Keeping your cash flow consistent can be tricky. You finished the job or completed the delivery, but now you have to wait 30, 60 or even 90 days to get paid for your work. However, you need those funds now.
Not having enough working capital can leave you struggling to pay your staff and your overhead expenses – and prevent you from growing your business. For instance, a staffing company has to turn away from a new client that requires longer payment terms. A distributor has to forgo profitable volume discounts without cash in hand. A fleet owner can’t run all his trucks if some need repairs now.
Two ways that businesses try to bridge the funding gap between completing a job and getting paid for it is through spot loans and factoring. (Here is a simple example of how factoring works)
Spot Cash Loans
It can be frustrating to learn that a bank isn’t willing to give you a generous loan when you need it. For many businesses, it seems like the only way you can receive a bank loan is if you can prove that you definitely don’t need it.
Some people consider one-time cash loans from a variety of financial services companies as an alternative. However, this debt must be repaid with interest, and invariably that interest is much higher than a traditional bank loan. Plus you may need adequate collateral and a strong credit history to qualify.
In many cases, partnering with a factoring company that allows you to factor certain invoices from clients would be a better way to speed up your cash flow. You sell your invoices to the factoring company and the company pays you upfront what you are owed. The factoring company can give you quick spot cash, very similar to a spot loan, but you don’t have to go through a lengthy application process. The factoring company evaluates your application based on your clients’ creditworthiness, not your credit report. Most importantly, you won’t be incurring debt.
The Smart Alternative: Factoring vs Spot Cash Loans
Access to quick cash doesn’t have to come with a huge price tag. With factoring, you can turn some of your company’s invoices into instant cash at an affordable fee. The main benefit is that you can use this service when you need it. You will also receive assistance with your collections chores and can choose to have your invoices prepared by the factoring company as well.
Interstate Capital offers top rated factoring services at highly competitive rates. Contact us for an free factoring assessment today!