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Factoring Can Provide Funds for Businesses in a Cash Flow Crunch

Written by: Michael Hemenway

Article Overview: The process of factoring, or selling off accounts receivables, can be a valuable lifeline when companies hit a cash flow crunch. Find the right partner by seeking out a funding firm that deals with exactly your specifications. How does factoring work and what should you ask before getting involved?

Factoring Can Provide Funds for Businesses in a Cash Flow Crunch



In these tough economic times, cash flow has taken a hit for even the most successful businesses. One client's inability to pay on time has the potential to sink a number of businesses on down the line. But even if companies aren't struggling, factoring can launch a powerful ability to grow the business, or help start-ups survive the outlay of cash until revenues start coming in.

So what is factoring, anyway? It's a process by which a company sells its accounts receivables to receive the cash instantly. This can be critical when dealing with large companies or government municipalities who often pay 30, 60 or 90 days in arrears. That delay can be critical to companies who have already had to pay for the costs of the products and the overhead that goes along with it. Particularly when a business encounters an unexpectedly large order, or begins to increase production for seasonal shifts.

Factoring can help small and medium-sized businesses achieve optimal cash flow at a low cost and with no risk to the company. brandEXPANSION's partner uses the full notification, non-recourse methods, which mean that debtors pay the funding company directly and the funding company assumes all the risk of collecting.

Our partner has helped cash-strapped manufacturing firms receive working capital to fill large orders, helped other businesses overcome sluggish cash flow due to lagging receivables and helped start-ups sustain until revenues began flowing. They have even helped companies that had negative cash flow and were in chapter 11 bankruptcy proceedings. Many factoring firms will limit the industries in which they work, or don't, such as medical or construction.

Not all companies qualify for this factoring program. Our partner typically works with small to medium-sized companies with revenues of $1 million to $50 million whose clients are large corporations or government agencies. Many competitors work with much small companies, advancing $75,000-$100,000 or larger firms that have the same underwriting processes as large banks. It is critical to find a factoring firm that deals with companies of your size. Smaller companies are limited in how much they provide while large companies may lag in decisions. A mid-sized firm can provide an answer--and usually the funds--in as little as five days, without an audit.

Factoring is a $100 billion industry and it is a widely accepted form of positive cash flow services for companies, meaning that using factoring will not reflect poorly on companies with their clients.

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Article Tags: 1 million, 50 million, accounts receivables, arrears, bankruptcy proceedings, chapter 11 bankruptcy, debtors, economic times, government agencies, government municipalities, large corporations, medium sized businesses, medium sized companies, negative cash flow, non recourse, outlay, sluggish cash flow, start ups, ups, working capital



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