Running a small business is something that many people dream of. Being the boss and making the rules sounds great. Even though running a company can have hassles, many will say, it’s well worth it. There’s a certain kind of pride and inspiration to be able to declare oneself as a business owner. Which is why so many owners continue to press on, even when their businesses are having issues.
Issues can be caused by different challenges, specifically financial challenges. Perhaps, the business owner overspent and purchased more inventory than needed. Or supposed not enough inventory was purchased, which caused the company to lose customers. It could also be that not enough employees were hired and trained. Not having enough employees could cause a bad ripple.
Many things can cause a new small business to get behind on their finances. Once a company gets behind financially it can be hard to bounce back. Payroll doesn’t disappear just because a company us having a bad month. The employees still need to get paid. Not paying an employee can land a company into unwanted legal trouble.
And let’s not forget the monthly supplies that have to be purchased. Supplies and materials are needed to keep the doors open. The same goes for the electricity bill, the phone bill and much more. The bills don’t stop coming in. However, there are options to choose from to alleviate some of the downward spiral of a business suffering from lack of funds.
One if those options are to take out a loan. Many small businesses may not qualify for a bank loan. In many cases the credit of the company has suffered slightly. This is due to paying bills late. It is always best to take action early, when the business cash flow slows to salvage the good credit of the company.
Invoice Factoring, How Does it Work?
Another option would be to participate in a small business invoice factoring. This is simply a matter of gathering all invoices and putting them in the hands of a third party. This third party will have complete control over all invoices. This benefits the company in a huge way, because now the office can concentrate on other things.
As we all know, an invoice is a bill. This bill must be paid. The company sends out these bills to pay for services rendered by the small company. The invoices can be paid at any time between 30-90 days.
Once the invoice financier has the invoices they will deliver to the company around 70-85% of the total amount of the invoices. This is terrific news for the company. With this money the company can now conduct payroll and other important tasks. As for the remainder of the bill, the company will receive that as soon as it is paid.
The fee to utilize a small business invoice factoring service will be deducted out of the remainder of the invoices. So when the invoice is paid, the amount that has already been given to the small company will be deducted, along with the necessary fees. Whatever is remaining will be given to the business owner.
This process allows small businesses to carry on with necessary tasks, while waiting for it’s clients to pay their invoices. It relieves some of the stress of having to juggle bills that are mounting higher and higher. And the good thing about invoice factoring is that to qualify the credit of the client is checked, not the credit of the small company.
The purpose of this is to ensure that the client is established enough to pay the outstanding invoices. This process alleviates mounds of worry from the business owner. And it makes way for an easier financing decision.