Many reliable small and medium-sized companies have a cash flow problem
. You may be in that situation. Even though you deliver your products and services efficiently, while sending customers timely invoices; your customers' accounts payables are set up for 60-day payments. You get in a bind because your accounts receivable lags behind your accounts payable. Although the shortage is no fault of your own, you still have a cash flow problem. Your receivables don't keep up with your payables. And your bank or financial institution won't provide the capitol to keep you running. Your company isn't big enough to obtain a loan or line of credit without high interest rates and payment that cut into your net profit.
There is an alternative that's been gaining popularity as more corporations convert their payables to 60-day cycles. Companies like yours have been turning to accounts receivable factoring to obtain financing to insure a steady cash flow. A Factoring company buys your accounts receivable. They pay a first installment of as much as 90% of the invoice values immediately. After your customer pays them, the factoring company pays you the remainder of the invoice value minus a small fee.
The appeal of accounts receivable factioring lies in the ease of obtaining financing and the efficient way it can be set up. A factoring company bases their decision to accept you as a client by your customers rather than your own financial records. Getting factoring is much simpler than working with a bank for financial support. The acceptance process takes considerably less time and the cost could be considerably less than interest you would pay for a loan or line of credit.
An additional benefit occurs when you agree to accept invoice factoring from a company. It only takes a week or so to set up the process. And the only adjustment you have to make is in your accounting system since you'll be receiving checks from the company rather than your customer.
Factoring could be the answer to your cash flow problems, by facttoring your receivables for as much as 90% of their value. Invoice factoring allows you to meet your monthly obligations. You don't have to wait for your customer's 60-day cycle. You maintain a steady cash flow and avoid paying late fees to your vendors.
It's a win-win situation. With accounts receivable factoring, you can stop worrying about your financial stability. You continue to sell your products or services to reliable customers and get paid in a timely manner.