Although there are many ways to manage small business cash flows and of course it is important to become an expert in this case if you intend to stay in business, all suggestions to maintain cash flows are excessive after you find yourself in the midst of the struggle for income. When your small business reaches a cash flow crisis, you might find yourself ready to be in line; And there will be a lot offered to you, because the cash flow solution is bread and butter many financing companies.
One of the most commonly discussed may be a finance invoice, the term sounds that include several different financing options. You can also hear it called a cash flow factory, receivables, debtor finance or financial sales, but what is it?
In a simple term Finance Invoice is a way for businesses to use their debtor books as collateral and release usual up to 85% of cash bound in waiting for money because of the business of an unpaid invoice. There are many industries that rely on this type of financing to trade, institutions that supply staff while for example, because their usual practices will mean unusual cash flow situations because they have to pay a large number of staff every week, but will probably wait for the solution to the invoice for the supply of staff For a month or more.
The term financial invoice, actually includes three major types of financial solutions and although all achieve the same goal to free business cash flow and all use extraordinary invoices as security, three very different ways.
Factoring the financing company will continue and take over the management of the LIGHT sales and credit control books. Basically the ‘bought’ invoice for most of their value to let go of money back to business and factoring companies then pursue debtors in the usual way. Many small businesses prefer this because they often lack facilities for their own credit control managers.
As factoring that he releases the same amount of money into business with extraordinary invoices used as security, but usually secret services without customers realize that financing is being used. Unlike factoring business receivables will maintain their credit control management. Greater companies with a credit or business control department are uncomfortable with customers knowing financial settings they often choose invoice discounts over factoring.
Where with the two previous two loan options, cash is released from extraordinary invoices, asset-based loans will release money on all business potential assets; It can usually include property, equipment, machinery, stock and even the company’s brand if it is quite valuable and the usual invoice. This is clearly a way to raise a much larger amount and most often used when there is one single event to cause the main cash flow crisis or to fund expensive businesses such as mergers or acquisitions.