How The Problem can be the Solution for Your Company’s Cash Flow Issues

It’s hard to imagine a company that has more business than they know what to do with running into cash problems, but that is precisely what happens many times. The source of the financial problems isn’t necessarily that the business doesn’t know how to handle its money. Sometimes, the problem is that a business has to wait for invoices to be paid.

Often times, services or products are provided before payment is made. In situations where invoice owners are slow to pay, it can put a business in a very difficult position by not having the cash that they need to continue operations. Fortunately, there is a viable solution to these cash flow issues.

The problem that many businesses face with slow to pay invoices is the exact solution for their cash flow problem. Not in the fact of getting invoice owners to pay their bill, although that is a good thing, but often it’s leveraging those outstanding invoices for necessary capital. This brings into play a third-party factor. These individuals or businesses loan money pursuant to outstanding invoices. This allows the business to have the capital necessary to continue operations without worrying about prompt payment from someone with an outstanding invoice.

A factor will typically either loan money against an existing invoice or, in some cases, the factor will purchase the invoice at a discounted rate. In situations where the invoices are leveraged for immediate capital, fees and interests are applied to the percentage of money loaned against the invoice. Once the invoice is paid, the business remits the amount of money borrowed as well as the interest the loan has accrued in any outstanding fees. When a factor purchases an invoice, the financial transaction is settled once the factor receives payment from the invoice owner.

While it may seem somewhat complicated, the process is fairly simple and is also extremely common. If your business is facing a cash flow issue because of outstanding invoices, factoring can be a necessary process to allow your business to have the capital it needs to continue doing business. Whether that means making payroll, purchasing more inventory or expanding the business, factoring is a viable and advantageous method of creating business capital from outstanding invoices. If your business is in a situation where it’s having cash flow issues, you may want to find out here how factoring can help.