Companies generate cash by making sales. In order to make a sale, a business has to create a demand, create a product or service, find a customer and then convince them to make a purchase. In many cases, the purchase a customer makes includes the ability to make payment at a future time, which is commonly known as a credit term. And while offering credit terms to customers is a great way to entice them to make purchases, it severely restricts the amount of cash a business has access to in order to repeat the cycle. That’s where business financing comes into play.
When it comes to finding the perfect solution for dealing with cash flow shortfalls, businesses have few options. In some cases, businesses will apply for and obtain a commercial loan, however this process is lengthy and complicated, often requiring companies to have been in business for many years and have well established credit in order to qualify for a loan and companies in many different industries simply don’t qualify at all due to the nature of their business. Those who do qualify must submit a large number of complex documents including a business plan, company and sometimes personal financials, and guarantees. The underwriting process can take weeks before the loan is approved and the company is funded.
Other companies will take another route, turning to the principle owners or investors to provide the cash they need to obtain the raw materials and/or equipment they need in order to fulfill customer orders. Business owners and investors may be hesitant to offer additional capital to a business that appears to be struggling with a cash shortage and require a substantial ownership stake in the company, which may alter the ability of the company to govern its own affairs.
This leaves receivables financing as a viable alternative to traditional financing vehicles. When a company choosing factoring invoices to raise cash, it first looks for an invoice factoring company that offers the services they need. They then review their existing invoices to determine which ones they can sell in order to cover the cash shortfall they have. These invoices can be current invoices, future receivables or even past due accounts.
The company then offers the invoices to the factoring company and the values are assigned. If everything is agreeable on both sides, the transaction closes and the invoices are transitioned to the factor while a lump sum payment is made to the company. The entire process can take as little as 48 hours.
So, if your business is in need of cash in order to cover a large, unexpected order, to cover a temporary shortfall of cash or to expand your business in order to grow, consider receivables financing. The process is quick and easy, especially if you turn to a trusted and reliable company such as Universal Funding. The friendly, experienced and professional staff has over 65 years of combined experience that they can put to work for you. For more information regarding the services Universal Funding provides or how receivables financing works, please visit www.universalfunding.com.