Money is like gasoline during a long road trip. You do not want to run out of gas and stranded on the side of the road! Similarly, you do not want to run out of cash when you have a vision and are tirelessly working on your business dreams.
For driven entrepreneurs who get their companies past the initial start-up phase, it is supposed to be clear sailing from there. But, in the business world, things do not always go as you plan. Many businesses fail before they get a chance to see success.
One of the most widespread causes of business failures is a lack of necessary cash flow to keep the business afloat. This is especially true for start-ups. In many cases, entrepreneurs have business plans that allow for the first six months of the business to receive payment for by start-up funding. After that period, they expect their Company to sustain itself. The problem is the Company is still nonbankable. Unless they get the additional working capital, the Company may have to shut down its doors.
When a Business begins its search for additional working capital, it needs to have a realistic overview of what options are available. Also to know its needs and for what it may qualify. Given these factors, many businesses find themselves with few choices.
Additional Funding using Accounts Receivable
One of the most accessible and flexible options is to generate the funding needed for Accounts Receivable. Accounts Receivable Factoring allows a Business to reboot its growth by providing reliable cash flow. The Factoring Company will advance up to 92% of the accounts receivable amount at highly competitive rates.
You will get the working capital you need to keep your Business afloat in a quick, low-cost and tension-free way.
For small Companies and start-ups, financing options are insufficient. Also, borrowers are often discouraged when they try to ask a bank for a loan. Banks will only lend money to a company’s proven profitability. Typically, a business has to provide a minimum of two years of tax returns. Also needing its profit-and-loss statements, and balance sheets supporting their profits. In total, only about 1/5 of businesses get approval for a bank loan.
However, Factoring Companies can provide a cash flow solution for Businesses that have experienced negative retained earnings and poor profits. A Business can utilize Accounts Receivable Factoring when it is burdened by weak guarantors or has a negative tangible net worth. Even if the Company has a highly leveraged balance sheet or the extension of credit terms stretches its cash resources, with Accounts Receivable Factoring there is a funding solution to put the Business back on track.
Factoring can help out in emergencies. However, you should also consider it as a valuable tool for Businesses that are not experiencing financial problems. Using Accounts Receivable Factoring to turn your invoices into cash before your Business starts to see economic challenges puts you in a better position to avoid problems in the future.