Turns out the secret to keeping up with growth opportunities is already in your hands. Here are seven ways account receivables financing can ensure you never miss one.
You might know it as account receivables financing, receivables financing, or invoice financing. But, in case none of those terms ring a bell, here’s a quick refresher. Account receivables financing is a tool that helps business owners to manage their cash flow smoother. Owners can sell (or auction) off their unpaid receivables to a third party called an invoice factoring company for a cash advance on the invoice amount. Some small fees are attached to the process, but business owners typically receive 80–90% of their invoice. Still have questions? Our Invoice Financing—Top 10 FAQs on Crowdz article might help.
Problem 1: Your Budget Needs More Flexibility
Agility is one of the most vital advantages small and medium-sized businesses (SMBs) have in maintaining a competitive edge. But when a lack of working capital prevents a team from seizing new opportunities, that nimbleness gets compromised. For example, you might have to pass up on investing in equipment or taking a bulk order because of the lack of funds on hand. That’s where Account Receivables Financing comes into play. By unlocking cash tied up in unpaid receivables, an SMB can create breathing room within their budget to accommodate gaps in a positive cash flow.
Problem 2: Your Cash Flow Looks Like An Earthquake Seismogram
A major client sends in payment, and a tight cash flow sees a sudden spike. Then, expenses are paid, and the cash flow takes a steep dip. Sounds familiar? SMBs experiencing this kind of bumpy cash flow can finance their outstanding receivables to achieve a steadier, more predictable cash flow activity. It is especially useful for invoices carrying lengthy payment terms because payers tend to take their time, leaving you scrambling over expenses in the interim.
Problem 3: You Need Working Capital, Stat
Lucky for you, account receivables financing operates at super speed. Unlike obtaining a loan from a traditional lender, which can stretch out to weeks or months, invoice financing can provide access to working capital within days. It’s all thanks to a quick application process and short turnaround times. With immediate funding, you can jump on new opportunities and deals, stop worrying about a bounced check, and avoid digging into credit.
Problem 4: You Missed Payroll
If your organization can not manage its cash flow, expenses are bound to drop. And employee morale won’t be far behind. Account Receivables Financing can act as a safety net for when money fluctuates, ensuring employees get paid on time, turnover remains low, and high productivity. Selling unpaid invoices is also a way to fund new hires while maintaining a sense of security.
Problem 5: Your Business Has Hit Its Low Season
Does your company have a seasonal element? Financing invoices can be a lifesaver for off-peak months when customer activity is low, but employees still need to get paid. As previously mentioned (see Problem 1 above), the flexibility you get from an immediate payout can make a world of difference, and that goes for seasonal variations, too.
Problem 6: Your Team Needs More Space
Expanding company operations is exciting, commendable, and, at times, financially stressful. It’s why some SMBs use receivable financing as a means of funding new shop locations and office space. Business owners can make the most of this strategy by selling on the Crowdz marketplace. Here, sellers have unique control over the quantity, frequency, and acceptable rate at which unpaid invoices are sold. Why is this important? Well, if you’re expanding to new cities or countries, you’ll likely want to take advantage of market trends for which timing is everything.
Problem 7: Your Electricity Is About To Go Out
Even before 2020, paying rent and utility bills was a very real struggle for small businesses worldwide. Today, many SMBs are even more desperate to meet their deadlines. Fortunately, when the receivables financing process begins is at the discretion of business owners and can be timed according to when bills need to be covered. The fact that funds are issued so quickly is a bonus for owners who have a bill that’s fast approaching.