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Benefits of Funding Accounts Receivables in Small Businesses

Studies done on small businesses and their financial stability indicate that most of them (82%) fail due to extreme cash flow problems. However, the studies revealed that they have money in account receivables to be paid in 90 days by their customers. Much of the money that can be used for daily operations is held in other accounts and not ready for immediate use.

Invoice factoring companies have been solving cash flow problems in small businesses by buying their 90 days invoices. By funding accounts receivables, small entities can continue with their smooth operations without experiencing extreme cash flow problems. As a small business owner, you should ask for funding accounts receivables from factoring companies so that you can handle the following business operations.

Offer Credit Terms

More than 60% of customers buying various goods and services from startup companies purchase on credit terms. This means that the business must be willing to wait for payments of goods and services offered for at least 90 days. This purchase program stifles businesses’ finances. Therefore, for small businesses to continue offering goods on credit, funding accounts receivables is a necessity. Small businesses cannot consistently sell goods on credit without business credit funding.

Hire More Staff

As the business expands, there is need to hire equivalent members of staff to handle the increasing business operations. Many small businesses have inadequate members of staff due to financial constraints. Most of them end up offering low-quality services to their customers. If you want your business to have sufficient funds that will allow it to hire more staff, you have to find a way of funding accounts receivables. You will receive your funds immediately and invest back into your operations.

Pay Business Bills

Have you heard of small businesses being disconnected from power supply due to increased electricity bills? This is common to small businesses. Thousands of them fail to meet their bills because they do not have sufficient funds in their bank accounts, while their customers hold most of the money in terms of credit. Business receivable factoring is very useful in such circumstances. It helps small companies to pay their bills on time and eliminate the risk of utility disconnections.

Open New Locations

As a small business owner, you would want to expand your company operations to other cities around the country. However, business expansion process takes money out of business, which you don’t have. You can fund your expansion by funding receivables. Business receivable factoring is a strategic way of making your funds available for use rather than waiting later when inflation and recession have struck.

Have you been struggling to meet the needs of your small business? Funding accounts receivables is one of the strategic financial decisions you can make in your business. By factoring in your receivables, you will be getting cash immediately rather than waiting for 90 days. With cash at a bank, your business will be able to provide the necessary services to its customers.