The business landscape is littered with small business owners who’ve stumbled in their search for capital. Many requests are denied. Those who are able to secure more traditional forms of funding, frequently have unacceptable strings attached. Some financial deals come back to bite the business owner in the form of substantial debt, insufficient revenue share or worse.
Raising money is difficult and time consuming, and most small businesses fail because they run out of cash. Getting additional capital in smaller chunks will get you the cash your business needs without risking a loss of equity or ownership.
Invoice factoring may be the answer to many business cash flow issues. Gaining in popularity, invoice factoring (also known as Accounts Receivable Financing) is the practice of selling your accounts receivable (invoices) at a discount to a specialized financial services company like Charter Capital. You get the money from Charter Capital and we help you collect on the invoices.
The reason many businesses make this move is to ensure the continuous flow of cash to the business without sacrificing equity or incurring debt. Essentially, businesses that use factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.
With small to mid-sized businesses, freeing up working capital through factoring can prove to be vital. The money can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.
The lesson here is: Working capital in-hand today is better than dashed dreams tomorrow.