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.

Invoice Factoring As An Alternative Financing Solution

An invoice is a document that has a list of what is owed to you for goods and services rendered. It is a demand for payment from your debtors.

There is usually time between when the invoice is received and when payment is made when the debtor scrutinizes the invoice and reconciles it to the goods or services received. The time taken is the credit period and it is usually agreed upon between the creditor and the debtor before services and products are offered.

The credit period can range from as few as payment on-demand where an invoice is settled immediately it is received, or it can be as long as 90 days. In international payments, the credit period may be even longer due to shipment and other delays in clearance of goods.

Invoice factoring is when a business leverages its invoices against cash to a third party called a factor. The main reason for invoice factoring is to avail immediate cash business to meet its current obligation. The invoice factoring company will then wait until the creditor pays to get its cash back. Invoice factoring is, therefore, a good source of debt finance.

How Invoice Factoring Works

A company delivers goods or services to customers who are reputable and sends them correct invoices. The company receiving the goods acknowledges receipt of the invoices.

Due to the time it will take to receive payment from the debtor, your company sells the invoices to an invoice factoring company otherwise known as the factor.

The invoice factoring company verifies the invoices by contacting the debtor and once the verification is satisfactory, your company receives up to 85% of the invoice amounts immediately. The amount you will receive will depend on your agreement with the invoice factoring company.

The invoice factoring company then receives the payment from the debtor and deducts a fee for the service it offered you. If there is a balance, it is forwarded to your company.

Invoice Factoring as Alternative Financing Solution

As a company, you can use invoice factoring to meet your immediate cash flow needs. The only collateral you need is the invoices from reputable companies and clients. Invoice discounting companies do not require many documents compared to banks.

Invoice factoring is a great way to get short term debt to keep running your business without having to worry about your short term obligations such as salaries and rent. With invoice factoring, you are assured of cash to produce goods and services for other clients.

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 can cash flow finance grow your business?

It will be challenging to manage a business, especially a start-up business without cash in your pocket. Therefore, good cash flow is very vital for any business to grow. The reduced cash flow of finance will or may result in the total collapse of the company. When operating a transport business, it will be essential to maintain a reasonable cash finance flow for your business. The below factors shows clearly show that good cash flow can be helpful in the growth of a transport business over a specified period. these factors are:

Maintenance of operations

Cash flow will help a transport business operate its activities in a given financial statement. An excellent cash flow finance will help a business in recording all the operating events in day to day operations of the company. These activities range from either transaction between the customers and the transport business or between the cash movement between the transport business and its suppliers, other businesses, or its employees. This record of the cash flow will help the transport business company maintain its records that can be used for future references.

Helps generate cash flow statement

An excellent cash flow finance will also help the transport business grow because it is used to generate a cash flow statement. This cash flow statement helps the transport business to know whether they are generating profit or losses. This is a bit different from the income statement, which only shows the benefits a company is making without showing whether your business is generating profit. This record of cash flow of finance will help in creating suitable methods of profit-making for the transport business and eventually leading to the growth of the company.

Good decision making

An excellent cash flow finance will also help in maintaining the growth of the transport business in that, it will be necessary for the decision-making processes of the company. A good cash finance flow in a business is expected to show the business’s financial position. It will indicate clearly whether the business is making a profit or losses during a given fiscal period. This will tell the transport business on the amount of cash they need to have on hand for the smooth running of its operations. This will enable the transport business to pay exceptional attention to its cash flow cycles and use those cycle trends to come up with the best measures they can be used to make the best decision that can be used for better growth of the entire business operations.

Why Invoice Discounting is the Best Source of Growth Capital

Growth capital is private equity used when a business wants to expand its facility, buy equipment or enhance sales and marketing strategies. With an extra capital injection, many small businesses move from their stagnation. Sourcing growth capital is not an easy task, especially for small businesses. One of the best methods to source capital for the expansion of small businesses is invoice discounting.

Many businesses offer credit to their customers, especially those buying in large quantities. This causes tying up of funds that businesses could otherwise use for growth. Invoicing these transactions can help you acquire funds for the expansion of your business through cash advances from these invoices.

Benefits of invoice discounting as a source of growth capital

*Alternative to loans

Due to the limits and constraints that loans put for small businesses, it is challenging for them to grow. Invoice discounting has fewer formalities giving a platform for small businesses to source capital.

*Increased cash flow

Since growth capital is tied to working capital, businesses must have an immediate method to improve their cash flow. With the instant providence of cash that discount invoicing offers, it makes it very simple for small businesses to achieve those short term objectives, eventually leading to growth.

*Access to business advice

Information about how business processes are conducted to achieve growth is vital for small businesses. The invoice discounting finance lenders are endowed with the know-how on how to achieve business growth. Despite these institutions providing you with growth capital, they also advise you on how to use it.

*Credit protection

In a case that your customers are unable to pay for your invoice, you are at least insured against it. Many lenders offer debt protection for a period that you select. If your customers are aware of this, they will most of the time comply with the repaying terms.

*Can be done online

The compatibility of invoice discounting to an online system is a significant advantage. With the highly demanding activities of your small business, you may lack time to look for an invoice discounting lender. You should, therefore, use a trusted lender with an online website to enjoy this.

*Grows as the business expand

If you invest the money you get from invoice discounting in expansion, your business will be in a position to offer more credits leading to a growth in your invoice discounting status.

If you want an easy and effective method to get you growth capital for your small business, you should consider invoice discounting. This method acknowledges that every big business starts from somewhere and hence it does not overwhelm you with complex processes and restrictions when you are beginning.

All you need to know about business financing

If you are a small business that is just getting started, it is very important to make sales payments on a regular basis. The reason for this is that the funds available for business are not too large and, if more payments are reserved, this can put you in a bad financial position. In most small businesses, debt management can be a very difficult task, as they usually do not have the financial structure to absorb the debt. There are times when payments are so poorly supported that business approaches bankruptcy. The cash flow from the company occurs at the usual rate because the services provided for the production of goods cannot be stopped. Thus, withdrawal of money and lack of money can lead to serious problems.

In these situations, many companies are looking for business financing from banks to keep them in line. It is usually quite expensive. The reason for this is that now the company must not pay the production team regularly, but also make payments to the bank. Also, the bank has a long process of applying and approving for each loan and the business may not have too much time to obtain finance. If the business rating is not very good, then the loan can be rejected as a whole.

In such cases, there is another viable option that companies can use. This option is called Financial Factoring. Billing companies usually redeem unpaid invoices from these companies at a discounted price and then receive full payment from customers. This greatly helps both businesses and companies. From the point of view of the company, it does not need a sale product, all it has to do is buy an invoice at a cheaper price and collect the whole amount. The difference leads to its profit.

For business, money is available after 24 hours. The profit they make is a little lower than they could get, but at least they get enough money to support the business. In addition, there is no need to make any payments, as this is not a loan, but what it has done is mainly direct sales. The process of acquiring this type of financing is much simpler and is therefore preferable to loans.

In some companies, finance suffers because customers do not pay on time. Doing business on credit can be very risky. If you do not have the money, sooner or later your production will stop. This is where factoring companies come from. These companies buy unpaid invoices from other companies at a discounted price. This is good for business because it may not be able to make a profit, but at least the cost of production will be reimbursed. business financing do not need to spend their money to continue production and do not have to borrow to pay salaries.

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.