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Economic Recovery Aids Invoice Factoring Companies

By Kristin Gabriel

Republish: EasyPublish™
Published: 29Oct2009
Word count: 462
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Big businesses as well as small businesses have been struggling to survive the current economy. But small business owners do not have the resources that larger businesses have. This is why so many small businesses have gone out of business during 2009. But the good news is that the current economic recovery in progress will actually aid many small businesses.

Many small businesses have been forced to close while others have either changed their model, introduced new products or services, or have added products. Typically during a recession it is the marginal businesses that do not survive, and this is true for all industries. It is this kind of "cleansing? that closes some doors, but opens up doors for other new businesses that start up after economic recovery.

So it is actually growth that creates an opportunity for many small businesses because as the surviving businesses grow, they will need funding that can not be obtained through traditional financing such as banks, credit unions or other asset based lenders. Likewise, the new businesses starting have limited assets, also requiring invoice factoring services.

How can invoice factoring aid these small businesses? Well you may need to know some new terms, as follows:

Asset liquidity -- this is the ability of a business to convert assets into cash. It's an important part of any small business practice, because working capital is really important in business operations.

Working capital and liquidity -- this allows business owners to meet their obligations and to stayin business. Good cash flow is critical to the survival of any small business.

No matter what way you look at it or what you call it, assets bring value to your company, in the form of cash. But an asset can also be your inventory, tools, supplies, machines, even your building. The opposite of an asset is a liability, an obligation or outflow of money. A liability could be a loan that you are making payments on or some other obligation that costs money. In order to cover the cost of the liability, you most liklely will need to turn assets into cash.

Liquidity - this is when you turn an asset into cash. It also represents the degree that an asset can be exchanged in a business transaction without losing value.

Cash is the most liquid asset. Your inventory is another asset that can be turned into cash. Invoices are also assets, but not as liquid.

Turning invoices into cash while waiting for their payment can be done via invoice factoring. A factoring company will look at your customers' credit (not yours) and can pay you the majority of what's owed to you within as little as 24 to 48 hours. Give a factroing company a chance as a new business strategy for profitability.

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 services such as invoice factoring to clients in more than 30 industries. IFG offers expertise in accounting, finance, law, marketing and banking. Ho to www.ifgnetwork.com to learn more about factoring.

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