Factoring invoices – Financing for small business owners 

Every owner of a business needs money. Therefore, do you own a small business that is growing and needs money? To learn about an easy way to get money for your business, this article is designed for you to discover all you need to know.

A young man named Peter owns a successful business that is growing quickly. Like many businesses, Peter’s company has good commercial and government clients that buy regularly from him. And as a result of all competencies on the part of Peter, it affords him to have the attention of his clients purchasing more and more products from him. His business appears well founded.

With the passage of time, some cracks started to appear in the business. He’s been close to missing payroll twice. He’s delaying supplier payments. Even worse, he chose not to bid for a major government contract because he couldn’t afford to. That’s true – he couldn’t afford to bid for new business. He was afraid of having to add more employees and buy more materials.

Well, it is reasonable to wonder how that could be. Like most business owners, Peter extends terms to his clients. They usually pay him in 30 to 45 days. But, since Peter runs a small business, his suppliers demand that he pay them in 10 days and employees need to be paid every two weeks.

Peter then has clients that want to pay in 45 days and suppliers/employees that want to be paid in 10. Since the company does not have a lot of money in the bank, this then brings difficulty.

Nonetheless, there is a solution.  Peter should consider factoring his invoices to fix his cash flow. This factoring will provides him with the necessary cash to pay suppliers and employees, while eliminating the 30 to 45 day wait to get paid.

 

The following are how invoice factoring works:

 

1. You deliver the product or service and invoice your client

2. You send a copy of the invoice to the factoring company for financing

3. The factoring company advances you up to 90% of the invoice. You get immediate funds.

4. Once your client pays the invoice, the transaction is settled

 

So far from Peter’s case, he was able to meet his current obligations with factoring. His company will also have enough cash on hand to bid on new job proposals, and give him the opportunity to grow the business and advance it.


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Small business guide is a site built to assist people in setting up business. I do this as a major hubby. As a prolific writer, How best will it be to have a blog that will be useful to those looking to set up or run their own business.
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