At one time or another, most businesses will run into cash flow problems. This happens even to the best managed businesses. It’s not unusual for a business owner to be so focused in managing operations or servicing clients that they lose sight of their cash flow, until it becomes a problem. Then, the business owners go in a frantic search for the solution. If they have business financing, they tap their line of credit. If they don’t have financing, they go to their financial institution and try to get a quick business loan. And that is usually where they run into a wall.

Most financial institutions provide financing based on your company’s collateral, your assets, the strength of your financial statements and your track record. Few companies with cash flow problems can show solid financial statements. Furthermore, most institutions can’t provide business financing quickly. Most require a month or two to complete the process. If your company needs emergency financing, waiting a month can spell disaster. However, ff you have a specific type of cash flow problem, there is an alternative that is usually easier (and quicker) to obtain than a business loan – it’s called invoice factoring.

Most companies that that sell commercial goods or services have to give payment terms to their clients. This means that they have to wait up to 60 days to get paid for their services. On the other hand, they also have to cover their current business expenses regularly. This creates a timing gap between income and expenses. Companies manage this timing gap by paying for expenses out of their reserves, while waiting for customers to pay. Sometimes due to circumstances, the gap becomes unmanageable. And that is where companies run into problems.

The simplest solution is to close the timing gap by asking customers to pay quickly . This can work if you offer them an incentive, such as a 2% discount for quick payments. But ultimately, you will end up at the mercy of your customers payment habits. A better solution may be to factor your invoices.

Factoring provides your company with a quick payment for its invoices by using a financial intermediary. The financial intermediary buys your invoices for an upfront payment and then waits until your customer pays. This provides your company with the needed liquidity to operate and expand. The factoring company charges a small fee for this service.

Invoice factoring is relatively easy to obtain and can be setup fairly quickly – usually in a week or two. The most important qualification requirement is the credit quality of your customers – factoring companies can only finance your invoices to credit worthy customers. Aside from that, your company need to be free of liens and legal encumbrances. Invoice factoring an ideal solution for companies that need emergency financing due to cash flow problems.

Although the natural gas and petroleum industry is doing very well, finding business financing for pipeline maintenance companies that serve this industry remains very challenging. Many are small or medium sized family owned companies that can have a difficult time qualifying for conventional bank financing because of their size. However, finding a source of financing is critical for growth, because pipeline maintenance companies are very cash intensive.

Most pipeline installation and maintenance companies run into cash flow problems because their customers pay their invoices in 30 to 60 days. However the pipeline maintenance company needs to pay a number of expenses much sooner than that – payroll needs to be met, rent needs to be paid monthly and suppliers need to be paid quickly. This creates a gap in the timing between revenues and expenses. And this gap can get many companies into trouble since they need to use their own cash reserves to cover expenses while waiting to get paid by clients. Ultimately, the company runs the risk of exhausting their cash reserves. At the very least, this will limit growth. If left unchecked, it could send the company into a financial tail spin.

There are three ways to handle and shorten the timing gap between revenues and expenses. You can accelerate your revenues by asking your customers to pay their invoices quickly. You will need to give your customers an incentive if you want them to pay sooner – a common incentive is to give them a 2% discount for if they pay an invoice within 10 days. A second approach is delay your expenses by paying your suppliers in 30 to 60 days. This may work for larger pipeline maintenance companies with good credit, but may not work for smaller companies. Most companies usually try to improve their cash flow by using a combination of these two strategies. While these two strategies can work, they ultimately leave you at the mercy of your clients and suppliers, who could change their minds at any time.

A third approach is to accelerate your revenues using invoice factoring. This strategy accelerates your revenues by using an financial intermediary, called a factoring company, between your company and your customers. The factoring company purchases your invoices for completed work (at a discount) and pays you upfront. This accelerates your cash flow and puts you in a better position to manage and grow your company. The factoring company then waits until your customer pays the invoice, at which time the transaction is settled.

One major advantage of factoring is that it’s easier to obtain than conventional business loans. Factoring companies consider your invoices to be your most important collateral and can finance them, provided they come from reputable and credit worthy customers. Because of this, factoring is accessible to small and medium sized companies that would not traditionally qualify for bank financing. Factoring can be a valuable tool for companies whose biggest challenge is that they need their customers to pay sooner.

Many business owners complain that access to business funding is the biggest limitation that they have to growing their businesses. It’s a sign of our current economic times, but companies are turning business opportunities away because they do not have the financial resources to pursue them. Many believe that a business loan or line of credit would solve their problems. However, it’s very difficult to obtain business financing in the current environment. Most institutions are reluctant to provide business loans to clients that cannot show substantial assets, sizeable collateral and strong financial statements. Few small companies can meet these criteria, so conventional debt financing in general is only available to companies that are in great financial health. There is an alternative though, one that lets you finance your company without using debt financing.

Having cash flow problems is one of the biggest reasons why many growing companies run into problems. For many, these problems start because they give their customer up to 60 days to pay their invoices. This common practice forces companies to use their own resources to cover expenses while waiting for customers to pay. This can lead to problems when the company runs low on cash or when customers start taking longer to pay. At the very least, it will prevent growth. At its worst and if not managed properly, it can put your company out of business. There are two ways to solve this problem without using a business loan. One way is to give your customers an incentive to pay quickly. A common practice is to offer then a 2% discount if they pay in 10 days. The problem with this strategy is that you are still ultimately at the mercy of your customers. The second alternative is to use an invoice factoring facility, a tool that allows you to obtain quick payments from your creditworthy customers.

Factoring accelerates your customer payments by using a financial intermediary, called a factoring company, that buys your invoices at a small discount and pays you upfront for them. This eliminates the problem of having to wait for customer payments and strengthens your cash flow. When managed properly, you can use factoring as a platform to grow your company without incurring in conventional debt. An important feature of factoring is that most transactions are structured as invoice purchases rather than as business loans.

The factoring company’s fee, commonly referred to as a discount, varies and it’s based on the size of your invoices, your sales volume and the credit quality of your invoices. As a matter of fact, the credit quality of your invoices is the most important criteria for qualification. This enables small companies, whose biggest asset is a list of strong clients, to use factoring to their advantage.

Most small and medium sized businesses that sell to commercial clients develop cash flow problems sooner or later. Most of these problems stem from the fact that companies have to deliver their products/services immediately but have to wait up to 60 days for customers to pay their invoices. On the other hand, the company still needs to pay many expenses quickly. Payroll must be met. Suppliers and rent have to be paid on time. This situation creates a timing gap between revenues and expenses, which can create serious cash flow problems. Unfortunately, business owners are usually caught in a catch 22. Large credit worthy customers will take their business elsewhere if you don’t give them up to 60 days to pay.

There are three ways to reduce the timing gap and improve the cash flow of your business. One alternative is to accelerate your revenue by asking customers to pay sooner. Many companies are willing to offer a 2% discount on their invoices to customers that pay in 10 days or less. Another strategy is to delay your expenses. For example, ask your suppliers to give you 30 to 60 day payment terms. However, to get 30 to 60 days payment terms, your company needs to have a good commercial credit. Using these two strategies will allow you to better match your revenues and expenses. The problem is that ultimately, you are leaving the fate of your company at the mercy of its clients and vendors.

There is a third alternative to solve this problem. You can accelerate your revenues using an invoice factoring facility. Factoring allows you to finance your invoices from large credit worthy customers – basically leveraging their credit strength to get financing for your own company.

Factoring works by using a financial intermediary, called a factoring company, that buys your invoices and provides an upfront payment. Your company gets immediate funding that can be used to cover current expenses or invest in growth opportunities . Once the factoring company buys the invoice from your company, they hold it until your customer pays. Once your customer pays the invoice, the transaction is settled. The factoring company charges a small fee for this service.

Obtaining factoring financing is relatively easy – your company needs to be free of problems and it needs to work with credit worthy customers. And, the financing line is directly tied to your sales, enabling it to grow dynamically as your sales grow.

Factoring is an ideal business financing solution for companies whose biggest challenge is that they can’t afford to wait 60 days to get paid by customers.

Although the recession officially ended a few years ago, the economy is still reeling from the economic after-shocks of the credit bubble. One of the most difficult challenges that small business owners are facing is the lack of conventional business financing options – namely business loans and lines of credit. Most lending institutions have substantial financial problems and are unable (or unwilling) to extend loans to small businesses, unless they have substantial collateral.

Businesses owners, on the other hand, have their own problems because cash flow is tight. Customers that used to pay in 15 or 30 days are now taking up to 60 days to pays their invoices. However, small businesses still have to pay employees and vendors on a timely basis. This creates problems, forcing managers to juggle payments between vendors. To complicate matters, many small businesses are turning away new orders simply because they are unsure if their cash flow will allow them to service the client properly. This create a vicious cycle that puts business owners in a catch 22.

There is one way to break this vicious cycle, and that is to use business financing to strengthen the company’s cash flow, enabling the business to take on new orders and grow. And since few institutions are offering financing, the only option is to use alternative financing. One product that has been gaining traction in the past few years is invoice factoring.

Invoice factoring is designed to solve cash flow problems that are created by slow paying customers. It accelerates the receipt of cash, providing the liquidity you need to cover current business expenses and grow the business. By eliminating the conventional net 60 day wait for payment, your company is able to make business decisions based on the potential of a customer, rather than their payment habits.

Factoring works by using a financial intermediary between your company and your customer. The intermediary, called a factoring company, buys your invoices and pays for them by advancing funds to your company. This provides your company with the needed liquidity to operate and grow. The transaction is then settled once your customer pays the invoice in full, usually 30 to 60 days later.

As opposed to other forms of financing, accounts receivable factoring is widely available and relatively easy to obtain. This two biggest requirements are to work with credit worthy customers and to be free of major problems, like liens and judgments. Customer credit worthiness is particularly important because the whole premise of factoring involves leveraging your customers commercial credit to your own advantage. This makes invoice factoring an ideal solution for small and midsized companies whose biggest challenge is that they can’t afford to wait 60 days for their customers to pay.

Most businesses are still feeling the effects of the past recession in one way or another. The most affected businesses are finding themselves with more liabilities that assets, leaving them with a negative equity situation. Unless handled correctly, this situation can easily spiral into a vicious cycle that ends with the company declaring bankruptcy or shutting down.

Most companies with negative equity also have cash flow problems. Most commonly, these appear when the customers start demanding longer payment terms. Instead of paying invoices in net 30 days, they start paying them in net 60 days. This creates a liquidity problem that forces the company to start juggling vendor payments and other expenses while waiting to be paid. It also limits the ability of the company to take new orders. Before long, the company goes into a tail spin.

Many times, this cash flow problem can be corrected with business financing, enabling management to turn the company around. And here lies the problem. Getting business funding while having negative equity is nearly impossible. You won’t be able to find a line of credit or business loan. And if you already have financing, it’s unlikely that your institution will increase the line. After all, if you have negative equity, your company has no collateral. And institutions don’t lend without collateral.

There is an alternative however. If you biggest problem is that you have cash flow problems due to slow paying clients, factoring financing may be the right solution to help you turn your company around. Invoice factoring accelerates your client payments by using a financial intermediary between your company and your customer. The factoring company, as the intermediary is called, advances you funds for your invoices as hold them until your customer pays. This increases your liquidity, improving your ability to pay vendors and take new orders.

One of the advantages of invoice factoring is that it’s easier to obtain than conventional financing. The collateral that factoring companies are most interested on are your invoices from credit worthy customers. Most factoring companies are comfortable holding only that as collateral. Aside from that, your company will need to show how it plans to turn around its current situation.

If you currently have another business financing solution in place (e.g a business loan), you will probably need your lenders cooperation to add and integrate factoring into your company. Turning around a company that has negative equity is very challenging. You should consider hiring a qualified financial professional to help you with this situation.

Trucking companies tend to be cash intensive businesses. To grow the company beyond the proverbial one person one truck business you will need access to capital or business financing. The big challenge is finding – and obtaining – business financing in this environment. Even though the recession ended a long while back, we remain in a small business credit crunch. Most financial institutions are unwilling – or unable due to their financial problems – to provide business loans to small transportation companies.

The biggest problem for most trucking companies and brokerages is cash flow. This problem stems from the fact that most trucking companies and brokerages have immediate expenses but delayed revenues. In other words, they need to pay for drivers, repairs and fuel quickly. On the other hand, customers pay their invoices 30 to 60 days after service. This time gap between expenses and income forces trucking companies to dip into reserves to cover current expenses. And therein lies the problem since few companies have the required capital reserves to cover current expenses for up to 60 days, while growing the company at the same time.

The obvious solution to the problem is to reduce the time it takes for customers to pay you. This is easier said than done since customers like being able to pay in up to 60 days. It helps them with their own cash flow. One strategy is to offer the customer an incentive to pay quickly, such as a discount if they pay within 10 days. It’s a good strategy, if your customers are willing to work with you. You will still be at the mercy of customers who may change their mind and opt out of the discount (and early payment). For many, the better solution is to use business financing.

There is one business financing solution that solves this cash flow problem and has remained available during the credit crunch. It’s called freight bill factoring. Freight bill factoring allows you to have the equivalent of a quick pay on your freight bills, without having to worry about convincing your customers to pay quickly. So instead of waiting 60 days to get paid, you can get paid in a few days. This strengthens your cash flow and helps ensure you have the funds to meet current expenses and take on new loads.

Freight factoring works by using a financial intermediary called a factoring company. The factoring company advances funds based on your freight bills and holds the invoices until your customer pays in full. Once your customers pay, the transaction is settled. The factoring company’s main collateral is the creditworthiness of the invoices it finances. This makes it a good solution for small carriers and brokerages whose biggest (or only) asset is a strong list of customers can benefit from this solution.

Factoring is an ideal solution for carriers and brokerages whose biggest challenge is not being able to wait 60 days for clients to pay their invoices.