Invoice Factoring: Your Small Business Bail Out Plan

In today’s tough economy, small business finance can be confusing unless you know the tips for negotiating the best
deals, sourcing funding, and most importantly, keeping the cash flow healthy. Many financial experts today know
that invoice factoring is a proven financial method to stay afloat.  After all, factoring has been around for the
last 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 a March 2010 report called, “An Analysis of Small Business and Jobs.”
(Source: Small Business Administration, Office of Advocacy.)

One of, if not the most important tip to remain successful in your business is to have sufficient cash flow. Therefore,
planning a budget a year in advance is essential. And don’t forget to consider how outside events will affect your
budget planning. What if your main customer goes bankrupt?  Or what if another good customer decides to move?
Do you know how much of your sales these customers generate? What if two or three of your customers don’t pay
their invoices on time?   Factoring is not a lending service – it’s really a discounted purchase. Invoice factoring can
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. Here’s how it works: Your business fulfills an order. 
Your business invoices the customer.  A factoring company buys the invoice at a discounted price for cash.  Your
customer pays the factor.  

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.  Here are some of the
other items that factoring resolves:

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

Using invoice factoring is one of the most effective ways for a business to raise working capital for ongoing operations
or planned expansion.

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.

In summary, today it is more important than ever to remain cash rich during this economic recovery. Why?  The 2010
Small Business Administration report which reveals that from 2008 to mid-2009, net lost 2.8 million jobs were from
establishments who employed 20 or more employees. Unemployment rate peaks during previous recessions declined
by 2.4 percent within 12 months. It is possible that such a reversal has begun in the current downturn as the
unemployment rate dropped from 10.1 percent in October 2009 to 9.7 percent in January 2010.

Through the use of invoice factoring, small businesses can survive and come out of the recent recession.