Heres a solution that may provide you will all the working capital your company needs. Most business to business sales usually carry 30 to 60 day payment terms. This means that you must deliver your products or services now. However, your client has between 30 to 60 days to pay you.
This creates a significant challenge for business owners. The is a potentially huge problem that has a simpe solution. Your clients want to pay you in 30 to 60 days, but you must pay rent, payroll and your suppliers now. As you can see, the math does not work. Unless you have a substantial bank account, this leads to an almost impossible situation.
If you are in this situation, it is also very likely that the bank will not be able to help you. As you well know, banks tend to lend to businesses that have three years of profitable operations and significant hard collateral. If you do not qualify for bank financing, your best bet may be to consider factoring.
Factoring is a business financing tool that helps business owners who cannot afford to wait 30 to 60 days to get paid by customers. Factoring provides you with the necessary funds to meet payroll, make rent and pay your suppliers on time.
As opposed to bank financing, factoring is easy to qualify for. The main requirements are that you have a business with a strong roster of commercial clients. Approval is based on your client’s credit and not yours. Factoring is also easy to use and it reduces the time you wait to get paid from 60 days to 2 days.
Factoring financing is an ideal tool for companies that are growing and that cannot afford to wait to get paid by the clients. It helps you to stabilize your financial situation and positions you for growth.