Who Can Use Factoring for Their Business?

Throughout the Business Cycle, many industries must adapt, cut back on costs, and find new financing avenues. Often banks and credit unions are not interested in small business, that is why an increasing number of businesses are stabilising their cash flows by using invoice factoring. Factors have helped lots of companies survive economic crises, this article will provide a list of those industries.

Some Industries That Can Benefit from Factoring

Here are some of the industries known to benefit from using factoring:

Manufacturing Companies

Even the largest manufacturing companies experience issues with inconsistent cash flow. When manufacturing businesses are low on funds due to unpaid invoices, it makes accomplishing even simple goals difficult.

You have the option to resort to bank loans but doing this could drive your business into debt. Implementing invoice factoring helps you avoid debt and provides you the working capital you need to meet payment deadlines on time.

Transportation Industries

Freight invoice factoring helps a variety of transportation businesses, such as owners, large fleets, and freight brokers.

Invoice factoring for business is a good solution to increase their cash flow and better predict when payments will be received. You can use freight invoice factoring to help pay for petrol, pay your drivers, pay for repairs, and even buy new trucks.

Technology Industries

This type of industry is highly competitive. The general pace of business and the need for quick upgrades and updates to the company’s hardware and software requires quick access to capital. Invoice factoring helps technology industries by mitigating payroll issues and keeping your team intact. With the help of factoring, they can fund their projects using their own invoices instead of taking out a bank loan.

Apparel Wholesalers

If you belong to this industry, you are not only competing with other boutiques, you are competing against online e-commerce stores that get paid instantly as well. To stay competitive, steady cash flow is necessary to keep your company’s operations going.

It is natural to experience cash flow peaks and troughs throughout the season, but if your company cannot maintain traction, it may cause you to stop taking more orders. With the help of invoice factoring, these problems will not happen. You will have the capital to make payroll, stock up on inventory, and upgrade your equipment.

Conclusion

Many industries experience cash flow issues, no matter how big they are. Invoice Factoring helps you overcome financial issues by providing instant access to fund to keep your operations going. Many industries utilise factoring nowadays, maybe it is time you consider it for your business.

To find out how Nova Cash Flow Finance can help your business, contact us here.

How Cash Flow Finance can help your Real Estate Business

To comprehend cash flow in real estate, you need to understand essential property financials. You must be able to discern and predict income and expenses in the real estate business. Cash flow is the financial gain you amass after accumulating gross income, financing all costs, and putting aside money for repairs in the future. It is a good source of passive income for real estate investors.

An intelligent real estate investor will have more income than expenses each month. When you put the right strategies in place, for instance, proper property management, cash flow for real estate business becomes a reliable source of passive income. Passive income is the money you make weekly, monthly, quarterly or annually that does not demand active working like when you are employed or running a small business.

Cash flow helps in financing your real estate business in the following ways:

1. Cash flow generates more possibilities

When you reinvest your profits into another real estate venture, you dramatically increase your profits and improve your financial welfare.

2. It produces security

Having additional income coming in regularly creates safety by enlarging your cash reserve so that in the case of unforeseen circumstances, for instance, unforeseen repairs, unexpected delays in rent payment, etc. you will be able to pay for them comfortably.

3. It allows you to invest in a prime location

Good cash flow from your real estate ventures will give you the ability to invest in properties located in prime areas that attract high-end tenants and bring handsome returns. Investing in prime locations gives you the power to select your tenants and to sustain pricy rental income for substantial profits. Also, a prime location has a lower likelihood of vacancy and therefore reduces the risk of insolvency.

4. Helps in Accumulating Long-Term Appreciation.

A property located in a prime location with good cash flow will increase in value with time. This is advantageous to the real estate investor who can sell it for a high price and reap a good profit from it.

5. It enfranchises the investor

When you set up your cash flow such that you can pay for all your living expenses, it means that you no longer have to labor for a livelihood. This allows you to focus on the things that you love doing, for example, your hobbies, traveling, and other passion projects. It will enable you to focus on maybe raising your family and spending time with friends and loved ones. You can visit any place you want with your extra income, and you can buy anything you want and even further your education.

HOW CAN CASH FLOW FINANCE HELP TO DEVELOP YOUR BUSINESS?

In business, there are seasonal peaks and troughs; hence during this period, cash flow finance avails injection of cash for managing budgets in the business. A business cash flow is the total of money that flows out and in of the company within a given period. If your business is growing rampantly and you are increasing profit each year, then you are heading in the right direction. However, building profitable companies can be hit by cash flow challenges if their finance maneuver or investing activities are not efficient. For example, if your business debts are due before you haven’t collected your money from your sales, there will be cash flow crashes; therefore, your bills won’t be paid in time, which leads to stricter problems like facing questions of creditworthiness. But you don’t need to worry since cash flow finance is there for you. In this article, I will discuss what cash flow finance is and how it helps in the development of your business.

CASH FLOW FINANCE.

Cash flow finance is a kind of a short term loan. This kind of fund is not a solution to managing long term cash flow challenges, but they are very significant when you need quick finance during lean times in your business. Cash flow finance for transport business is flexible, manageable, and one can access quickly .when you secure the loan, you repay the loan with interest within a short period. The period of paying the funding is always approximate 1-6 months. While borrowing these funds, it’s important to check terms and conditions as payment schedules differ from one lender to the other.

SIGNIFICANCE OF CASH FLOW FINANCE IN A BUSINESS.

1 Cash Flow finance is an option loan when your company has a short supply of money. It often happens in small businesses as they build a customer base, and when they are growing.it may even occur in companies where sales are seasonal and have specific natural peaks.

2. Cash flow finance is an option when you need an injection of emergency cash or a case you need Temporal unplanned funding to make a quick investment on pieces of equipment and other genuine business needs.

3. Cash flow finance helps a business plan ahead and prepare a budget, thus hindering businesses from facing shortfalls.

4. Cash flow finance is obtained fast when you provide information to a potential lender; you’re an established business, thus saving your business from falling or collapsing during hard business times on time.

In summary, if you want to improve cash flow in your business, then cash flow finance will be the best option.

How To Make Money Through Cash Flow Finance For Your Business?

Cash flow finance for business is a form of short term funding where a business acquires a loan backed by money to be earned in the future. Cash flow finance is a quick loan, but it’s not a permanent solution to your cash flow. This type of funding will have higher interest rates than the traditional loans, and they get paid within a short period, which is one to six months. However, cash flow finance for business can be used to make money if the cash acquired is appropriately used. So how can you make money through cash flow finance for your business?

1.Expand your business

You can use cash flow finance to open more branches, and this will earn you more money. The more branches you have, the more money you make. You can also expand your business by adding more products to your line of business. However, before you use cash flow finance to open another branch or add products, make sure you have a ready market. This is because you will have limited time to pay your loan back.

2. Buy equipment and stock

Another right way of using cash flow finance to make money is by adding your stock and buying any necessary equipment that your business may need. If you have a ready market, why don’t you use that funds and buy stocks for your customers? If you are in the manufacturing sector, purchase equipment to produce more products that will meet market demand. Of course, the profits you will get will be more than the interest you will pay. That is if you did the right research.

3. Employ more staffs

Serving customers well is the key to any business. If your business is expanding, you will need more staff to serve your customers well. If you don’t have enough money and you feel that your business needs an extra employee, then cash flow finance is for you. Cash flow loans are processed quickly, and they will help you to hire employees no matter how urgent you need them. You can you this finance to cover for hiring expenses and the first few months’ salaries.

Expanding your business is vital if you want to increase your profits. For your business to thrive, you will need to open more branches, add equipment and stock, and also hire more staff. If you don’t have ready cash to do all these, you can consider getting cash flow finance for business.

What Can Factoring Do To Double Up Your Business Working Capital?

Definition of Working Capital

When you subtract the current liabilities from the existing assets, you get the working capital. Working capital helps take care of the daily expenses of a business.

  • Current Assets: They include liquid cash and other assets that you wish to convert to money before the end of a financial year such as inventories or accounts receivable.
  • Current Liabilities: These refer to any debts that a business owns and which it must clear before twelve months elapse, like short term loans.

Working capital is essential because it will help you know the amount of money you have to run your business once you have accounted for all the current liabilities.

Balancing Cash Flow

Many businesses fail because they lack consistent cash flow. The biggest challenge that entrepreneurs face is how to balance cash and ensure their business is healthy and flowing smoothly. When a new business needs working capital, the owner will turn to personal liquidity, investors, friends and family, bank loans or factoring.

Once a business owner exhausts all personal assets and does not want to give control of his business to an investor, they have two options left, a bank or factoring company. The business owner will first visit a bank to apply for a loan. However, banks have many regulations that you must adhere to, making it difficult for entrepreneurs to secure loans. Factoring comes in handy at this point, and the business will have the necessary capital to keep the business running.

What is Factoring?

It refers to the selling of invoices to acquire working capital which in turn provides the business with the liquidity necessary for growth. Factoring offers a financial package that includes, working capital, protection from credit risk, bookkeeping of account receivables and collection services. A factoring company Australia will purchase account receivables from a business at a discount hence allowing the business to access capital instead of waiting for a month or two for a customer to pay for an invoice. A factor will buy invoices from the company, pay the business a portion of the account receivables immediately and clear the balance after collecting from the customers.

There are two major types of factoring:

  • Recourse: The factor is at liberty to demand that the client pays them if customers fail to pay for account receivables.
  • Nonrecourse: Here, the factor cannot demand payment even if customers will not pay.

The factor is highly dependent on the clients’ customers; therefore, it will take time to determine the creditworthiness of a new customer.

Factoring is not a loan, and that is what most business owners like about it. The owners are not borrowing money; hence there is no collateral involved. They get immediate cash and do not need any paperwork, unlike bank loans, which are also slow. Factoring, therefore, acts as an extensive line of money for the business.

Discovering Invoice Factoring Financing And Its Benefits

Businesses face financial struggles after starting up. That’s an inevitable thing that can happen to you especially if you are not an experienced entrepreneur. Rest assured that it’s a common thing for companies to undergo a lot of financial pressure during the course of their business. What’s not common is letting the financial pressure affect your business decisions badly. So, if you are currently under this type of situation, there’s something you can do. You can borrow money from banks and financial institutions or sell your receivables. Selling your receivables is called invoice factoring and it is a well-known method to finance a business. If you think this is the best way for your business to stand up, here’s what you need to know about invoice factoring and its benefits.

What is invoice factoring?

Invoice factoring is a factoring finance method wherein you will sell your accounts receivables to a third-party called the factor. Receivables are achieved when you sell your products and services to your customers. You exchange your goods for the amount they are going to pay in the future. Most of the time, vendors give terms to customers so they can enjoy discounts for paying the receivables early. For example, a vendor or your business will provide 2/10, n/30 terms for clients who will buy on account.

However, not all customers can pay early even with discounts. There are times that you will have to wait for more than 30 days just to get their payments. As someone who is continuously running a business, this can affect your cash flow and your overall business decisions. This is one main reason why companies are choosing to sell their accounts receivables in exchange for funds that they could have gotten from paying customers.

So, what are the benefits of invoice factoring financing?

First and foremost, it allows you to get the funds you need for your business. The main purpose of why you are selling your receivables is to get additional money to keep your business running. If you are going to use this factoring finance method, you’ll be able to get the amount you need in your hands.

Second, it reduces your hassle of asking your customers to pay. Invoice factoring is selling your accounts receivables to a factor. This means that you are transferring the responsibility of an AR owner. The factor becomes the owner of the receivables so he/she should be the one contacting your customers to pay. With this factoring method, you are going to save yourself a lot of time. Communicating with customers might take a while. You don’t have to worry about this anymore once you find the perfect factor.

Finally, invoice factoring will only cost you around 5-10% of the account receivable plus the factoring fee. If there are variances as to the amount collected, the money will be deposited back to you. Compared to the amount you are going to get, a 5-10% discount is not that big especially if you really need the funds for your business.

How can Receivables Finance Gives You Working Capital For Business

If you are currently experiencing financial setbacks, remember that there is a solution to your business problem. And that is not to close down and add loans to your existing flooding debts. You have to be resourceful and think of other ways how you can add funds to your cash account. Ever heard of receivables finance? That’s right, you can use your accounts receivables to get cash and solve your financial struggles.

Receivable financing is a method of getting funds for your business by means of selling your accounts receivable. It is where you find a factor that can buy your accounts for a discounted amount. Most of the time, you will get 90-95% of the total amount of your accounts receivables. You will also spend additional for factoring fees. But, compared to the amount you are going to receive, the discount and fees are worth it to spend.

Working capital, on the other hand, is the money you need t use to survive the day-to-day activities of your business. It can be computed using your current assets and your current liabilities. Let’s not focus on the equation. You need this capital in order to get your business going. So, how can receivables finance help you get your working capital?

First, receivables finance gives you the amount of cash you need. If you are short on cash and you need actual money to buy your inventories or pay your existing liabilities, you can rely on receivable financing. Your accounts receivable will be converted into cash that you can utilize for your everyday business activities.

Also, receivables finance allows you to reduce your current liabilities if that’s the main purpose of your sale. Some debts are not meant to be long overdue. You have to pay your loans in order to get a good credit standing so banks and financial companies can lend you money in the future. With receivables financing, you can now pay your creditors without applying for a new loan. Remember that it’s never a solution to pay a loan for another loan.

Receivables finance serves as your cash cow. Although it is opposed to the substance of your accounts receivables, the method of converting your accounts into cash can be your only way to get a good amount of working capital. It’s really a good thing that factors exist to give you a chance of survival. Without this method, you will only push your business to its limit.

Why Account Receivable Financing is Useful

There are many benefits to Account Receivable Financing. Companies that need a lot of capital pressure to find a better or faster option. This funding is independent of corporate credit or time spent at work. As long as the company has customers with good credit and unpaid bills, debt financing is a viable option for commercial financing. Below, we will analyze in more detail only some of the many benefits of generating capital in this way.

Fast money

Account Receivable Financing is a great way to get money quickly. Most factors can ensure payment of bills within 24 hours. Initially, this process may take longer. However, as soon as the company establishes relations with the employee, the process takes place quickly. If a company does not have an open credit line, it is difficult to come up with a faster way to increase commercial capital. Even in cases where a credit line is used, the company is required to pay interest, which can be very expensive. There are no such costs associated with debt financing.

Easy Money

Account Receivable Financing is a small amount. When a company wants to get a bank loan, you should be prepared to jump through circles. You will need to have all the financial documents in order. For a small business, this may require a nasty trip to an accountant. They should also be prepared to answer any questions the bank has. If they cannot do this satisfactorily, they will not be eligible for a loan. In addition, many banks will not give money to new companies, it is often those companies that need them most.

A business credit rating does not matter.

If the company has the opportunity to get a bank loan, you should get a good credit rating. In this day and age, you may need an excellent credit history, without defaults. Fortunately, companies that use debt financing do not have to worry about this. The factoring company takes care of the credit history of the customers who are billed, and then the company that stores these accounts because they will receive money from them.

Today, obtaining bank financing has become more difficult than in the past. Banks do not want to give up their money now. They reject loan applications from good credit companies that have been operating for a long time. Commercial financing becomes more difficult than ever, but not in every way. Account Receivable Financing is a very easy way to make money. As long as the company has outstanding bills held by customers with good credit, they may be eligible to receive funds.

Invoice Factoring Mistakes to Avoid

It can be a miserable experience as you are waiting for a long time for your customers to pay. This could even be a serious problem for the cash flow of your business. But the good news is that invoice factoring is a good option, as it will provide you with the opportunity to receive a cash advance in regard to invoices that are not yet paid. However, it is to be noted that this system does have some complexities. Therefore, it is important to be aware of key mistakes to be careful to avoid.

1. Not being informed of the fees in the fine print

It is important to read the fine print regarding the fees pertaining to the issue of invoice factoring. This means that you need to check if there are any additional fees above the factor rate. When you decide to use invoice factoring, you, in essence, are selling the invoices that are unpaid for a discounted rate to the factoring company which will provide you with a cash payment instantly.

2. Payments that are misdirected

It can take a while to comprehend how factoring functions. As a result, an error that tends to be prevalent frequently is the fact of payments being misdirected. In other words, the business receives payments that really should be directed to the company that is providing the factoring service. When you choose to use a factoring service, it is necessary to designate the setting up of a new bank account in order to ensure the redirection of payments to the company that is providing the factoring service. It is necessary to inform customers which account they are to make their payments to. If there is a mix up in payments going to the wrong account, the company that is providing factoring service may charge you some extra hefty fees for such mishaps.

3. Purchase orders that are submitted

It is wrong to submit a purchase order to the company that is providing the factoring service. This is due to the fact that a purchase order is not an invoice. Purchase orders only show a representation of products and services that have not yet been provided to the customers. A purchase order is only a sort of commitment to buy particular products or services, but no payment has yet been made for the item. Therefore, not revenue is yet owed, which is why the purchase order cannot be processed by the company that is providing the factoring service.

POST HOLIDAY CASHFLOW SOLUTIONS

How to deal with the “out of office” phenomenon and a slow start to the new year…

One of the major downsides that comes with dealing with a lot of small businesses is the waiting game that business owners are forced to play every January. Many entrepreneurs take an extended period off work at this time leaving you with nothing but a “gone fishing” sign and unpaid invoices.

Not only is it frustrating having to wait weeks for invoices to be paid but it can often mean that January is a write-off in terms of business growth. Thankfully, invoice factoring services like the one that Nova Business Finance offers are available to small business owners who can’t afford to wait for their payees to get a tan.

How does it work? At Nova we have a range of finance and factoring options that can help small businesses during this time whether they need quick cash to keep them going or they are looking for a more stable cash flow that will help their business grow.

Invoice factoring
This is for those of you who are waiting on payments from clients who are either still on holidays or are just having a slow start to the new year. We understand that waiting on invoices to be paid can impact on a business in many ways and cause so much unnecessary stress, particularly at this time of year when so many of us are facing the financial hangover from Christmas.

Invoice factoring can help your business meet payroll, take advantage of supplier discounts and provide capital to purchase new equipment. We do this by advancing 80% of the invoice value to you within 24 hours of approval and allowing you to pay this back with fees when you are paid by the client. Nova is able to provide this service on an “as needed” basis for those of you that only require funds advanced for a short amount of time or for a few clients. However, most businesses find it extremely helpful to use our “full ledger” service which means that we advance on all invoices all the time and provides stable cash flow for your business year round.

In addition, invoice factoring can be used to finance a start-up. At Nova we know that the beginning of a new year can signal a period of hope for the ambitious among us and can be a great time to focus on growing a new business. By using invoice factoring you don’t need to put a crazy amount of capital on the line like you do with a bank. In fact, if you have an invoice that we can advance on we can help you!

Assistance in credit collections
Unfortunately, for some businesses the slow holiday period is not the only reason that they are waiting on invoices to be paid. In fact, sometimes as small business owners we are forced to chase those who owe us money. This can get to a point where outside assistance is required because it can be a drain on the resources of business to continue this follow up and it can create unwanted hostility. Go into the new year with no old invoices waiting to be paid by letting Nova help you retrieve what you are rightfully owed.

Contact us now to become a part of the Nova family!