Cashflow can be a real issue for companies in certain industries. When you deliver your goods and services before receiving payment, you’re often out of luck if the customer fails to pay. Even when you do receive payment, it may be up to 90 days before you see the cash, but you need funds for overhead expenses now. Running in the negative can end up seriously affecting your business’s ability to take advantage of new opportunities and grow.
Factoring can let you take these risks and turn them into assets by selling your accounts receivable. The buyer gives you an immediate payment on a portion of the owed funds and takes on the responsibility of collecting the client debt. It’s a mutually beneficial system that can be a real boon for a number of entities.
Growth can be difficult for trucking companies because of the many areas they have to invest in. To successfully serve more clients, they need to secure more of the following:
- Technology to track inventory
They may also require specialized equipment, such as forklifts and refrigeration units. Those rarely come cheap. Financing accounts receivable can allow trucking companies to invest in growth without putting their current business at risk.
Services such as gas, water, electricity, and internet are usually provided with the understanding that customers will pay for what is used. This can put service providers in a bind when invoices go unpaid. Factoring takes an industry-standard that usually costs businesses and makes it work for them instead.
While scoring a government contract can be a great boon for a company, it comes with its own issues. Bidding and planning consume resources that aren’t usually repaid right away. This can leave a company financially strained when it comes to actually complete projects.
Oftentimes, small businesses don’t have the same kind of financial security as large corporations. Delayed payments can, therefore, be especially painful. Limitations on capital may also squash opportunities to grow and achieve that sought-for security.
Many aspects of the food industry can benefit from financing accounts receivable, including agriculture, grocers and restaurants. The margins can be notoriously thin for these businesses, which is why a new source of capital would make a huge difference.
Factoring is a great solution for companies that constantly struggle with cashflow. It offers a new way to get capital while eliminating the risk that comes with accounts receivable.