Staying in business is often a major difficulty when your cash flow does not meet your standard requirements. As customers fail to pay quickly enough, you can seek the advantage of an Accounts Receivable factoring company so that your invoices are paid quickly and efficiently, and you do not have to wait for your customers to pay to benefit from an improved cash flow.
Banks Are Not Necessarily Your Best Friend
For a small or new business, banks may not appreciate your difficulties in mastering your cash flow and might not extend your overdraft facilities, if you have any, at the most important moment in the life of your organization.
A loan agreed by a bank would not be on favorable terms when you’re suffering from a difficult cash flow period unless your previous credit record was exemplary. Nevertheless, the final terms may not be as good as the short-term fee from a factoring company.
An Accounts Receivable factoring company effectively receives your invoice when work is completed. The factoring company is then responsible for paying the invoice within 24 to 48 hours and then sets out to receive the funds from your customer, without you being concerned about the actual payment date.
Your accounts receivable factoring company will have performed all the necessary credit checks on your client as a due diligence procedure to ensure that they are going to be able to receive their funds from your customer. You will not receive all the value of the invoice as a discounted amount will be the equivalent of a fee charged for the processing.
Factoring is a long established financial facility and is used by organizations of all sizes to improve their cash flow. Receiving the cash flow one or two months ahead of time may be the difference between your business continuing to exist of facing bankruptcy.