Solutions
Financing Solutions For Small Businesses...
Putting Your Receivables To Work For You
No business can function without
reliable cash flow and sufficient funds for operations.
In the case of small businesses,
this may be a vital factor for survival. Insufficient operating funds may prevent the
business from accepting new contracts simply because the cash or credit necessary to
service the contracts is not available. The business may have a high amount of accounts
receivable - that is, it's owed a great deal of money - but that money may not be due for
30, 60, 90 days or more. There is a limit to how long your suppliers will wait, and with
expenses such as payroll, there is no flexibility at all.
For many businesses, a simple
answer to this problem may be "invoice discounting", sometimes referred to as
"factoring".
In its simplest form factoring,
or invoice discounting, allows a company to sell it's rights to payment for products and
/or services satisfactorily rendered to creditworthy customers. By selling receivables,
the business can generate cash almost immediately, instead of waiting the usual 30, 60, 90
days. The amount paid for the receivable will be discounted by a small amount,
representing the factoring company's fee, and the factoring company will want to verify
and control the transaction with the ultimate payer.
Sometimes, as an additional
service to pure invoice discounting, a factoring company will help the business arrive at
the invoicing stage by providing a guarantee of payment to a necessary supplier. A
business may have the ability to generate orders from large creditworthy companies or
government agencies, but cannot perform the transactions without cash or credit. With a
credit guarantee in place, suppliers will have the confidence to release the goods,
thereby solving the problem.
The supplier guarantee will
commit to payment within a mutually agreed upon time, provided the goods and services are
satisfactorily accepted by the end-user. This arrangement assures the supplier that a
creditworthy third party is administrating the ultimate transaction funds and promising
payment within the specified terms.
With these techniques, the client
is now in a position to obtain higher credit and accept business that it would otherwise
have had to decline. Review the circumstance of a few typical examples
of companies who take advantage of factoring.
If your money is tied up in your
receivables, but you need an improved cash flow now, then call Fleet Street at
416-929-9272, or send an , and find out how
to get an immediate advance on your money.
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