Running a small business isn't easy when times are good, but if you find yourself in a cash flow crunch you may find yourself having to make difficult decisions and possibly even turning away business and losing some customers. While it would be great to get a line of credit, most small businesses have trouble qualifying for a line of a credit. Even if they may qualify for one, the banks move so slow that by the time they get a line it is oftentimes too small or too late. However, if your small business has receivables, factoring them and getting funded 30 days earlier (or more) may be just what your company needs.
Factoring is a very different process than applying for a line of credit. For starters, your factoring company is giving credit to your customers and making decissions based on their good credit, so even if you may not qualify for a line of credit, you will qualify for factoring. So rather than you trying to get approved for $25,000, a factoring company simply has to approve 25 of your customers for $1000 each, a much simpler task.
Factoring also moves very quickly, after all, waiting months to get funded doesn't exactly help your cash flow. As a result, factoring companies make credit decisions in a matter of minutes, and will fund you the same day you invoice your customers.
Another benefit of factoring is that there are no minimums and no maximums. Micro factoring works for companies that are just getting started and may only have several invoices for a few hundred dollars each. But as your business grows, the amount you can factor grows along with it. Unlike other forms of financing that have strict credit limits regardless, the amount you can factor scales directly with the amount of business you are doing. So whether you are doing $50,000 a year or $5,000,000 a year, factoring is a solution that works for your business.
Of course the best part of factoring is that when you factor your receivables you are not taking on any debt. With lines of credit and other types of loans, you need to pay back the lender over a fixed period of time, and there may be minimum payments that need to be made each month regardless fo whether or not you have the working capital available to pay them. With factoring there is nothing to pay back, you are simply selling your receivables to your factoring company, and it is your customer's responsibility to pay once the receivables become due.
Want to learn more about how factoring can help improve your small business's cash flow? Give DSA Factors a call today at 773-248-9000, and you could have healthier cash flow tomorrow!
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