If you’re stuck for cash flow, accounts receivable financing solutions could be exactly what you need to keep your business afloat.
Most SMBs live or die based on their ability to keep incoming flowing in, but that can be difficult when their invoices won’t be paid for 30-60 days. Plus, that’s assuming the customer are prompt with their payments. If a customer drags their feet on payment, it can cause a serious revenue problem.
In short, the problem is that a company has plenty of assets on paper, in accounts receivable, but no actual cash in hand.
Accounts receivable financing solutions can correct for this.
Assuming you pass the requisite business background and credit checks, you can use your accounts receivable as collateral against loans. When your customers pay you, then you pay the loan. Or, you could even simply sell the debt off (called factoring) and let collections be someone else’s problem.
Obviously, both of these solutions require taking some loss, versus the total amount of your accounts receivable. But when the choice is between getting 60-80% of an invoice or getting none at all in the foreseeable future, accounts receivable financing starts making a lot of sense!
In fact, it can be a lifesaver in a number of situations. For example:
You have multiple deadbeat clients. Everyone hopes their customers will be prompt with payment, but that’s not always the case. Some have cashflow problems of their own. Others may deliberately not pay, hoping you’ll consider litigation to be too costly to be worth it. Either way, all it takes is a handful of deadbeats to kill your cash flow.
A job cost more than you thought. This happens to a lot of companies in contracting. You make a bid for a job, based on certain assumptions on costs, but it turned out to be more costly than you expected. You have to dip into your liquid funds to complete the job – but now you’re left out-of-pocket until the invoices come back.
You got hit with a disaster. Maybe it’s a flood. Maybe it’s a tornado. Maybe it’s the unexpected loss of a mission-critical employee. Whatever the situation, you need cash now to get your business back on track, not 30-60 days from now.
Let Camel Financial Help