How can factoring companies help you succeed?

Invoice Factoring Group

Managing the the available cash flow of a company can be one of an entrepreneurs most important jobs. While it may seem like mundane bookkeeping, making sure you have enough money to run your operations and grow your business is critical. It often involves juggling payments from customers and payments to suppliers and vendors. This task is often complicated by the fact that corporate and government clients often demand payment terms and most suppliers demand quick payments.

Payment terms affect your cash flow

Most corporate and government customers demand to be given term credit - that is the option to pay an invoice in up to 60 days - as a condition of doing business with your company. Few business owners plan for this cash delay, which often leads to financial problems. In some cases, it may mean that you can't pay suppliers on time because you don't have the money. In other cases, you may have to turn clients away and lose a sale because you don't have the working capital to deliver. But in the worst cases, it may cause you to miss payroll or other critical expenses, causing irreversible damage to your company.

Solve the problem - Finance your invoices

One simple solution is to negotiate a faster payment from your clients. This can be possible if you offer them something in exchange, such as a quick payment discount. Many clients will be willing to a accept a 2% discount from you and provide a quick payment. However, this won't always provide reliable payments since clients can change their payment habits as they see fit. And this can be a problem is you need reliability.

A better alternative that can provide reliable working capital is to finance your invoices. Factoring companies can provide a simple value proposition. They will finance your invoices and provide immediate working capital, in exchange for a fee. The fee is usually percentage and is discounted from the invoice at final payment.

Factoring your invoices has two very important advantages. The obvious one is that it improves your cash position, allowing you to run your company smoothly. You no longer need to worry about slow paying clients because you always have the option to finance their invoices. But there is a more important advantage. It allows you to offer credit terms to customers with ease. You can increase your sales because it removes the limitations caused by slow payments. For many companies, this can be a tool that moves them to greater sales success.

Is it right for my company?

This solution can be used by a number of companies. If you answer yes to the following questions, financing receivables may be right for you:

  1. Are your commercial clients creditworthy?
  2. Do they pay in 30 to 60 days?
  3. Are their slow payment creating working capital problems for you

How does it work?

Most transactions are structured using a two installment payment model. Your company gets the first installment, usually 85% of the gross value of the invoice, as soon as the work is delivered and accepted by your client. You get the second installment, 15% (less the fee), once your customer pays in full.

Tool for growth

Most receivables factoring companies do not impose maximums on their lines. This means that you can finance as many invoices as you can generate, provided that they meet the criteria for funding. This flexibility, enables the line to grow dynamically along with your sales. And this feature makes it an ideal tool to finance sales growth.

Rates as low as 1.5% for qualified clients. Advances as high as 85%
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