Cash flow is the lifeblood of a business, large or small, and its ability to be successful in today's marketplace. However, did you know that 69 percent of small business owners in the USA have claimed that they are being kept up at night due to experiencing cash flow issues in their business?
Are you one of those business owners? Do you lose sleep at night or get caught up worrying about your cash flow?
Not having steady cash flow in your business is an easy way to lose employees and ultimately lose your business that you have worked so hard to build and grow. But, what if there was a cash flow solution that could help relieve the stress and keep your business growing?
Cash flow financing is essentially using some sort of financing or funding to help aid a business’ cashflow. This can come in many different forms such as invoice factoring, merchant cash advances, SBA loans, lines of credit and the list goes on.
There are so many reasons why a company would seek out options to finance their cash flow, like to keep up with operational costs, pay their employees, manufacture new orders, marketing and any other costs that go along with running a growing business. In this article, we are going to elaborate on a common problem that creates cash flow problems for businesses and one cash flow solution that has been utilized for decades and is accessible to most business owners. .
Payment terms. Having clients that require payment terms of 30, 60 or 90 days is very common and often a standard business practice. However, often expenses of payroll or manufacturing will come up while a business owner is waiting weeks, and sometimes months, for a customer to settle their invoices. We don't need to tell you that cash flow issues can completely hinder a company's ability to grow or even keep their doors open. The longer a customer takes to pay their invoice, the longer a business has to struggle to stay afloat with the expenses while they wait to be paid by their clients.
With 61% of small businesses experiencing issues with cash flow today, it's becoming more and more critical for business owners to have action plans in place to ensure their business does not needlessly suffer from insufficient cash flow.
Invoice Factoring is ultimately a cash flow solution. It is a kind of working capital that allows companies to have access to between 80 and 90 percent of their outstanding accounts receivable (or outstanding unpaid invoices) upfront. This allows them to compensate their staff and pay for any other expenses they have incurred while doing the work to produce the invoice or while moving on to the next project.
Companies use Invoice Factoring because it does not matter if their clients pay in seven days or 90 days, the 80-90% of the invoice value is available to them to meet their cash flow requirements. By using Invoice Factoring in your overall business strategy, you can grow your company without the financial limitations that come having all your business’ cash tied up in your outstanding accounts receivable.
A factoring company issues funds based on outstanding invoices/accounts receivable. So, once a business has an agreement with a factoring company, they submit copies of their outstanding invoices to the factoring company. The factoring company will then verify the work is done and, in most cases, will advance between 80-90 percent of the invoice value to the business. This enables the startup business to have access to cash or working capital for their business within hours of creating an invoice. This enables a business to:
Once the invoice is paid by the customer, the factoring company would receive a small fee for providing the service. This fee is generally around 1.5 percent of the invoice value but can change depending on how long the client takes to pay, and then the business would receive the rest at that time.
As businesses are constantly generating invoices for work completed, this can act as a type of line of credit that will continue to grow as the business utilizing the factoring grows.
Imagine having steady cash flow. The kind of cash flow that allows you to sleep at night, pay expenses, compensate your employees, and so much more, without wondering how it's going to get done. You won't have to wonder whether or not the funds will be there. You won’t be kept awake at night worried about unpaid invoices because the funds will already be in your bank accounts ready to be used as necessary.
How much sleep would you regain? How much stress would you get rid of?
By incorporating cash flow financing into your business model, you can get rid of stress, regain sleep, and keep your business running smoothly because you will have a steady flow of cash coming in!
If you have any further questions about invoice factoring for your business, feel free to reach out to us here at Meritus Capital anytime by email at info@merituscapital.com or call us toll-free at 1-877-648-3709. We have been providing factoring services to businesses across the U.S and Canada for almost 20 years!
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