It is always the ideal situation for a business to be able to have the funding to be able to operate, make payroll, maintain equipment and inventory and also have the ability to take on new contracts and grow when the opportunity is present.
However, for most businesses, cash flow issues can be a significant problem, particularly for B2B sales with 30, 60 or 90-days between invoicing and payment. To get around these times when there is no income, working capital factoring provides a great opportunity.
In addition to these natural gaps with B2B transactions, there are other specific situations where working capital factoring is the best way for a business of any size to get cash immediately rather than waiting for customers to pay.
Rapid Growth
Having to slow down the growth of a business due to delays in receiving payment can hurt a company. It can also cost in contracts if any business has to pass on new opportunities because of lack of inventory, employees or equipment.
Utilizing immediate cash from a factor without having to deal with banks and loans is always a good option during these situations.
Seasonal Business Increases and Decreases
Many businesses operate on more of a seasonal type model. For these businesses, using working capital factoring during their busy times allows them to maximize their income potential. It also provides the operating capital necessary when there may be lulls in business and invoices are still outstanding.
In addition, as there is no repayment or any type of interest with factoring, there is no need to worry about how to manage payments during the slumps in the cycle. This frees up the business owner to make the most effective and profitable choices in when to use factoring without having the time delay and the long-term financial consequences of a loan or a line of credit.
