Most small- to medium-sized businesses have struggled with having enough working capital at one point or another. Even seasoned business owners can have a hard time maintaining their working capital cycle. Defined as the amount of time it takes to turn current assets and liabilities into cash, a properly aligned working capital rhythm is essential to your business success.
Insufficient working capital is a red flag that signals your business can’t sustain its operations’ costs. Yet lengthy working capital cycles are likely costing your business in terms of productivity. For new businesses, it can take some trial and error to determine and execute a solid working capital process.
Business Factors Offers Small Business Capital in the Form of Accounts Receivable Financing
Accounts receivable factoring is an alternative financing option that can help small business improve their working capital and thus improve their cash flow. It does this by helping your business collect on its outstanding invoices faster thereby shortening your working capital cycle and making it more efficient.
So if you operate a manufacturing business that supplies goods to major corporations, your business is on a continuous cycle of sourcing raw materials, fabricating the materials into the product, and then selling that finished product. Your business issues the invoices for the product sold but still must wait 30-days or more to collect payment.
During this time, your business still needs to continue with the manufacturing process of procuring raw materials, manufacturing them into a finished product and then selling them. This costs money, and most businesses can’t wait 30-days for payment.
Receivables Financing Is Your Working Capital Solution
With accounts receivable factoring from Business Factors, you can collect on that unpaid invoice in 3-5 days instead of 30-days. Business Factors will essentially buy the receivable and pay you for it right away. It will then collect on the invoice from the client during the 30-day payment period.
With accounts receivable financing, you can have access to small business capital as fast as you can issue invoices. You don’t have to slow down factory production because you lack the funds to procure raw materials, cover payroll, hire additional workers, or simply cover your operating expenses.
Small business capital from receivables financing can be a great tool to shorten your working capital cycle and thus improving business efficiency and cost effectiveness.