to reach that goal. Maintaining sufficient working capital is a constant struggle for many small businesses, making it difficult to invest in growth. There are ways a business owner can increase capital as well as a variety of working capital solutions available through alternative finance providers. However, before investing in a growth strategy, it’s important to determine your current level of working capital and how much more you’ll need to fuel business growth.
Working capital is defined as a company’s current assets minus its current liabilities, found on their balance sheet. Cash on hand, accounts receivable, inventory and any short-term company investments will be listed as assets. Accrued expenses such as accounts payable, payroll, short term loans, and interest are listed as liabilities. Positive working capital means you have enough cash or liquid assets to cover all accrued expenses. That doesn’t necessarily mean there is enough capital to kickstart business growth. So how much is enough?
There is a basic formula that can help a business owner figure out their current level of working capital and where they need to be to start investing in growth. The first step is to determine the company’s current ratio which is their current assets divided by current liabilities. A ratio less than one means the company’s liabilities are costing them more than they are making. A ratio of more than 2 is considered the target ratio, indicating that your current assets are at least twice your current liabilities providing positive working capital. This ratio can vary by industry.
Exactly how much capital is needed for growth depends on the target ratio and how quickly you want that growth to happen. There are online working capital calculators such as SurePayroll that can help you figure that out.
There are internal working capital solutions that can help increase profits, build capital and fund growth. Start by taking a long hard look at your liabilities and see where you can reduce expenses. Review your payroll. Are you paying for employees to work overtime? It may be more cost-effective to hire temporary or part-time staff rather than pay the higher overtime hourly rate. Another way to reduce expenses is to refinance debt to get a lower interest rate or smaller payments. This can be done with high-interest rate credit cards or bank lines of credit.
Closely monitor your inventory levels to make sure you aren’t keeping more on hand that you need. The value of inventory can fluctuate over time, potentially leaving it worth less than what it costs. Find a supplier that can provide you with inventory quickly when you need it, allowing you to sell it and increase your profits while reducing your expenses.
Don’t overlook the value of assets that you’re no longer using. Equipment that has become obsolete for your company can be sold. Other businesses may be able to use it or in some cases, the materials or components that make up the equipment may be valuable such as scrap metal. Selling such equipment will increase your working capital.
Consider re-evaluating supplier contracts and see if you can negotiate with them to get lower prices. If they won’t budge, you can look for alternative suppliers who offer similar products at better prices. All of these methods can help improve your working capital.
Have you reduced liabilities on your balance sheet, converted unused assets into cash and creating positive working capital but still need a little more capital to grow your business? CapFlow Funding Group offers working capital solutions to provide the funding you need to grow your business. We work with business owners across various industries to find the best working capital solutions to their businesses on track. Our team will work tirelessly to see you through to success. Contact us today!
Has your small business grown to the point where you feel it’s time to expand? Whether you are looking to add new products or services to your offerings, open an additional location or relocate your existing location to a larger facility, successful business expansion requires proper planning. If you’re considering taking your business to the next level by expanding, Here are some factors you should consider before jumping in with both feet.
This is one of the first things to consider. You don’t want a business expansion to have a negative effect on your existing business. You need to ask yourself – Will new products or services complement or diminish existing offerings? New offerings need to increase revenue, not just sustain it. If you’re considering a new or additional location, will you be reaching a wider audience or just replacing your existing customer base with a new one? Your existing business has to remain strong and support new locations or offerings until they become established and begin to turn a profit. If the expansion will diminish your existing business, it may be best to put it on hold and rethink your growth strategy.
Also, if your plans for business expansion include an additional location, it will need your undivided attention to get it up and running. Can your current location continue to operate properly and generate a profit in your absence? You need to be sure that you have an experienced and responsible staff and the most efficient procedures in place before you can devote your attention to an additional location.
If your business expansion involves a new location, it is important to choose the right location. When you chose your existing location, you probably put a lot of time and research into making sure it was the best spot to open your business. You need to do the same with your new location, as you will be marketing to a new audience and be up against new competition. There is no magic equation to figure out how much distance should be between the two locations. Just make sure they are far enough apart that they won’t be sharing the same customer base. Otherwise, you will be increasing your overhead without increasing your profits. A new location should complement the existing one, not take business away from it.
You probably went through a lot of trial and error refining the systems you have in place at your existing location. Don’t try to reinvent the wheel when expanding to a new location. Implementing those existing systems at your new location will help you achieve stability and success much faster than you did at your existing location. Your new location will benefit from all the time and effort you put into developing your current system and using the same systems in both locations will streamline operations.
While the funds for expansion typically come from the existing business, be careful not to short change your current location or offerings. Pulling too much capital from your existing business could weaken it and leave it vulnerable. It is typically recommended to either build up enough excess working capital to fund business expansion or seek outside funding, either from traditional financial institutions, investors or alternative funding providers.
If you’ve done your research and you’re ready to move forward with business expansion, don’t let a lack of funding hold you back. Capflow Funding Group provides invoice factoring and merchant cash advances to boost your cash flow and kick start your expansion. CapFlow Funding Group is dedicated to providing the short-term working capital you need to keep your business growing. We will work with you to find the best funding solution for your business. While CapFlow Funding Group specializes in factoring and MCAs, 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.
It’s something that most small business owners don’t think about until it’s time to implement it, but an exit strategy is an integral part of growing a business. Just as you would plan for your personal retirement, you need to plan ahead for that time when you either hand over the reins or decide to simply close up shop.
There are a variety of ways to exit your business and move on to the next stage in your life. One of the most common options for a small business is to exit by handing it down to a family member. With this type of exit strategy, you need to choose someone who can handle the challenges of business ownership and groom them over time so they are prepared when you are ready to step down. Even if it was your intention to keep your business in the family, there isn’t always a family member who is up to the task. To ensure a successful exit strategy you may want to consider other options.
Selling your business is a great alternative to making it a family legacy and there are a number of ways to do this. You can offer it to a business partner, manager or a qualified employee. Often one of these people will be just as passionate about the business and its continued success as you are. They’re familiarity with daily operations and your customer base can make for a smoother transition. They may also want to continue working with you on a part-time consulting basis until they are confident in their own abilities.
If there isn’t anyone within your company interested in buying you out, a merger, an acquisition or an “acquihire” are also good options for an exit strategy. With a merger or acquisition, your business is typically either merged with or purchased by a company whose products or services align with yours. An “acquihire” is very similar to an acquisition but your business is purchased simply for the sake of acquiring its talented or skilled employees. While this can help provide consistency in their employment, it is important to negotiate for your employees’ needs when executing an “acquihire” or there may end up being a mass exodus leaving everyone unhappy.
Some business owners opt to close their business, rather than hand it down or sell it. This decision may be intentional or due to a lack of interested parties, but can still be a viable exit strategy. Exiting your business takes planning to ensure it is in the best possible shape no matter which exit strategy you choose.
A solid exit strategy should include tactics that optimize your company’s value and be an integral part of business growth. Here are some of the key things to focus on to keep your business growing and your exit strategy on track.
Build recurring revenue – Important to both business growth and fortifying your exit strategy, you want to figure out ways to increase your recurring revenue. It could be through subscriptions, loyalty programs or lease agreements – whatever creates repeat business for your specific industry. Potential buyers or family members poised to take over your business will want to know they have a certain amount of revenue they can count on every month.
Location, location, location – Just like in real estate, the location of your business matters. If it’s a physical location, it should offer easy access for your customers and provide ample and attractive space to conduct business comfortably and efficiently. For an online business, you should have an attractive, informative and user-friendly website that is current and fresh. The prospect of moving to a new location or a major website overhaul right out of the gate could make a potential buyer or family member hesitant to take over your business.
Measurable growth – In addition keeping pace with your industry, you should be implementing ways to outpace your competitors. This will have a significant impact on business growth and better position your company for a successful transition.
Diverse customer base – It just like that old saying “don’t put all your eggs in one basket”. If your customer base only includes one or two demographics, your business will be more vulnerable to fluctuations in revenue. The more varied your customer base is, the better shot you have at mitigating that risk and maintaining a more consistent income.
Proven sales funnel – No one knows your customers better than you. Be certain to document any successful sales tactics or techniques that have consistently resulted in conversion. Passing them on to the next person to take charge of your business will allow them to feel more confident in their future success.
Now, you’re probably thinking these sound a lot like things you need to do to grow your business – and you’d be right. Cultivating a successful business will make whichever type of exit strategy you choose equally successful. Along with hard work, dedication and sweat equity, keeping business growth on track can sometimes take a bit more working capital than a business has on hand. Securing small business funding to bridge that gap can keep your business moving forward toward the perfect exit strategy.
If a lack of working capital is holding your business back, Capflow Funding Group may be able to help. We specialize in factoring for businesses in need of short-term working capital. We also partner with other lenders to provide funds for businesses that require financial services other than ours. Contact us today and find out how we can help you grow your business and achieve your long term goals.
