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Invoice Factoring Helps Economic Recovery for Small Businesses

By Kristin Gabriel

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Published: 26Mar2010
Word count: 476
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Small business finance can be confusing unless you know the trick to negotiating the best deals, sourcing funding, and most important of all, knowing how to keep the cash flowing. More and more financial experts are recommending invoice factoring as a proven financial strategy for a small business stay afloat until there is recovery from the economic recession.

Factoring has been around for more than 4,000 years. Over a recent 15-year period, small businesses created some 65 percent of the net new jobs in the private sector, according to "An Analysis of Small Business and Jobs," a March 2010 report.(Source: Small Business Administration, Office of Advocacy.)

It seems like the most important tip to remain successful in your business is to have sufficient cash flow. this is why you need to plan a budget a year out, and you need to think about how outside events will affect your budget planning.

After the recession, people need to be realistic, and have a plan in case their main customer goes bankrupt. Or what if another good customer decides to move? Do you know how much of your sales these customers have been generating? What if two or three of your customers don't pay your invoices on time?

Invoice factoring is not a lending service - it's really a discounted purchase. Factoring can help resolve some of these types of issues and it can also make your marketing budget work better, and help you improve operations, increase profits, buy more supplies and pay your bills on time. Whether you are a start up business or one that has been around for many years, companies everywhere in the United States are struggling to make a profit. One of the world's oldest methods of finance, invoice factoring, also known as accounts receivable factoring, provides small to medium-sized business owners with working capital when traditional funding is not available - such as bank loans or credit. The financial practice of factoring dates back to the ancient Roman civilization.

Using invoice factoring is one of the most effective ways for a business to raise working capital for ongoing operations or planned expansion. Here are some of the other items that factoring resolves:

1. Has no limits and provides fast results Stimulates economic growth, allowing expansion without debt.
2. Provides companies with continuous working capital, increasing their cash flow.
3. Is accessible and flexible.
4. Increases production and sales.

There are a variety of ways that a business can survive an economic slowdown, including reducing business costs, planning for future growth and measuring the growth.

It is more important than ever today to remain cash rich during this economic recovery. Through careful budget planning, watching expenses and the use of invoice factoring, small businesses can survive and come out of the recent recession on top, which will ultimately create more jobs, and fuel a better economy in the future.

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 invoice factoring, serving clients in more than 30 industries in the United States, Canada, Australia and New Zealand. IFG offers expertise in factoring, accounting, finance, law, marketing and banking.

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