Looking for stability in the chaos? Consider invoice factoring

 In Accounts Receivable Factoring, Alternative Financing

Mixed signals ahead

Uncertainty looms large over the coming quarter. Compared to last year, this fall shows some promise: People are getting back to in-person work, and demand for products and services is strong. Opportunities exist that have been dormant or spotty since the start of the pandemic.

However, just when many organizations envisioned a return to business as usual, the Delta variant has forced them to revisit their fourth-quarter plans. While demand is up, there’s also a kink in the supply chain caused by a shortage of trucks, drivers, and workers.

This uncertainty puts businesses in a challenging position as they examine their cash flow projections. Before deciding how to staff, stock, and expand, businesses like yours may be considering whether there’ll be another government stimulus, and if so, how large it will be. Will Delta drive a widespread shutdown as we experienced in 2020, or will businesses and schools largely remain open? Will labor shortages continue, and how much will wages rise?

One thing is certain—it’s harder to make a plan when so many factors remain up in the air.

A flexible option

In a volatile economy, stability can be in short supply. Invoice factoring can be a powerful weapon in your arsenal, providing access to cash flow when opportunities arise. And when the horizon looks unclear, a dependable source of working capital helps create more options to hedge against risk.

Invoice factoring is based on your current invoices. A factoring company accelerates your cash flow by advancing the cash as soon as your business invoices a customer for goods or services. Instead of waiting 30, 60, or 90 days to get paid, you’ll have working capital at your disposal within days. This reduces the chance that you’ll make investments in resources too early⸺or miss opportunities while waiting to receive funding.

Why choose invoice factoring over a bank loan?

Both invoice factoring and bank loans offer competitive rates, with invoice factoring often coming in around 1%. One of the bigger advantages of invoice factoring is speed. It can take as little as 4-6 business days for a factoring company to approve a business for funding and provide cash for up to 90% of the value of the invoice amount.

Another advantage is structure: A bank loan requires collateral, and involves the risk of losing that collateral. In addition, the loan may contain covenants requiring your business to meet goals for its performance or else pay financial penalties. By contrast, factoring contracts tend to be more flexible, with no long-term commitments and the ability to include as many or as few of your invoices as you’d like.

Does my recent credit rating matter?

Getting a bank loan may be difficult when you’ve experienced bad credit. But a factoring company recognizes that businesses have faced unprecedented hardships over this past year and a half. And so while there’s still paperwork and due diligence involved in any funding decisions, imperfect credit doesn’t have to be a roadblock.

What types of businesses benefit most from invoice factoring?

Any company that’s seeing a spike in demand can benefit from invoice factoring, including manufacturing, transportation, government contracting, staffing industries, and many more. One staffing consultant told us, “The demand for qualified people is through the roof. But without strong cash flow, I couldn’t take advantage of the opportunities. Invoice factoring gave a boost to my working capital, letting me stay competitive during these unpredictable times.”

Invoice factoring can also appeal to companies that often get overlooked by banks, such as start-ups and businesses facing a financial setback. It’s also a good fit for businesses that require a significant cash outlay to secure the resources necessary to deliver their goods and services.

To sum it all up: Uncertain markets can create timely opportunities, but they also may wreak havoc on a company’s cash flow. If your business is facing challenges from a disrupted supply chain, rising costs, and shortages of goods and workers, consider how invoice factoring can provide the cash you need to keep your business growing.

To find out if your business qualifies for invoice factoring, complete your application now.

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