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Small Business Growth and Profits Using Single Invoice Factoring

By Kristin Gabriel

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Published: 12Mar2009
Word count: 452
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One of the major challenges facing almost any small business owner today is how to maintain and control positive cash flow. And, one of the least understood options for increasing cash flow is factoring. This one tactic alone can help a business meet immediate operational expenses, including payroll, materials, equipment, or even taxes. It is also a great way to quickly fund growth for any small business.

You can raise funds immediately through single invoice factoring, and then take advantage of such discounts when purchasing raw materials, equipment or supplies, so your business grows. This will help you reduce your manufacturing costs.

Here's how it works. A business sells its accounts receivable to a factoring company, which results in the business being able to improve its immediate cash flow. The full amount of the accounts receivable is then collected by the factor from the customer.

Here are some of the benefits of factoring: - Collections: Outsourcing the function of accounts receivable management to another company often times will free up resources, so you and your employees can to focus on doing more business. - Provides working capital: Many companies have the majority of capital tied up in things like their inventories, or supplies. Funding that comes from accounts receivable factoring gives a company the chance to free up capital.

- Invoice factoring provides quick financing: Accounts receivable factoring doesn't require a business plan or tax statements. It's a quick form of cash.

The bottom line is that you won't be giving up equity in your company when you obtain financing through accounts receivable factoring.

How quickly can you receive funding from invoice factoring? Most factoring companies complete funding within 24 hours.

Many people ask if they can be selective in the invoices that they sell. And, yes, you can be selective, because you don't have to sell 100 percent of your accounts receivables. In fact, if you want, you can even sell just one invoice. Many factoring companies have no minimum sales volume requirements, so you can use the service only as you need it. It also works in reverse, as there are no maximum limits either.

In case you are wondering how much you can advance against an invoice -- most companies advance up to 90 percent against each invoice that you sell. The cost of doing factoring involves a professional fee -- and they are typically competitive, however each client's circumstances vary.

In summary, invoice factoring is a highly effective cash management strategy. There are some industries that have been using factoring for many years. For example, the construction industry reports that sub-contractors who often experience cash flow problems use factoring. Factoring allows businesses to obtain funds based on their current accounts receivable.

Kristin Gabriel is a writer who works with The Interface Financial Group (IFG), North America's largest alternative funding source for small business. The company provides short-term financial resources including accounts receivable factoring, serving clients in more than 30 industries in the United States, Canada, Australia and New Zealand. IFG offers expertise in accounting, finance, law, marketing and banking. www.ifgnetwork.com

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