Ten Simple Reasons Why You Should Factor Government Receivable Invoices
1. Government contracts can be costly: While many companies are thrilled to secure government contracts, they can be quite costly. Subsequently, there may be little money for anything else after the job has been completed. Factoring government receivable invoices can provide a company badly needed money.
2. Lack of future operating capital: When a company pours a lot of money into a government contract job, they may have little money left over to take on additional jobs. As a result, they miss out on future business because they can not pay to service it. This would mean the loss of potential earnings. They can avoid this by factoring the invoice from the governmental job. By receiving an advance on what is owed them, they are able to get badly needed operating capital.
3. No collections team: Some small or newer companies my not have a collections or accounts receivables department. They can outsource these duties by working with a factoring company. Factoring companies will provide them with an advance on the outstanding debt, collect it and then return it to the business, minus a fee. This allows companies to hand these duties over to a company that specializes in them while not requiring them to create their own department.
4. Your company needs money fast: Companies that need money fast often feel like they have few options. Many depend on some sort of bank loan, line of credit or business credit cards. All of these options can be extremely expensive and are at times unavailable. A very good alternative that many companies don’t know about is accounts receivable financing: this can give companies much needed funds in as little as seven days.
5. Your company has poor credit: A business with poor credit will find it difficult to get a loan. This can put them in an incredible bind if they need money right away. Factoring largely depends on sales volume and the credit worthiness of a business’ customers. This takes a company with bad credit off of the hook.
6. Your company currently has a good deal of debt: Companies that have a lot of debt may no longer be able to get a loan because their debt ratios are too high. They might have also maxed out their line of credit. In these cases, there options are few. Accounts receivable financing is perfect for these companies because their debt is really not a big issue.
7. Your company has cash flow problems: Cash flow is the lifeblood of a business. Money has to be available to pay employees, utilities, operational expenses and the like. When monies are not available for these things, it spells trouble for a business. Having to wait until one’s business collects on the invoices can take a good deal of time. In the meantime, a company does not have this money available to them. Receiving an advance on these invoices can inject some much needed cash into the company, enabling them to meet their obligations.
8. No need to take out a loan: Loans can be costly and risky. Invoice financing, also known as accounts receivable factoring, is an excellent solution for companies needing cash flow without the need of taking out a loan.
9. Your company is fairly new: Companies that are new or even fairly new, will find it quite difficult to get bank financing. Factoring provides them with the money they need regardless of how long they have been in business.
10. No need to sell equity: Some companies are forced to sell equity in order to raise money. This is not necessary when a company uses invoice factoring.