Corporate cash flow nightmares are more common than most people think. Thanks to the current uncertainty about the economy, many companies have started delaying payments to their suppliers. They still pay, but they pay later. Two years ago, invoices usually got paid in 30 to 45 days. Now they may take 60 or even 70 days to pay. Large customers delay payments for one single reason – it helps their own cash flow. They get to use the cash, that was destined to pay your invoices, for 15 or 30 more days. Think of it as an interest free short term loan that you make to them.

Having clients that pay beyond terms can create a cash flow nightmare. Many business owners run their business very tightly, with little room for error. It only takes a few late payments to throw operations into a tail spin. When this happens, business owners compensate by starting to pay their own bills late. This can easily get out of hand and start affecting the ability to meet payroll. If you are at risk of missing payroll you know you have a nightmare in your hands.

Since making clients pay quickly is no usually an option, there are two possible solutions. One solution is to start building a reserve fund ahead of time. This ensures you will always have money to cover all expenses. But this comes at a cost because money in the reserve fund can’t be used in other parts of the business. And, few companies have the resources to build the fund.

A second alternative is to look for business financing. This will usually solve your problem, if you get the right type of financing at the right time. Unfortunately, asking for a business loan when you are in the middle of a cash flow disaster seldom works. Most financial institutions will only give business loans to companies that have solid financial records.

A better solution may be to use invoice factoring, which provides an advanced payment for your invoices. Factoring covers your customers payment gap and provides the liquidity you need to operate your business. Furthermore, most factoring companies are used to working with clients that have financial problems or are turning around their business, so few will be too concerned if your financial statements show some problems.

Factoring is a very specific solution, it helps bridge the gap between delivery of services and payment, and can help stabilize cash flow. It’s an ideal solution for companies whose biggest problem is slow paying clients.

Finding a way to finance your business in the current economic environment remains pretty difficult. Most institutions have tightened their business financing standards and will only offer business loans to large companies that have substantial assets and impeccable financials. Unfortunately, few small companies have been able to weather the recession without a substantial financial impact. And thanks to the recession, most small businesses don’t have impeccable financial statements – that’s why they need business financing. Fortunately, a business loan is not the only financing alternative.

Is your company having cash flow problems because customers are paying their invoices slowly? If this is the case, and If your customers have good commercial credit, you may be able to use invoice financing. Invoice financing bridges the gap between delivery of service and payment and helps companies with cash flow problems. This solutions provides predictable cash flow, enabling the company to meet expenses and capitalize opportunities.

There is one critical advantage of that differentiates invoice financing from other solutions. Your customers credit is much more important than your own company’s financial situation. This means that companies whose biggest asset is a solid list of customers can usually benefit from invoice financing.

Most invoice financing transactions are structured as invoice purchases – where the financing company buys the financial rights to your invoices and pays you immediately. They settle the transaction once your client pays the invoices in full. The key point is that the finance company buys the invoice, therefore they are very interested in the credit worthiness of your client. They consider that to be the strongest collateral for financing. And this allows you to leverage your clients financial strength to your advantage.

Having good paying clients is a key requirement to qualify for an invoice financing program. Additionally, your invoices need to be free of legal encumbrances such as liens or judgments. Generally, invoice financing works best for companies that are reasonably free of problems. However, it can also be used in turnaround situations where funding is needed to restructure operations.

Finding business financing for a company has always been a challenge. to complicate matters, the current economic environment has made it a nearly impossible task to find investors. Nowadays, investors are looking for safe investments, and unfortunately, small and medium sized companies are not considered safe investments.

Although investor financing has many benefits, you should also consider alternatives that don’t require that you give up ownership in the company. One common way to finance a company is to use a business loan. Although business loans are well known, they can be difficult to get because they have to go through a strict underwriting process. To qualify for a business loan, most companies need impeccable financial statements, solid assets and a few years of positive operating experience.

One alternative to business loans is factoring financing. This solution specifically helps companies with cash flow problems that arise from slow paying clients. It provides a cash advance against slow paying invoices, enabling your business to cover operating expenses. By reducing the number of days it takes you to get paid, invoice factoring can help free cash flow that can be deployed to new projects and growth opportunities.

One of the advantages of invoice factoring is that it is reasonably easy to obtain. Most factoring companies structure the transaction as a purchase, meaning they buy the invoice from you. Since they are buying the invoice, their biggest concern is the credit quality of your clients. This means that small companies or medium sized companies with a short track record but very solid clients can usually qualify.

Factoring companies buy invoices in two payments. The first payment covers about 80% of the face value of the invoice. Your company gets this very quickly. The second payment covers the remaining 20% of the invoice, less the factors fee. This payment is usually provided shortly after your client pays the invoice in full.

Invoice factoring is a flexible financing solution that can help small and medium sized companies that have cash flow problems.

It’s not unusual for small and growing manufacturing companies to have some cash flow problems. Most of them stem from the fact that there is a delay between delivering your products and actually getting paid for them. This delay can last from 30 days and go up to 90 days and is a common industry practice.

The problem is that few manufacturing companies can wait that long to get paid. They have a number of current expenses that must be paid for – rent, supplies, electricity and salaries. The discrepancy between dollar inflows and outflows can cause major headaches to manufacturing company owners.
Getting clients to pay quickly is one possible way to fix this problem. It seldom works though. Most of your clients actually need to delay payments themselves to keep their cash flow straight. Another alternative is to use business financing to bridge the gap.

Most company owners will try and use a business loan to solve this problem. Although business loans can have several advantages, conventional loans tend to lack the flexibility needed to solve this problem. Furthermore, qualifying for a business loan can be a daunting task that requires weeks or months of work. Your lending institution will likely require that your company been in good financial health, have solid assets and have seasoned executives.

There is another solution that may work better than a small business loan. It’s designed to specifically reduce the gap between outflows and inflows – it’s called invoice factoring. Invoice factoring uses a financial intermediary (a factoring company) to finance your invoices while waiting for your client to pay. This strengthens your cash flow providing the liquidity you need to meet current expenses and tackle new orders.

Since your invoices are a liquid asset, most factoring companies buy your invoices outright. Because of this structure, they make most of their funding decisions based on the creditworthiness of your client. This enables you to leverage the creditworthiness of your clients and use it in your favor. Most small companies whose biggest assets is a roaster of good (but slow)paying clients can usually benefit from factoring.

One of the worst nightmares for a business owner is not being able to get the financing they need for their business. For many owners, the need for financing occurs when they have a cash flow emergency . Unfortunately, trying to get business financing during a cash flow emergency is very difficult.

Most cash flow emergencies happen due to the difference in timing between income and expenses. Often, expenses happen first. Income then follows. Due to this, companies need to have a cash reserve to handle expenses. However, business owners sometimes overextend themselves and get into trouble.

For example, most companies sell their products/services to other businesses on credit because large clients demand it. So companies give their client 30, 40 or 60 days to pay their invoices. However, the company itself must still meet its obligations while it waits to get paid. It has to pay suppliers. It has to pay rent. And most importantly, it must meet payroll. Sooner or later, the company may face an unexpected expense and run into trouble. It won’t be able to wait until an invoice gets paid. That is when the problems start.

Asking clients to pay sooner seldom works. Few, if any, will agree. Most clients pay their invoices in 30 to 60 days because that is how they keep their own cash flow healthy. An alternative is to look for business financing. Most business owners will focus on trying to get a business loan. The problem is that business loans are hard to get – especially if the business is in trouble. The lending institution will usually need to see audited financial statements, strong assets and excellent growth prospects. Few companies with cash flow problems meet this criteria.

A better alternative may be invoice financing. Invoice financing is specifically designed to strengthen cash flow by providing interim financing until invoices are paid. It provides the financing quickly, usually a few days after invoicing, enabling you to cover your operating expenses.

One important advantage of invoice financing is that the financing company uses the commercial credit of your client (who is paying the invoice) as part of their decision process. This makes it a viable solution for companies whose major strength is that they work with creditworthy clients. Additionally, most invoice financing lines can be setup in around a week, making it an ideal situation for companies that need funding quickly to cover an emergency.

Finding small business financing in the current environment is very difficult. Lending institutions are being very cautious and are only providing business loans to companies that have impeccable financial statements, a long history of growth and substantial assets. Because of this, few small companies can get a business loan or other forms of conventional financing.

Fortunately, not all financial problems need to be solved with a business loan. Many cash flow problems, common to small business, can be solved using invoice factoring.

Most small companies run into cash flow problems because they don’t have an adequate reserve of capital to handle unexpected growth or costs. This situation is worsened by the fact that small companies usually have to give clients 45 to 90 days to pay invoices. This leaves the small company with the hard costs of delivering their product or service while having to wait for payment.

Asking clients to pay their invoices sooner will not work. Most clients, especially large corporations, require 45 to 60 day payment terms. Most will have these payment requirements in their contracts and won’t show flexibility. And unfortunately, if you don’t provide them with payment terms, someone else will.

This is where invoice factoring comes to play. You can get an advance on your invoices using a financial intermediary, called a factoring company. This provides you with the liquidity you need to operate your business. The factoring company holds the unpaid invoice until maturity and then settles the transaction with you when the client pays.

One of the biggest advantages of invoice factoring is that it enables you to leverage your invoices. Factoring companies look at the credit worthiness of the companies paying the invoices as an important components in their funding decision. This means that a small company whose biggest assets is a client list of large credit worthy companies can usually qualify for this form of financing.

At one point or another, almost every company will need some form of business financing to grow the business to the next level. For small companies, finding the right type of business funding can determine the difference between success and failure.

One of the most common reasons that small companies look for funding is cash flow problems. These are usually caused because clients don’t pay their invoices immediately, but rather pay them in 30 to 60 days. The company dips into their reserves to cover expenses, while they wait to get paid. And if the company has minimal reserves, as small companies do, there is a chance that the company will eventually run into problems.

You can address this cash flow problem in three ways. Your first option is to try and get clients to pay their invoices sooner. This has little chance of success since large companies usually demand 45 day payment terms and put a clause to that effect in their contracts and purchase orders. Your second option is to get a business loan from an institution. The problem with that strategy is that business loans have difficult qualification criteria. Institutions require that your company have impeccable financial statements, a solid growth history and substantial assets. Almost by definition, small companies do not have substantial assets.

Your third choice is to finance your invoices. Invoice financing solves the cash flow problem by providing an advance against you slow paying invoices. This provides your company with the liquidity it needs while reducing the burden of waiting for invoices to be paid. The transaction works by using a financial intermediary, who funds your invoice and holds it to maturity. The transaction is then settled once the clients pays the invoice.

Most invoice financing transactions are structured as a purchase – where the financing company purchases the invoice from your company at a discount. Since the financing company is purchasing the invoice, one of the most important criteria for their decision is the credit worthiness of your client )who is paying the invoice). This feature makes invoice financing accessible to small companies whose biggest asset is their customer list.

Sooner or later, almost every business will run into cash flow problems. Although ideally you want to prevent these problems, this is not always possible. Part of running a business involves, at times, living a little bit on the edge. Sometimes, you go a little farther than you should have.

One of the more common causes of cash flow problems is slow paying clients. These happen because most commercial sales are not paid immediately, but rather 45 to 90 days after the product or service has been delivered. Few business owners can afford to wait that long to be paid, though. There are constant business expenses that have to be covered.

Common wisdom suggests that companies should keep a cash reserve that is large enough to cover expenses while waiting to get paid. This works beautifully in theory but seldom in practice. The truth is that most small companies keep inadequate reserves.

One way to fix this problem is to complement the cash reserves with business financing. Selecting the right type of business financing to help with this problem is critical. Most business owners will first try to get a business loan. They soon find that business loans have difficult qualification requirements. The business must have a profitable track record and impeccable financial statements. Also, the business and the owners need to have substantial assets. Few will actually be able to get the loan.

However, a business loan is not always the right solution. You can eliminate the cash flow problem from slow paying clients by factoring your invoices. Invoice factoring provides you with a funding advance on your invoices. This enables you to cover business expenses while waiting to get paid. The transaction is facilitated by a factoring company, who buys the invoices from you (at a discount) and hold them until maturity. Since the factoring companies buy invoices, their biggest concern is that the invoice will be paid. Although the factoring company wants to make sure the company selling the invoice has no major problems, they are more interested in the credit worthiness of the company paying the invoices. This makes factoring an ideal solution for small companies who don’t have a lot of credit or a long track record – but have a solid list of clients.

Common wisdom suggests that companies should keep a cash reserve that is large enough to cover expenses while waiting to get paid. This works beautifully in theory but seldom in practice. The truth is that most small companies keep inadequate reserves.

One way to fix this problem is to complement the cash reserves with business financing. Selecting the right type of business financing to help with this problem is critical. Most business owners will first try to get a business loan. They soon find that business loans have difficult qualification requirements. The business must have a profitable track record and impeccable financial statements. Also, the business and the owners need to have substantial assets. Few will actually be able to get the loan.

However, a business loan is not always the right solution. You can eliminate the cash flow problem from slow paying clients by factoring your invoices. Invoice factoring provides you with a funding advance on your invoices. This enables you to cover business expenses while waiting to get paid. The transaction is facilitated by a factoring company, who buys the invoices from you (at a discount) and hold them until maturity. Since the factoring companies buy invoices, their biggest concern is that the invoice will be paid. Although the factoring company wants to make sure the company selling the invoice has no major problems, they are more interested in the credit worthiness of the company paying the invoices. This makes factoring an ideal solution for small companies who don’t have a lot of credit or a long track record – but have a solid list of clients.

Most companies that have weathered the recession have been left in a shaky financial position – where that can’t completely capitalize the current economic recovery. For many companies, cash flow has degraded to the point where they are living from client payment to client payment. For example, most commercial invoices used to get paid in 30 days. Now it usually takes 45 to 65 days to get paid. Sometimes even longer.

Although payments seem to take longer to come by, expenses seem to pile on very quickly. You have suppliers to pay. Payroll. Utilities. Office expenses. And the list goes on. This creates a serious gap in your company’s cash flow. And this gap can prevent your company from growing once the economy improves and sales start increasing.

One way to fix this problem is to ask clients to pay their invoices faster. However, this seldom works as most clients are paying slowly because they have problems of their own. The alternative solution is to get business financing. Few companies are able to obtain business loans in the current environment though. Institutions are only lending money to companies that have impeccable financial statements, substantial assets, years of experience and well seasoned management. And even if you meet this criteria, qualifying for a business loan is far from certain.

A third approach is to fix the cash flow problem using accounts receivable factoring. This solution reduces the cash flow gap by financing your invoices, and therefore reducing the amount of time it takes you to receive payments. The transaction uses a third party financing company referred to as a factoring company.

The transaction mechanics are fairly simple. Once you have an invoice from a credit qualified client, you sell it to the factoring company, which pays you for it in a few days. The factoring company will buy your accounts receivable in two payments. The first payment is usually for 80% of the invoice. You get the remaining 20%, less a factoring fee, once your client pays the invoice in full.

Qualifying for accounts receivable factoring is easier than qualifying for conventional business financing. The most important requirement is that your clients need to have solid commercial credit.

Most business owners are confronted with a tough economic environment. They have to work harder and longer to get sales. And when you do get the sale, clients insist on paying their invoices in 30 days or more.
Although giving 30 to 60 day payment terms to commercial and government clients is customary, it can also drain your company’s resources. Few companies have the necessary cash cushion to cover all their operational expenses while they wait for clients to pay. There are two ways to solve this problem.

The simple solution to this problem is to get clients to pay their invoices quickly. In reality, this strategy seldom works because large corporate clients are used to getting 30 – 45 day payment terms. If you can’t offer it to them, they will go somewhere else. The second solution is to get business financing, and use it to cover the cash flow gap.

Getting a business loan in the current lending environment can be very difficult. Most institutions have tightened their lending requirements and will only provide business loans to companies that have a solid track record of performance, impeccable financial statements, seasoned management and substantial assets. Unfortunately, few companies can meet this criteria.

However, there is a different way to solve this problem. It provides the equivalent of a quick invoice payment – but without requiring your clients to pay quickly. It’s called invoice financing. With invoice financing, a funding institution provides advance on your invoice. This gives you immediate liquidity to cover business expenses. The transaction settles once your client actually pays for the invoice. The funding institution charges a fee for their service, usually based on the size of the invoices and the time they took to get paid.

One advantage of invoice financing is that it’s easier to get than a business loan. Having high quality commercial customers is the most important criteria for funding, since funding is based on your invoices. This makes invoice financing an accessible solution to small and medium sized companies who have a solid client roaster.

One of the side effects of the current recession is that business financing has become hard to get. A few years ago, business credit was flowing and companies could shop from bank to bank looking for the best terms. Nowadays, even companies that have solid financial statements are having problems getting a business loan. This situation is not likely to change for the foreseeable future as many lending institutions have capitalization problems and won’t be able to lend much until these problems are solved.

Because of this, many companies that need business financing will need to find an alternative – or do without. One alternative that has been gaining popularity is invoice factoring.

Invoice factoring is designed to solve the cash flow problem that are generated when clients pay their invoices in 30 to 60 days. While extending 30 day payment terms is common for commercial clients, many small and midsized companies can’t afford to wait that long to be paid. They have a number of expenses that need immediate handling, such as supplier payments, payroll and rent. Factoring invoices can reduce the days outstanding on invoices substantially, putting your company on a solid financial footing.

The mechanics on invoice factoring are fairly simple. Once the work or product for an invoice is delivered, you sell the invoice to an intermediary company called a factoring company. The factoring company examines the business credit of the company paying the invoice (your client), and if acceptable, buys the invoice from you at a small discount. This provides a quick source of funding that can be used to cover operational expenses and grow the company.

Most factoring transactions are structured with two payments. The first payment, called the advance, is for about 80% of the invoice amount. The second payment, which is for the 20% reserve (less fees), is rebated once the invoices is actually paid in full.

The biggest advantage of factoring is that it’s easy to obtain. Most small and medium sized companies can get it, provided they have solid clients and no encumbrances on their assets. This makes invoice factoring an ideal solution for companies that cannot afford to wait 30 to 60 days to get paid by their clients.

Small businesses have been one of the biggest victims of the economic credit crunch. Some have seen their revenues go down. And almost everyone has seen their cash flow suffer. Clients that used to pay in 15 days are now paying in 30 or even 45 days. And those that used to pay in 45 days may now be paying in 60 days. The net effect of this is that cash flow weakens, and with it, the company’s ability to operate.

Although larger companies have sufficient reserves to wait for payments, few small companies do. And, due to the lack of credit, small companies usually need to pay their own bills sooner. This creates an unsustainable situation, where the end result is downsizing the company, if not closing it.

The most obvious way to solve this problem is to get a business loan. The problem, especially in today’s market, is that qualifying for business loans is very hard. Most institutions are being cautious, in part due to their own capital problems, and are only providing business financing to their prime customers. These are customers that have solid income statements, strong balance sheets and seasoned management teams. This also rules out a number of small and midsized business owners who also need the funding.

One alternative that is often overlooked is invoice factoring, a solution that is specifically designed to address slow payments from commercial clients. It helps by providing an advances for your slow paying invoices – this accelerates your cash flow enabling you to meet your obligations. You get immediate funds, while the factoring company who bought the invoice from you, waits to get paid. The transaction settles once your client actually pays the invoice. The factoring company charges you a small fee for the service.

The transaction is usually structured as a sale – where you sell your invoice to the factoring company. Because of this structure, factoring companies are more interested in the commercial credit of your clients than yours. This means that small to medium sized companies whose biggest asset is a list of solid customers can usually obtain factoring financing.

Finding the right type of business financing for your company can be a major challenge, especially in the current economic environment. Understandably so, institutions are behaving cautiously and only providing business loans to their prime clients. To qualify for a business loan, companies have to show that they have solid balance sheets, stable (or growing) income and an experienced management team. These requirements put small and medium sized companies in a competitive disadvantage since few will have the financial stability to qualify for financing, especially in today’s marketplace.

A business loan is not always the best solution to cash flow problems, especially if these are caused by slow paying clients. In most commercial transactions, clients have to pay their invoices in 15 to 30 days. However, most companies have been extending their payment terms to 45 or 60 days as a way to cope with the current credit crisis. Small businesses have been affected the most, because they can’t afford to wait 45 to 60 days to get paid. The need the funds immediately to fulfill their own obligations.

Factoring financing could be a good solution If the company’s biggest problem stems from cash flow and clients that take too long to pay. It is very different than a business loan. With factoring, a financial intermediary called a factoring company buys your invoices for an immediate payment. They wait for your client to pay the invoice and settle the transaction, while you get the benefits of the immediate funding. Most factoring companies will charge a fee for their services – usually a percentage based on the invoice.

One of the biggest advantages of working with a factoring company is the way the structure their transactions. Since they buy your invoices, their biggest concern is the credit quality of the company paying for the invoices. This allows you to leverage your client’s commercial credit and make it work to your advantage. Thanks to this structure, small companies that have a solid list of clients can usually qualify for this type of financing.

Factoring can be an ideal solution for companies that can’t afford to wait 60 days to get paid and that sell to solid commercial clients.

Most companies experience a cash flow shortage at one time or another. Unfortunately, thanks to toughening economic conditions, cash flow shortages are becoming common place. As a general rule, experts recommend that companies keep a cash cushion that is equivalent to six months worth of operating expenses available as cash in a bank account. The cash cushion can cover any variations in your cash flow and enables the company to operate efficiently.

There is a problem with this strategy, though. Few small companies can afford to have that much money tied in a bank account. Especially in the current economic environment. But without it, the company is exposed to serious problems if customers start paying late or if they face an unexpected expense.

One way to bridge any gaps in cash flow is to get business financing. Getting a business loan can be difficult and time consuming. Lending institutions have tightened their due diligence requirements and will only provide business loans to companies that have solid balance sheets, seasoned management teams and well developed growth plans. The problem with this is that few small companies have solid balance sheets. In this case, an alternative source of funding called invoice financing may be the right solution.

Invoice financing can reduce/eliminate the 30 to 60 day wait to get paid for your accounts receivable. It provides an advance payment for your invoices, smoothing out your cash flow and ensuring you are better prepared to meet your expenses and address new opportunities.

Financing your invoices is fairly simple. You work with an invoice financing company, who evaluates the quality of your account receivable and provides an advance based on those results. One important advantage of invoice financing is that the financing company considers the invoices to be strong collateral. Because of this, small companies with a solid list of clients can usually benefit from financing their invoices.

Hurry up and wait. It’s common knowledge that clients always want business owners to hurry up and delivery their services – only to have them wait 30 to 60 days before invoices are paid. Giving 30 to 60 days terms to clients can have substantial implications for small and medium sized businesses, who simply may not be able to afford to wait for payment.

Unless a company has a substantial capital reserve, waiting for payments can be very difficult. There are businesses expenses that must be met – rent, telephone and supplies. There is also payroll, one of the most important businesses expenses that must be met – on time – every time.

If you lack the funds to wait, the obvious solution is to get business financing. This is easier said than done, especially in the current market. Qualifying for a business loan can be a long tedious and uncertain process. One alternative to business loans – at least in some instances – is to get and advance on your invoices using invoice factoring.

Invoice factoring is a simple financing process that provides you with an immediate advance on your invoices. Instead of waiting for your clients to pay, a factoring company advances you funds on each qualifying invoices. The transaction is completed once your client pays the invoice in full. The factoring company charges a fee for this service, which is usually based on a percentage of the invoice gross value.

Factoring has a couple of advantages over conventional business financing. A factoring company is in effect, buying your invoice for a discount (their fee). Because of this structure, they are more interested in the credit quality of your clients than in the financial strength of your company. This makes it easier to qualify for. However, your company must be reasonably well managed and free of any liens or encumbrances. The other advantage is that qualifying for factoring is a quick process – and can usually be completed in a couple of weeks.

Although factoring is not a cure-all, it’s an innovative solution that should be considered if your company cannot afford to wait to get paid on its invoices.

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One of the side effects of the economic crisis is that more companies need business financing while less institutions were willing to provide it. Because of this, companies started looking for other options to business loans. One of the options that has gained substantial traction in the last year is invoice factoring.

Invoice factoring is a form of financing that is often offered by factoring companies. It’s ideally suited for companies that are selling goods/services on net 30 to net 60 days, but can’t afford to wait for payment. This is a common problem since most medium sized companies have immediate expenses and don’t have the necessary capital to wait for payment.

Factoring companies solve this problem by accelerating payment of your invoices. They act as an intermediary who buys your invoices and pays you for them immediately. This provides your company with the necessary cash flow to pay operating expenses and handle new orders. The factoring company, which now holds the invoice, waits for your client to pay for the invoice and settle the transaction.

A factoring company usually buys your invoice in two payments. The first payment, called the advance, is usually 80% of the invoice. The remaining 20% is called the reserve and is held to cover any invoice discrepancies and potential underpayments. Once your client pays the invoice in full, the factoring company sends the second payment, which is the 20% reserve less the factoring fee.

Factoring fees are determined by the credit quality of your clients, the volume of financing that you need, your industry and invoice diversification. They vary in range but they are usually a specific percentage of the purchased invoices.

One of the big advantages of invoice factoring is that factoring companies consider the credit quality of your invoices to be your biggest asset. This means that medium sized companies that have a solid roster of clients can usually qualify. However, to qualify for factoring your invoices need to be free of any potential encumbrances or liens.

Business owners are usually surprised that a business that has solid income can actually have serious cash flow problems. Sounds like a contradiction, but consider that income is usually booked when you invoice the client – not when they pay. And in the commercial world, clients pay on “terms” and can take 30 to 60 days to pay for their invoices. This cash flow gap can surprise many business owners and create serious problems to the company.

One way to handle the gap is to try to convince clients to pay their invoices sooner. Sometimes this works. Oftentimes, it doesn’t. Clients like to pay invoices in 30 to 60 days because it helps their own cash flow. You can be sure they will be reluctant to change their payment habits.

Another alternative is to apply for business financing. The current lending environment is difficult though, and getting a business loan will require substantial work and take time. Since most institutions are being very careful with their business loans, you can expect them to be very diligent and require a lot of documentation, such as financial and tax reports. And even if you have reasonable financial statements, there is a chance your request will be denied for other reasons.

There is a third alternative is to use a financial intermediary to get a quick payment on for your invoices. Invoice financing, as the process is called, is relatively straight forward. A financing company advances a payment against your net 30 to 60 invoices. They hold the invoice until it pays, while you get immediate use of the money. The company charges a fee, usually a percentage of the invoice, for this service.

One advantage of this form of financing is that the financing company provides you with financing based on the strength of your invoices. This enables small companies with a good list of clients to get this form of financing. Another advantage of invoice financing is that it’s easier and faster to qualify for than a small business loan.

Invoice financing can be a great solution for companies that have good clients but can’t wait 30 to 60 days to get paid for the products and services.

The number of companies looking for business financing has increased as a result of the current economic environment. Unfortunately, the number of institutions that are willing to provide business loans has decreased substantially. This has created a surplus of companies who need but can’t access to funding in their time of greatest need.

One of the biggest reasons companies need funding is because they have cash flow problems. These can stem from lowered sales and slow paying clients. As a matter of fact, slow paying clients represent a major challenge for business owners. Accustomed to paying invoices in 30 to 60 days, it’s hard to ask clients to pay invoices faster. Especially when they can take their business to competitors elsewhere at any time.

If your biggest challenge is that you can’t afford to wait for your clients to pay, and your business is otherwise doing well, invoice financing may be the right solution for you. When used correctly, invoice financing can provide the needed funding to help your business.

To use invoice financing you need to work with a funding company that acts as an financial intermediary between your client and your business. Once you invoice your client, you sell the invoice to the funding company, who pays for it immediately. This gives you the funds you need to pay expenses and grow the business. The invoice financing company, who now holds the invoice, settles the transaction once your client pays in full.

One major advantage of invoice financing is that the funding company main interest is in buying quality invoices. That means that clients with few assets other than invoices from solid clients can usually qualify for this type of funding. Also, the funding is tied to your sales, and therefore is dynamic. It will grow with your sales volume.

Invoice financing is a solution that works well for companies whose main problem is that they can’t afford to wait up to 60 days to get paid by clients.

There is nothing more frustrating to a business owner that having to turn away sales because they lack the cash flow to support them. For companies that sell products, this means not being able to replenish inventory in time to capitalize new opportunities. For companies in the service industry, this means not being able to pay the additional employees (or hours) to cover additional service requests. This problem is fairly common, especially for small and midsize businesses.

There are many things that can cause cash flow problems. The most common problem is a simple one: timing. The timing of the revenues does not match the timing of expenses. For many companies, expenses come before revenues. For example, a product supplier buys inventory (an expense), sells it on net 30 terms and then collects revenues 30 days later. Likewise, a staffing agency can place employees, who must be paid weekly but then bills the client on net 30 terms. Again, they wait 30 days before being able to collect the revenue. Unless the company has a capital reserve to operate the company and grow while waiting to be paid, it will run into problems.

The solution to this problem is fairly simple. The right business financing solution can fix it. The problem is that getting a business loan can be very difficult for small companies. They require substantial documentation and collateral. And many times, they can take a long time to close as the institutions credit committees review the cases. There is an alternative solution that can work better than a small business loan – especially if your challenge is that you cannot wait 30 to 60 days to get paid by clients. It’s called factoring financing.

Factoring is a very different than conventional business loans. With factoring, you get an advance for your outstanding invoices. This is the equivalent of a quick pay. This helps correct the timing problem between expenses and revenues and provides your business with the cash flow to support existing operations and new sales.

Most factoring companies don’t lend money, rather they buy the financial rights to your invoices. Their most important consideration is your clients’ ability to pay the invoice in a timely fashion. This makes invoice factoring accessible to companies who don’t have substantial assets but do have great clients. However, the credit quality of your invoices is not the only qualifying consideration of a factoring company. Your business must also be free of judgments, lawsuits and liens.

Factoring transactions tend to be structured as a sale with two installment payments. The first installment is usually 80% of the invoice value and is given to you as soon as the invoice is sold to the factoring company. The second installment, usually 20% less the financing fee, is given as soon as your client pays for the invoice.

Small business factoring integrates quickly into most organizations and it has a very specific scope: it is designed to solve the cash flow constrains generated the timing discrepancy between expenses and revenues.

Most companies are able to finance operations and growth by using their own funds or by having the owners make additional capital contributions. Some companies do this by choice – they dislike the idea of getting business financing. Most companies, though, do so because they have no other choice. They just cannot obtain conventional business financing.

Many companies that run into cash flow problems do so because there is a timing gap between expenses and revenues. Usually expenses are immediate, but revenues are delayed for 30 to 60 days. Revenues are usually delayed because of the common practice of offering net 30 payment terms to clients. This timing gap can affect the availability of funds for other projects or worse, may force the company to delay certain critical payments.

One possible solution is to use a business loan (or line of credit) and use it to cover expenses when available funds are low. However, business loans are usually hard to obtain and can have inflexible limits. Furthermore, the loan application process can require that you provide the institution with substantial documentation and can take a long time to close. Many times, a better solution is to use receivables factoring to accelerate your revenues.

Factoring accelerates your revenues by providing your company with an advance for your net 30/60 invoices. This provides the necessary funds to cover operating expenses. The accelerated cash flow strengthens your company’s financial position enabling you to capitalize on new opportunities.

Qualifying for accounts receivable factoring is relatively easy since the main collateral are your invoices, which are backed by the reputation of your clients. It’s also more flexible than other forms of financing since it’s dynamic and moves in parallel with your billings. This enables your financing to grow, as your company grows. Accounts receivable factoring is an ideal solution for companies in the staffing , services, manufacturing and transportation industries.

Finding the right business financing solution for a company can be a major challenge, even for seasoned professionals. Each financing solution has benefits and drawbacks and knowing which solution to deploy is critical. Deploying the wrong solution can have long term negative consequences for your company, dragging down growth.

One specific challenge stems from selling products and services to other companies on net 30 terms. This can be a problem because most companies incur a number of expenses before delivering their product or services. Waiting an additional 30 to 60 days to get paid increases the gap between spending funds and receiving revenue. This forces the company to dip into reserves to pay for operations. There is no problem with this strategy as long as the company has sufficient reserves. However, the company can get into problems very quickly if the reserves are exhausted. Interestingly, this can happen from a seemingly positive event, such as winning a large sale or project.

There is a specific business financing solution for this type of problem. It’s called accounts receivable factoring and it works by providing your company with a quick payment on your net 30 to net 60 invoices. The quick payment reduces, or eliminates, the gap between expenses and revenues. This puts your company on a solid financial footing, providing a platform for sales growth.

Qualifying for receivables factoring is usually easier than qualifying for a small business loan. Most factoring companies are more interested in the quality of your receivables than anything else since that is the collateral that secures their transaction. Thanks to this approach, small and medium sized companies with few assets other than a strong list of clients can usually qualify.

Accounts receivable factoring integrates fairly easily into most companies and works as follows. Once your company completes the work, you send a copy of the invoice to the factoring company. The factoring company gives you the first advance on the invoice which is about 80% of the face value. Once your client actually pays the invoice, the factoring company remits the second advance, which is the remaining 20% less the financing fee.

This type of financing lends itself well to certain industries. For example, staffing, security and transportation companies commonly factor receivables as a way to ensure they have funds to meet operational expenses.

Invoice factoring has been gaining popularity as an alternative to conventional business loans, especially for startup, growing and distressed companies.

Let’s examine a situation that is all too common in business. A small business lands a contract to supply products or services to a large company. It’s a solid contract that calls for ongoing deliveries and will be very profitable for your company. However, there is a small problem. Your client has asked that you give them 60 days to pay the invoices.

This puts you in a complicated situation. If you try to negotiate for a quicker payment, your client may think that your firm does not have the financial wherewithal to provide the product or service. If you agree to those terms, you have to be prepared to cover all expenses for two months. It’s a difficult choice. What’s worse, if you can’t afford to wait 60 days to get paid, your only alternative is to turn the opportunity away.

The common solution is to get business financing and use that to cover the 60 day gap. However, few conventional financing products are designed to solve this problem. A line of credit is probably a good solution. A business loan, on the other hand, may not be the best solution. Although business loans can help address this problem, they tend to be better suited to buy capital goods and equipment.

There is one solution that is specifically designed to solve this problem. It’s called invoice financing. As its name implies, invoice financing provides funding for your net 30 to net 60 invoices. This is equivalent to getting a quick payment on the invoice and enables business owners to cover business expenses without having to wait up to 60 days to get paid by clients. It provides stability to company’s cash flow, enabling the owner to better manage expenses and to better determine which opportunities to pursue.

Most invoice financing transactions are structured as a purchase, where the factoring company finances the invoice in two installments. The first installment, usually 80% of the invoice, is made as soon as you invoice your client. The finance company withholds 20% to cover any invoice discrepancies or underpayments. However, the remaining 20% less the discount, is advanced as soon as your client actually pays for the invoice.

Offering 30 day payment terms, or net 30 as it’s called, is a requirement for companies that sell goods and services to larger companies or the government. As a matter of fact, thanks to the recession, most companies are paying their invoices in 45 or as many as 60 days. Larger companies do this because it’s a source of cheap financing for them. They get use of your services and products for up to 60 days before having to pay for them.

While this arrangement is good for the larger businesses making a purchase , many small and medium sized vendors can’t afford to wait 60 days to get paid. They have their own expenses to deal with – salaries, rent and vendors. Due to this, growth will be limited to the amount of available capital. Vendors will sign on new clients until they reach the point where they can no longer afford to offer terms – and then stop growing.

One way to extend your capabilities and support growth is to get business financing. Some financial products address this problem better than others. Small business loans, for example, can be used to cover operating expenses but are not ideal as they are usually better suited for buying assets or making certain types of investments. Lines of credit offer more flexibility than a business loan in this case, but like most business loans have bank imposed maximums or limits.
Usually, a better solution is to use invoice financing. As its name implies, this solution provides you with financing based on your invoices. The financing company advances you funds against your invoices, enabling you to cover operating expenses.

By financing your invoices you can offer net 30 to net 60 terms without having to worry about waiting for payment. This provides you an important competitive benefit while improving the financial stability of your business. Invoice financing is a flexible solution as it dynamically adapts to the changes in your accounts receivable. This enables you to focus on the most important task of all – growing your company.

One of the most important features of invoice financing is that it’s easier to obtain than other forms of financing. All you need is a business that is free of liens/judgments and has a solid roster of clients who pay their invoices in 30 to 60 days.

Managing the cash flow of a growing business is a constant juggle for company managers. On the revenue side, most of your clients want to pay their invoices on 30 to 60 days. On the expense side, you have to deal with many immediate expenses that have different payment timeframes. Most pressingly, payroll, which tends to be either monthly, biweekly or weekly.

One way to improve your cash flow is to demand that your suppliers give you the same terms you offer your clients. In other words, if you give 45 days of payment terms to your clients, you want your suppliers to give you 45 or more days. This is easier said than done. Unless you own a large company or have impeccable business credit, most of your suppliers will demand quick payment.

One of the easiest ways to get into a cash flow squeeze is to have clients that pay in 60 days but have expenses that are immediate. Your only solution is to cover the gap with your company’s resources until invoices get paid. Unless you are careful managing your sales, revenues and expenditures you are bound to get into trouble and run out of resources.

One way to solve this problem is to use business financing. Although a small business loan is seen as a solution by many, they have their own challenges. They are hard to get, require extensive application processes and more importantly, require that the company and its owners have impeccable credit. An alternative to a conventional business loan is to use invoice financing.

Invoice financing eliminates the 30 to 60 days invoice payment wait, helping companies gain a more stable financial footing. It’s provides the funds you need to meet you immediate expenses, enabling you to tackle new opportunities.

One critical difference between invoice financing and other products is that invoice financing companies look at the credit worthiness of the company paying the invoice as their most important source of collateral. This feature makes invoice financing a viable alternative to small companies with thin or no credit, but a strong list of clients.

Most invoice financing transactions are arranges as an invoice purchases, where the factoring company finances/purchases the invoice in two installments. The first payment, usually 80% of the invoice, is made as soon as you submit the invoice to your customer. The remaining 20% ,less the discount, is advanced as soon as your client actually pays for the invoice.

Having a business loan application rejected can be a very heavy blow for a business. Ultimately, this may mean that the business will not be to invest for growth – or not be able to cover certain expenses. For many companies, having business financing is a requirement for growth as they need funds to be able to expand the company into new opportunities.

The two most commonly known financial products that are used to improve a company’s cash flow are conventional small business loans and lines of credit. Although these two products are the best know, they don’t always provide the best solution. If the biggest challenge your company has is that you can’t afford to wait 45 days to get paid by your commercial clients, you should look into invoice financing.

Most commercial transactions follow the same format. The product or service is delivered, along with an invoice. The client then has between 30 to 60 days to pay your invoice, depending on the terms you offer. Many companies have no alternative other than to offer payment terms simply because large companies demand it. It is a cost of doing business, though it could cost you your business if you can’t manage your cash flow properly.

One way to solve this problem is to use invoice financing. Invoice financing is a fairly straight forward product that has been gaining market traction in the past years. It eliminates the 30 to 60 days invoice payment wait, helping companies gain a more stable financial footing. One critical difference between invoice financing and other products is that invoice financing companies look at the credit worthiness of the company paying the invoice as their most important source of collateral. This feature makes invoice financing a viable alternative to small companies with thin or no credit, but a strong list of clients.

The majority of invoice financing transactions are structured as an invoice purchase, where the factoring company finances the invoice in two installments. The first payment, usually 80% of the invoice, is made as soon as you submit the invoice to your customer. The remaining 20% ,less the discount, is advanced as soon as your client actually pays for the invoice.

Financing any business in the current credit environment is extremely difficult. Banks and many financial institutions are retrenching their credit facilities, forcing companies to look for financing elsewhere. One of the business sectors that has been hit the hardest is manufacturing.

Manufacturing companies tend to be cash flow intensive businesses. They are constantly paying suppliers and employees. There are equipment, payroll, supplier and rental expenses to handle. Most managers (or owners) will do their best to keep up to date with these payments, or they risk getting their company into trouble. What usually gets cash flow into trouble is that most clients pay their invoices in 30 to 60 days. Basically, most owners need to pay suppliers before they get paid by clients. Therefore, unless the company has a cash reserve, it will run into problems.

This situation can be fixed with business financing. Unfortunately, getting a business loan is the current environment is very challenging. Business loans are simply not available to companies unless they have stellar credit and impeccable financials.

But let’s review the problem though. The issue is the timing difference between when expenses are made and when payment is received. If you accelerate the payment, the problem is solved.
How do you accelerate a payment? One way to accelerate a payment is to finance it through a factoring company. When you factor an invoice, you assign it to a factoring company who gives you an advance payment for it. This accelerated payment can be used to pay corporate expenses therefore alleviating the pressure on your cash flow. The transaction is settled once your client pays the invoice in full. Factors will charge a fee for their services, usually a percentage of the invoice.

In an invoice factoring transaction, the factoring company is buying your invoice, rather than lending your company money. Since the factoring company is buying your invoice, the commercial credit of your customer (who actually pays the invoice) is very important. Because of this, many companies with good customers can qualify for factoring financing, even if they are startups or have some financial difficulties.

Managing a company’s cash flow is one of the most important functions of a business owner during tough economic times. If done correctly, it will ensure that the business is there to thrive another day. If done incorrectly, it will jeopardize the business.

From a cash flow perspective, cash moves in only two directions. It moves in, when you make money. It moves out, when you pay expenses. Keeping this flow in balance is one of the toughest jobs in any business.

This problem is even more complex for companies that sell to other businesses or to the federal government. Large business clients usually expect to be given terms – which means that they will pay their invoices in 30 to 60 days. But as a business owner, you are usually presented with expenses that must be paid regularly. There is rent. There is payroll. And then, there are suppliers. All of which demand payment now. This difference in the timing of the flow of “cash in” and “cash out” usually creates a problem for business owners. If the business has ample cash reserves, the solution is simple. Pay the expenses now and replenish the reserves once a client pays. But what if you own a small business – or a growing business – and have no reserve? Then you must get business financing to cover the gap.

Most people think that obtaining business financing is difficult and requires a complex application process. While this is true for certain business loans, it is not true for all financial products. As a matter of fact, factoring, a product that is designed to deal specifically with cash flow problems, is fairly easy to get.

Factoring provides a simple solution. You sell your invoice to a factoring company, who advances you money for it. This reduces the time you take to get paid. The transaction is settled once your client pays the invoice in full. It’s a fairly simple concept.

As a matter of fact, you are selling the invoice to the factoring company, so usually factoring is not considered a business loan. Because of this, factoring is relatively easy to get, provided your company does not have any liens or judgments and provided your clients have good commercial credit.
Factoring financing is a little know solution that can help a company improve its cash flow and when used correctly, it can position the company for growth.

Invoice factoring is quickly becoming a mainstream business financing tool that being used by small, medium and large sized businesses. It has been gaining traction in part because banks have tightened their lending standards, leading company managers to look for business financing elsewhere.

Although most business owners are familiar with how business loans work , few are familiar with factoring. The most important thing to know about factoring is that it is designed to help companies that cannot afford to wait 30 to 60 days to get paid for their invoices. Companies that sell products to other companies or the government usually need to wait 30 to 60 days to get their invoices paid. While some companies have no problem extending 30 days terms, many do and can’t wait. Invoice factoring solves this problem by giving your company an advance for the invoice. This minimizes the amount of time you wait to get paid and provides funds to cover business expenses.

When you factor an invoice, your company actually sells the financial rights to the invoice to the factoring company. Because of this, the transaction is structured as a sale, with two payments from the factoring company. The first payment, usually referred to as the advance, is given to your company as soon as you sell the invoice. The advance is about 80 to 90% of the invoice. You get the remaining payment of 10% to 20% (less factoring fees) once your client actually pays the invoice. This second payment is usually referred to as the rebate.

One major difference between a business loan and a factoring line is that qualifying for factoring is a lot easier and quicker. Since factoring companies are usually buying the invoices they factor, their biggest concern is the credit worthiness of the company paying the invoices. Because of this, small businesses and distressed companies can usually have a good chance of getting a factoring line, provided they work with a strong roster of customers.

Costs for factoring will vary but are usually higher than the cost of a business loan. Costs are determined by the size of the line, the credit quality of the invoices, the industry and the stability of the client’s business.

Selling products and services to the US government can be a very profitable enterprise. The US government can be one of the best customers your business can get. They buy almost any product and service that exists. By law, they are structured to help small business owners succeed. And, unlike most commercial customers, they pay their invoices quickly. If you work with government projects you know that you need to treat this customer very well and be sure that you always deliver what you promised – on time and at the right cost.

So, what happens if you bid for a government contract, win it, and realize that you don’t have the capital to deliver? One alternative is to try and go to an institution to get business financing. Many institutions will provide a business loan (or similar financing) to government contractors. But as you know, qualifying for business loans can be very difficult, especially for startups. Institutions will review your business plan, along with your company’s financial statements, management team and track record. Because of this, many startup companies find that obtaining financing can be very challenging.

This problem is particularly challenging for product re-sellers. Most product re-sellers that work with the government need to pay their suppliers before they get paid by the government. Because of this, they can only compete for certain bids since their capital limits the size of the projects that they can pursue. Some resellers are able to negotiate better terms with their suppliers, basically enabling them to wait until the government pays them first.

There are two other alternatives that can help you grow. They are invoice factoring and purchase order financing. Both are alternative sources of financing and can be ideal for government suppliers.

Let’s looks at two examples to see how invoice factoring and purchase order financing can help your company grow. Let’s say that you have a government purchase order that you have completed and will get paid in 30 days. Let’s also say that your supplier needs to be paid in 10 days. The problem could easily be fixed if you could get an advance payment on your government invoice. That is exactly what accounts receivable factoring can do for you. It provides you with an advance on your invoice that enables you to pay your supplier on time. This enables you to maximize the use of your supplier’s payment terms to your advantage, helping you grow your company.

Now let’s look at a more complex problem. Let’s assume that you won a government contract that is substantial and you have a supplier that is demanding an advance payment before shipping the goods. This situation is very common for startups because few of them have any type of supplier credit. In this case, the solution is to use po financing. PO funding helps you pay your supplier so that the government order can be fulfilled. The transaction is then settled once the government receives the goods and pays for them.

Both receivables factoring and po funding are available to both new companies and established companies. Both are relatively easy to obtain and can be set up relatively quickly. This makes it an ideal solution for growing companies.

For many years, companies have relied on venture capital financing to grow and expand their businesses. Recently, most venture funds have been reduced in scope and size to deal with the current economic environment. Unfortunately, this has had a substantial effect in the broader economy by limiting entrepreneurship and innovation – key component of economic success.

Without venture capital, many business owners try to finance their companies by looking for a business loan from a lending institution. However, business loans are only given to companies that have strong collateral and can show profitable operations. Companies will also need to provide financial statements that will be rigorously reviewed to ensure that they meet institutional criteria. Because of this, this type of business financing is out of the reach of many business owners, especially at this time.

There is are alternative ways to finance your company. They can help you expand your company organically without generating any new debt. And more importantly, without having to give any equity in the business to someone else. Remember that when you use venture funding, you are selling a piece of your company to someone else. They will want a say on how things are done. Many times this is good, since venture capitalists usually have seasoned executives that can help you. However, it will take some of your independence away.

There are two alternatives that can help you, depending on your situation and line of business. One if factoring financing. Factoring bridges the 30 to 60 day gap between invoicing a commercial customer and actually receiving a payment. This advance payment enhances your cash flow, providing you with funds to pay current expenses and grow the business. The other alternative is to use purchase order financing. PO Financing only helps product resellers who have a large order and don’t have the funds to buy the product from their supplier. In both factoring and purchase order financing, the transaction is settled once the customer pays the invoice. And as opposed to other types of financing, the most important collateral if your customers credit rating. Thus, you can leverage your clients credit rating to fund operation expenses and growth. This makes factoring and purchase order financing an ideal solution for many businesses.