Accounts Receivable Factoring: Is It Right For Your Business?
Accounts receivable factoring is great tool for funding your company. It helps your small business get the working capital needed to maximize opportunities and keep profitable. Below, we will discuss scenarios where receivable factoring is a funding option that makes sense.
Is Your Business New?
Startup businesses do not typical have a lot of working capital. Having the ability to meet payroll, invest in a new idea or buy raw material can make or break the company. Often times, new businesses are not able to secure bank funding giving them few options to raising capital.
Selling their accounts receivables can be an effective way to raise money without taking on debt. To be quickly approved the accounts receivables should be associated with clients with a solid credit history and aging report. With receivable funding the factoring company looks at the startup clients payment history(aging report) and their clients overall credit.
Does your company have IRS tax related issues?
Accounts receivables factoring is an amazing funding tool to use when your company is experiencing IRS tax issues like liens. An experienced factor will negotiate the subordination with IRS and get you the funds you need quickly to get the tax lien lifted. If your current finance company has cut you off, the factor can buy them out.
Do you have only one or two clients?
Client concentration is typically a non-starter for obtaining financing. With receivable factoring it is not an issue. Lets say your only client is Walmart, the Federal Government, Comcast or the City of Dallas. This gives the factoring company a safe bet these big clients will pay the invoices in full. A good factor understands your relationship with your clients is critical and we work in a cordial and professional way with your customers that strengthens your relationship and improves cash flow.
Do you sell to the Government?
Many banks and accounts receivable funders specifically exclude Government Receivables from availability. Only the most experienced and knowledgable factoring companies handle government factoring arrangements. Do you homework and find a factoring company that effectively deals with all levels of Federal, State and Local governments.