Running a small business can be one of the most rewarding experiences of your life. Simultaneously, it can feel like you’re on a tightrope, with alligators on one side and lava on the other. If you own a business, especially a new or small one, you know what I mean.
Sometimes, the money is excellent, but at times it is stretched paper-thin. Other times, you can’t seem to find the money at all.
One of the most stressful situations for business owners occurs right after one of the best cases. Imagine this: You just signed a deal with your biggest client yet. This is your tipping point; you know that after this job, it’s (comparatively) smooth sailing. But there’s a problem.
Your contract delineates payment either upon completion of work, or net 30, net 60, or even longer. That means it could be weeks or months before you get paid. Worse still, the next job requires new equipment, more employees, or an entirely different infrastructure that you don’t have yet, and need to pay for it as soon as possible.
What arises then, is a situation wherein you need to pay big-company money when you haven’t been paid big-company bucks yet. Some business owners panic at this point. Circumstances like these are a big reason many companies fail: They can’t find financing fast enough to stay afloat.
But you’re different. You don’t panic, you act. The next day, you apply for a loan. Just enough to cover the expenses, with principal and interest repaid once you get the payment from your client. All seems hunky-dory with that plan, so you submit the application and wait for approval from your bank.
You get the call. Denied. Even the most adaptive and experienced business owner will get the shivers after hanging up that phone. Now you’re here, wondering why you’re wasting time reading this when you should be looking into getting a second job.
First, remember to breathe. You need to make the right decisions, so stay calm and remember your big picture. A loan is not your only option. It never was. Consider something that’s been around for decades: invoice factoring.
When you get turned down for a business loan, it might seem like you don’t have enough money to make ends meet. But you actually have way more capital than you think. It’s just locked up in the form of accounts receivables. You have an intrinsic IOU from your big fancy client whose work you just completed. That’s an asset, and assets can be sold.
That’s what invoice factoring is. You sell your receivables to a factoring company for an instant cash advance, based on a percentage of the value of the receivable. Then, you do whatever you need to do: upgrade equipment, buy land, hire a programmer, or catch up on bills. When it comes time for your client to pay, the payment is routed to the factoring company and you receive the remaining balance of the receivable, less a small fee. No debt, no collateral, just profit and peace of mind.
Now, this is a basic form of factoring. In reality, businesses all over the world use factoring every day to get consistent cash as soon as they need it, for myriad reasons. Feel free to check out this factoring calculator. All you need is your sales figures and some estimations on timing and factoring rates for your industry.
Factoring is a popular form of financing used by companies in many industries. Small and mid-size firms find it ideal to get cash quickly. Any business can and should consider it for fast cash flow solutions.
For some reason, many people think factoring is a complicated process that requires a prodigal finance manager with just the right connection. That’s not the case at all.
In fact, you’re only a few clicks away from factoring at this very minute. At Scale Funding, factoring is what we do. Check out our factoring services to learn more about the specifics of how we can help you pay the cost of doing business without going into debt or scrounging for couch-cushion change.
With invoice factoring, you have one more weapon in your financial arsenal. Make sure you use it.