As a small business owner, there may seem to be a limited number of options when it comes to funding for business. If you are only thinking of traditional types of lenders, this may be the case. However, with the sale of accounts receivable, it is possible to access the cash your customers owe before the account is due, giving you cash on hand to avoid having to take out a loan.
There are several very good reasons that a business should use the sale of accounts receivable. As this is not a loan, it offers several short and long-term advantages, including no need for repayment, no change on the business profit and loss statement and no complicated application forms.
Replenishing Inventory
With a 30 to 90-day invoice, it can be difficult for a company to have the funds to replenish inventory to take on new work. By using a factoring service to obtain funds immediately rather than waiting, your company can take on new work and boost your customer base.
Making Payroll
It is not uncommon for a business to have difficulty making payroll even when they are thriving and growing. By using the sale of accounts receivable, employees are always paid on time, helping to retain the best employees to continue with the company.
Seasonal Opportunities
With seasonal businesses, the 30 or 60-day payment window can easily push payment outside of your peak time for work. By accessing the funding immediately through the factor, you can use those funds to keep your business growing without having to worry about loans and payments throughout the slower part of your sales year.
As there are many different ways that a business can use funding in advance of customer payment, factoring plays a big part in many successful businesses. Considering this option over traditional loans provides even a small business with a wealth of opportunities not available through other funding means.
