Any company that experiences a steep increase in sales will generally experience a cash flow shortage. Like the trucking company that just landed a large account and now has to hire more drivers and pay for more fuel for their trucks on a weekly basis, then wait for 60 days to get paid for the loads. The runs are non-stop around the clock, but the cash flow is not.
Running inventory must be acquired to ship the loads as ordered to fill the contract regardless of the fact that the incoming cash was from loads ran 3 months ago when sales were lower. The scenario is much the same with rapidly growing service companies, which typically run into a shortage of staff to service their sales as they escalate to higher levels.
Numerous remedies exist for businesses experiencing a cash flow crunch, including various forms of debt and equity financing. However, the current slowdown has made banks increasingly reluctant to fund loan proposals that are not airtight, while equity funding, with the loss of control involved in shared ownership of a business, is not suitable for every company.
There is another type of financing that is more and more common every day called Accounts Receivable Factoring. While it is true that Invoice Factoring has been around for hundreds of years now, coming from the textile industry initially, it growing in popularity very rapidly in all industry sectors. The reason for its increased popularity is that the company that is selling the Accounts Receivable, will receive a cash injection of up to 90% of the face value of their invoices with 48 hours of the invoice being raised rather than having to wait 60 or 90 days to collect the invoice.
The Accounts Receivable Financing Company will generally remit the initial amount up to 90% of the Invoice face value and then submit the balance of the reserve once the customer pays the invoice, less the small service fee for use of funds. The money that is advanced can be used for any purpose the company sees fit ” payroll, inventory, fuel, or maintenance what ever they need the money for.
There are many alternatives to bank financing today, do your homework in finding the best option for your situation and keep an open mind. Banks are not always the best answer and they certainly are not the only answer. Financial brokers today have a vast array of products to fit most circumstances and the best ones are up to date with the latest trends and options so they can place your financing with the best product on the market. Most Commercial Finance Brokers have access to funds for Accounts Receivable Financing, Export Factoring, Purchase Order Finance, Commercial Equipment Loans and Commercial Real Estate Mortgages.