It’s what every small business owner dreams of – taking their business to the next level. The biggest challenge most owners face when trying to achieve this is having enough funding. Whether the growth is planned or an unexpected opportunity presents itself, it often takes much more cash than most small businesses have on hand, leaving owners in search of growth capital solutions.
What is Growth Capital?
Growth capital is sometimes confused with working capital or venture capital. Let’s start by explaining how they differ. Working capital is used to cover normal day-to-day business operations and venture capital is used to start a business. Growth capital is funding used to expand an existing business and increase profitability. Small business loans resulting in long term debt have traditionally been one of the most common growth capital solutions. Today’s business owners have more funding options than they did in the past. Invoice factoring can be a great option for business owners looking to fuel business growth without the hassle of a traditional loan or acquiring long-term debt.
Invoice Factoring Basics
For businesses that normally have to wait for 30, 60 or even 90 days for accounts receivable to be paid, invoice factoring can allow them to leverage the value of outstanding invoices and turn them into cash. Instead of waiting for clients to pay when their invoices come due, a business owner can sell them to an invoice factoring company, commonly known as a factor. Once approved by the factor, the owner will receive an immediate payment of those invoices, minus a small factoring fee. Those invoices are now owed to and collected by the factor. Invoice factoring can only be used for invoices to customers with good payment history. Overdue invoices can not be factored. When searching for growth capital solutions, invoice factoring can be beneficial in a number of ways.
Manage Cash Flow
Every business experiences fluctuations in cash flow, whether it’s waiting on invoices, a seasonal slump or a downturn in the economy. Consistently sustaining normal day-to-day operations is the first step to successful business growth. Invoice factoring can bridge any gaps experienced in cash flow, keeping your business on track and moving forward despite any minor setbacks.
Seize Unexpected Opportunities
Opportunities for growth often appear when least expected and business owners often lack the cash to take advantage of them. For example, let’s say a small business finally gets that big order they’ve been hoping for – unfortunately, it will take much more capital than they currently have access too. Invoice factoring provides the necessary capital to take on that order without impacting the ability to cover daily operations or taking on long term debt.
Invest in Business Growth
Investing in business growth can be a tall order for a small business. Growth involves more inventory, more employees, more equipment and of course, more cash. Freeing up the revenue a business has in outstanding invoices can allow owners to get all the essentials for successful business growth.
Growth Capital Solutions
Invoice factoring is just one of the growth capital solutions available in the alternative finance industry. CapFlow Funding Group offers invoice factoring and merchant cash advances and 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 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.