Most factoring applications can proceed very quickly if the client company is well prepared and does not have any liens, legal problems or tax problems. As a matter of fact, many factoring companies can implement a factoring line in about a week or two if everything goes smoothly. However, there are a number of things are beyond the control of the factoring company that could derail an application.

Here is a list of the most common roadblocks to having your invoice factoring application approved:

1. Incomplete / Missing documentation
2. Open UCC Liens from previous lenders
3. Unpaid federal taxes  liens (FTL)
4. Unpaid payroll taxes
5. Open judgements
6. Owners with a criminal background
7. Uncooperative customers
8. Customer credit

Here is an explanation of these roadblocks:

Item 1: This one is obvious but it’s the most common reason factoring applications get rejected – they are basically incomplete and are missing key components. Thus the factoring company can’t make a decision.

Items 2 – 5: All of these can fall under the category of encumbrances. Basically all these items can create a lien on your accounts receivable that has a higher priority than the factoring company.  Like most business financing solutions, factoring companies need to be able to secure collateral (invoices) and be in 1st position. All of these items can prevent the factoring company from getting the priority they need.

Item 6: Most factoring companies will do a  background search on the company owners. Many factoring companies will decline working with individuals that have certain criminal backgrounds. This varies by factoring company.

Item 7: If you want to use factoring, your customers will need to be on board with the decision. This is because they will need to sign a notice of assignment that advises the customer of the factoring relationship and specifies the proper payment address. Their refusal to acknowledge this document can derail the factoring process.

Item 8: The whole premise of factoring is that your company will get an advance for invoices from slow – but credit worthy – customers. Even the most complete application will not get funded if your customers don’t have sufficient commercial credit.

To maximize your chances that your factoring application will be successful your best bet is to plan, prepare and do your homework. Make sure that you have all your paperwork in order and submit it when you are ready to move forward. If you have issues relating to items 2 to 6, you may want to consult with an competent attorney to help you handle those issues.

Disclaimer: This article does not contain legal or financial advise. If you need advise, please consult a competent professional.

Managing the cash flow of a business can be very difficult. You need to be able to forecast when invoices will be paid, then factor in the timing of any supplier payments and costs while taking your cash reserves into consideration. This is a very challenging task and it’s hard to be precise about your cash flows – this makes offering payment terms (net 30 to net 60) even more difficult – especially if you don’t have any substantial cash reserves to cover any shortfalls.

One way to solve this problem is to use invoice factoring. When used properly, this financial tool can help you offer payment terms to your customer without having to worry too much regarding whether they will pay in 30 or 60 days. It offers a very simple proposition – a factoring company provides an upfront payment for your invoices so that you don’t have to wait to get paid. The transaction is settled once your customer pays the invoice in full. Factoring allows you to take on new clients while minimizing the worries about the effects of late payments on your cash flow.

However, factoring is not for everyone. For starters, it’s more expensive than a conventional business loan (or line of credit). So it’s best to use it for companies that have relatively high gross margins – more than 15% is advisable (though this varies). Also, since the transaction is based on the strength of your invoices, it will only work if you have solid credit worthy customers.

One big advantage of factoring over other business financing solutions is that it’s easier to get. The most important requirement is that your customers need to have solid commercial credit. Aside from that, your company needs to be free of tax and legal problems. Another advantage of factoring is that most lines don’t have a fixed limit, rather your use limit is determined by a combination of your sales, your performance and the creditworthiness of your customers. This makes it an ideal tool for small companies that have solid customers and good growth opportunities.

One of the toughest jobs of running a small or mid sized company is juggling your expenses and revenues. As an owner or manager, you need to make sure that there are sufficient funds to cover all expenses. At the same time, you  have to deal with clients who typically pay invoices in 30 to 60 days. Although trying to match revenues and expenses usually helps, most business owners usually build a reserve fund and use it to pay expenses while waiting for clients to pay their invoices.

Although using a reserve fund can be  a good strategy, it also has important limitations. One of them is that money that is sitting in a reserve account can’t be used for other projects without putting your company at risk. This  limits your growth, since many owners are hesitant to use reserve funds to finance new projects. Another challenge is that you could still  run into a cash shortage if clients decide to take longer to pay their invoices. Therefore,  managing how much cash to keep in a reserve account is as much an art as it is a science.

A better solution is to use business financing, which if used correctly can smooth the unpredictability of client payments. One program that has been gaining popularity in recent years is invoice factoring. This program allows you to create a predictable revenue stream by reducing the time it takes for you to get paid for you invoices from 60 days to just a couple of days. And once you have a predictable revenue stream, you can manage your expenses and use your capital more efficiently.

Factoring works by using an intermediary finance company, who is positioned between your company and your customer. Once you invoice a customer, the factoring company buys the invoice from you and pays your for it. The factoring company then holds the invoice and settles the transaction with you once your customer pays. Most factoring transactions are structured as follows:

• You invoice your client and send a copy of the invoice to the factoring company
• The factoring company advances 80% of the invoice to you (Payment #1)
• The factoring company waits for your customer to pay
• Once your customer pays, the factoring company advances you the remaining 20%, less their fee (Payment #2)

One of the advantages of factoring invoices is that it’s relatively easy to obtain, especially when compared to other sources of business financing. The biggest requirement to qualify is that your business have good commercially credit worthy customers. Aside from that, your company needs to be free of judgements and liens.

Non recourse factoring is one of the most misunderstood subjects in the industry and prospects tend to have the wrong expectation about this product. Let’s start by stating what non-recourse factoring is: It’s a factoring facility where the factoring company assumes the risk of non payment if the customer does not pay the invoice due to insolvency during the factoring period. This definition can sound a little confusing to some. Furthermore, non recourse factoring options varies by company, but this definition generally holds true.

In simpler terms, this means that if your customer cannot pay the invoice due to insolvency (i.e. bankruptcy) that happens during the factoring period, then you are covered. The invoice factoring period is usually defined as the 60 to 90 days that a customer has to pay the invoice back.

For example, the following items are usually NOT covered in a non recourse agreement:

• Payment disputes of any kind
• Product or service disputes
• Late payments

Remember that non recourse factoring offers some protection against credit risk, it does not offer protections against disputes and performance problems. Basically, non recourse factoring generally covers you if your client unexpectedly goes bankrupt during the factoring period. It can be an important protection but it’s not all inclusive.

One additional point is that while unexpected bankruptcies do happen – current credit analysis technology is reasonably good at detecting the warning signs that happen prior to a bankruptcy. Most factoring companies will monitor your customer’s credit regularly anyway and will advise you if they detect any increase in the level of risk.

The details of how the non recourse factoring plans operate are defined in the factoring contract. It’s a good idea to review the contract with a competent attorney to make sure you understand it.

Although it has been gaining market traction in the last decade, invoice factoring is still not very well known in the US as a business financing option. This is surprising because small business factoring can be a good alternative to finance a startup company. Many startups that work in the business to business environment usually spend their first years of business operating under very tight cash flow – this is because most commercial clients pay their invoices in 30 to 60 days. On the other hand, the startup has a number of immediate costs that must be met in order to service the client. Products need to be bough, employees need to be paid, etc. This creates a challenge and many company managers try to get financing to solve this problem. This is where small business factoring can be of most help.

Instead of waiting to be paid, the company can use a factoring arrangement to advance funds against their soon to be paid invoices. This eliminates having to wait for payments and provides predictable cash flow. This allows the company owners to take on new opportunities without having to worry about handling their operational expenses.

The biggest advantage of small business factoring is that is a lot easier to qualify for it than to get a business loan. Most lending institutions will only provide loans to companies that have substantial assets and a track record of profitability. Furthermore, many institutions will only work with companies whose owners have stellar personal credit and can post substantial collateral. The bottom line is that few startups can really qualify for conventional business financing.

On the other hand, invoice factoring has simpler requirements. The most important one is that the company must have credit worthy customers – since those invoices are the collateral for the transaction. As a matter of fact, factoring allows you to use the credit worthiness of your clients to your advantage. This is what makes factoring an ideal solution for small companies who can’t wait 30 to 60 days to get paid by their customers.

Fleet maintenance companies tend to have demanding cash flows. Meeting payroll is probably the top cash flow concern, since paying employees on time is vital to the success of the business.  Paying suppliers quickly is also places a strong demand on your company’s cash flow. The problem comes form the fact that employees and suppliers need to be paid quickly, while fleet owners usually pay their invoices in 30 to 60 days. This creates a situation where you have  immediate expenses coupled with delayed revenues. It will become a problem if your company does not have the funds to cover expenses while waiting to get paid.

One way to solve this problem is to use invoice factoring financing, which accelerates your revenues, providing funds to pay employees, suppliers and other expenses. Factoring financing also positions your company on a more stable financial footing, allowing you to take new customers and larger orders with confidence.

Factoring works by providing you with an advance for your slow  paying invoices from credit worthy commercial clients. This eliminates the uncertainty of when you’ll be paid since the funds will come from a factoring company. The transaction is completed and closed once your client actually pays for the invoice.

One of the biggest advantages of invoice factoring is that the most important requirement to qualify is to do business with commercially credit worthy clients. This is because their invoices (and payment capacity) acts as the collateral in this transaction. So small companies with a strong customer list can usually have access to this type of funding.

One of the nice aspects of owning a consulting business is that generally, profit margins are very high. The more challenging aspect is that consulting companies  require that you hire highly skilled employees along with other staff members that need to be paid regularly to work on projects. This becomes a challenge when you work with large corporate clients who pay their invoices on a net 30 to net 60 day time frame.  This is because your company needs to have enough capital to cover the expenses, while waiting to get paid by your large clients. This can become a serious problem is the company grows too fast and finds itself holding a number of invoices but with little actual funds to pay employees.

The solution to this problem is to use business financing to cover operational expenses until your invoices get paid. One solution to this problem is to use factoring. It works by providing you with an advance on your invoices. You can use these funds to pay your employees and to cover other expenses of running your business. Once the customer pays the invoice, the transaction is settled with the factoring company, who charges a small fee for the service.

One of the advantages of invoice factoring is that it’s easy to obtain. To qualify, the client needs to be free of liens, judgments and major problems. But more importantly, they need to do business with solid and credit worthy commercial or government clients.

At first, most clients are always perplexed to hear that the factoring advance, which is paid as soon as the invoice is sent to the factoring company, is less than the full value of the invoice. Most factoring companies will advance anywhere between 70% and 85% as a first installment, and hold 15% to 30% of the invoice as a reserve.

Factoring companies hold a reserve for a very simple reason – they want to protect themselves in the event the invoice is not paid in full. There are many reasons why invoices are not paid in full. Some include:

• Order errors
• Breakage (i.e. not all product was delivered in good condition)
• Delivery errors
• Quality errors
• Etc., etc.

By not advancing for the invoice in full, the factoring company protects itself. Bear in mind that the factoring company does not keep the reserve for ever. Most will rebate it, less the factoring fee, as soon as the client pays the invoice in full.

The advance percentage is determined by a number of variables which include:

• Client’s track record in collecting full payments
• Customer’s track record of paying in full
• The financial stability of your firm
• The soundness of the delivery / payment confirmation documents
• Client’s industry

Actually, client’s industry is probably one of the biggest determinants of advance percentage. For example, transportation companies that use freight factoring usually qualify for advances that average 90% (or higher at times). Likewise, staffing agencies can get an invoice factoring advance of 90% as well.

On the other hand, construction subcontractors using construction factoring usually get advances of 75%. This is becauise subcontractor invoices usually have retainage of 10% and general contractors are notoriously difficult payers. The same goes for companies using medical factoring – advances range from 65% to 85% because insurance companies can be difficult payers.

However, the average advance is between 80% to 85%.

Here is a sample invoice factoring transaction that will help you better understand how they are structured. Assume the following:

• Advance Rate: 80%
• Factoring rate: 1% per 10 days
• Invoice: $1,000

This is how the transaction would work out:

1. On day 1, you send the invoice yo your client. You also send a copy to the factoring company who advances of 80% or $800 and deposits it in your bank account. The remaining 20% (or $200) is not advanced and remain as a reserve
2. One day 29, your client pays the full value of the invoice $1,000
3. The factoring company determines the factoring fee is $30 ($1000 x 3%) and rebates $170 ($200 held back less $30 factoring fee)

After long negotiations, your star salesperson makes a big sale to a new client. This is a big enough sales that it could easily make your year. There is only one minor catch – your client is asking for net 30 terms. They will pay your invoice 30 days after receipt. In the meantime, you need to cover all costs of the sale (products and services) plus all your business costs. Should you make the sale?

It’s a tough question to answer. If you are confident that your client can pay the invoice, then making the sale is probably a good idea. If you are not confident they will pay then you should be very careful and remember that it’s only a true sale if the client pays.

But how can you determine if your new client will pay? The best way to determine if your new commercial client is likely to pay their invoice is to check their commercial credit. A good commercial credit report will provide your clients track record of paying clients and will suggest a credit limit. Although credit reports are not perfect, they are a very good tool to have if you need to make a quick decision. If you need to make a credit decision for a very large sale, you should consider buying reports from several providers and doing more thorough credit evaluations. Two well known providers of credit reports are Dun and Bradstreet and Experian Business Credit.

There is another problem with net 30 sales. What if you want to make the sale but cannot afford to wait 30 days to get paid? If you have that problem you should consider factoring the invoice. Invoice factoring is a form of financing which advances funds against your invoices from credit worthy commercial clients. The quick payment by the factoring company also enables you to offer net 30 day terms with confidence, knowing that you can finance the invoice if you need money sooner.

When you factor an invoice you get two payments. The first payment is given upfront, as soon as your invoice the client. It’s usually for 80% of the invoice. The second payment , the remaining 20% (less fees) is given once your client actually pays the invoice.

One of the advantages of invoice factoring is that your financing line is dynamically tied to your company’s sales. This enables to grow your business knowing that you can always tap into the factoring line if you need to fund your invoices.

Most growing companies run into cash flow problems at one time or another. The recent recession has made this problem all too common, forcing managers to find strategies to cope with these problems. Many cash flow problems are caused by customers delaying their invoice payments. In the recent past, most commercial customers paid their invoices in 30 to 45 days. As conditions deteriorated, they started paying at slower rates, sometimes taking up to 70 days to pay.

Slowing payments can have serious repercussions for the business. At first, you can counter their effects by paying your own suppliers at a slower rate. If left unchecked, it may jeopardize your ability to meet critical payments – like payroll. One you are at risk of missing payroll the business is in grave danger.

One way to deal with this problems is to build a cash reserve. This is easier said than done as few small companies have the resources to build a reserve. Another alternative is to use business financing to cover the gap.

Using a business loan to cover expenses while waiting to get paid by clients can work if used properly. Most business loans are designed to buy goods and are paid on an amortized schedule. This makes them cumbersome to use if you are only interested in covering expenses while waiting to get paid. A better solution would be a revolving line of credit. The problem is that all these solutions are subject to strict banking underwriting standards, and are a viable option for companies with substantial assets.

There is a better alternative though. It’s designed specifically to solve the cash flow problems generated by slow paying clients. The solution is called invoice factoring. An invoice factoring program will give you a funds advance on your slow paying invoice. This enables you to cover business expenses while waiting for your clients to pay. Once your client pays, the transaction is settled by the factoring company.

As opposed to most conventional business financing products, invoice factoring is relatively easy to qualify for. You need to have invoices from credit worthy clients that are free of encumbrances and liens. This makes it an ideal solution for small companies whose biggest assets is a list of solid clients.

Large companies usually pay their invoices in 30 to 45 days. It’s a standard practice in which few companies make any exceptions. Lately, due to the past recession, companies have started lengthening their payment times. Many now pay their invoices in 60 or even 80 days. This has caused a number of problems to small business owners who depend on timely payments to be able to run their companies.

Why do many large companies take so long to pay their invoices? On the administrative side, paying an invoice usually requires that paperwork be reviewed by several people and that deliveries be checked. Furthermore, most invoice payments need to be approved by several layers of management. given all the moving parts, the process of getting all the proper paperwork and signatures can actually take a couple of weeks. However, there is another reason why companies take so long to pay invoices.

One of the main advantages of paying invoices in 30 to 60 (or more) days is that the company gets to use your product for free for a couple of months. One could argue that it’s the equivalent of getting an loan from you – the supplier. Delaying payments basically gives your client use of the cash that otherwise would have been used to pay you. From this perspective, it’s obvious why they chose to pay invoices in 30, 60 or even 90 days. This strengthens their cash flow.

But what can you do if you need the money sooner? Asking for a quick payment seldom helps, although sometimes you can get companies to pay you in about 10 days if you offer them a 2% discount. This is seldom reliable though. Another alternative is to use business financing. Although business loans can be used to solve cash flow problems, a better solution may be to use invoice factoring. Actually, invoice factoring is specifically designed to solve the problem from slow (but solid) paying customers. It advances funds on your slow paying invoices, providing the funds you need to cover operations. The transaction with the factoring company is settled once the client pays the invoice in full. Most factoring companies will advance funds based on the credit quality of your clients, provided your invoices are free of liens, judgments and other potential encumbrances.

Factoring can be an effective solution for companies that have good potential but cannot afford to wait for their clients to pay.

One of the side effects of the current recession is that business financing has become hard to get. A few years ago, business credit was flowing and companies could shop from bank to bank looking for the best terms. Nowadays, even companies that have solid financial statements are having problems getting a business loan. This situation is not likely to change for the foreseeable future as many lending institutions have capitalization problems and won’t be able to lend much until these problems are solved.

Because of this, many companies that need business financing will need to find an alternative – or do without.  One alternative that has been gaining popularity is invoice factoring.

Invoice factoring is designed to solve the cash flow problem that are generated when clients pay their invoices in 30 to 60 days.  While extending 30 day payment terms is common for commercial clients, many small and midsized companies can’t afford to wait that long to be paid. They have a number of expenses that need immediate handling, such as supplier payments, payroll and rent.  Factoring invoices can reduce the days outstanding on invoices substantially,  putting your company on a solid financial footing.

The mechanics on invoice factoring are fairly simple. Once the work or product  for an invoice is delivered, you sell the invoice to an intermediary company called a factoring company. The factoring company examines the business credit of the company paying the invoice (your client), and if acceptable, buys the invoice from you at a small discount. This provides a quick source of funding that can be used to cover operational expenses and grow the company.

Most factoring transactions are structured with two payments. The first payment, called the advance, is for about 80% of the invoice amount.  The second payment, which is for the 20% reserve (less fees), is rebated once the invoices is actually paid in full.

The biggest advantage of factoring is that it’s easy to obtain. Most small and medium sized companies can get it, provided they have solid clients and no encumbrances on their assets. This makes invoice factoring an ideal solution for companies that cannot afford to wait 30 to 60 days to get paid by their clients.

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Information about factoring in Virginia and Washington factoring

Are you selling goods or services to commercial customers or to the government? If so, you are probably used to the idea of having to wait up to 60 days to get your invoices paid. However, waiting to get paid can be challenging, especially if you have business expenses that can’t wait.

That is where a factoring company can help you.

Factoring companies can provide you with financing, based on your slow paying invoices. They eliminate the 60 day payment waiting period and provide you with the necessary liquidity to meet payroll, pay rent and meet business obligations. Here is how factoring works in a nutshell:

1. You invoice your customers and send a copy of the invoice to the factoring company
2. The factoring company advances you up to 90% of your invoices
3. You get immediate use of the funds. The factoring company waits to be paid.
4. Once the factoring company is paid by the customer, the transaction is settled

Although many business owners will go to a factoring company to get financing, factoring companies also provide other important services. Most notably, factoring companies can act as your business credit department. They can review existing clients and new prospects and advise you of their payment habits. And since they manage your accounts receivable, factors can also provide you with important financial reports and financial analysis.

More importantly, a factoring company can help you grow your business. By turning your slow paying invoices into cash, they give you the financing and the flexibility to take on  new opportunities. And, factoring financing lines don’t have arbitrary limits like business loans. They grow in relation to your sales. The more you sell, the more financing you get.

Because of these benefits, factoring companies can be great business partners and help finance your business growth.

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Learn about factoring New Jersey and invoice factoring in New Mexico.

Are you looking for a business financing? Many business owners who need financing start their financing search by looking for a business loan or a business line of credit.  Although business loans and lines of credit are well known products, they are very hard to get. And in reality, few business owners actually manage to get them.

In certain instances, invoice factoring may be a better and easier to obtain alternative. There are three conditions that can determine whether factoring is a better alternative than a business loan:

1. Are your clients’ slow payments hurting you? Do they take up to 60 days to pay?
2. Are you turning away bigger sales because you lack working capital?
3. With the right financing, does your business have significant growth potential?

If you answered yes to these questions, then chances are that factoring your invoices will be better for you than more traditional business financing products. Invoice factoring provides you with financing based on your invoices, eliminating slow payment cycles and providing you with money to pay rent, meet payroll and expand your business.

Since factoring is tied to your sales potential, it does not have the arbitrary use limits that business loans have. The more your business grows, the more financing you qualify for. Period. This makes it an ideal product for businesses that have significant growth potential.

Factoring (or receivable factoring as it is also known) is easy to use. Once you have invoiced your customers you send a copy of the invoice to the factoring company. The factoring company, in turn, advances you up to 90% of your invoice and waits to be paid by your client. Once your client pays the invoice, the transaction is settled.

In effect, by financing your invoices you eliminate the slow payment problem. You accelerate your cash flow, enabling you to pay your obligations, take new opportunities and grow your company.

In terms of cost, factoring is a very competitive product. Factoring fees range from 1.5% to 3% per month, making it an affordable product. If you own a business that is growing and you need financing, be sure to consider invoice factoring.

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Learn about factoring in Nevada and factoring New Hampshire

It’s not unusual for small and growing manufacturing companies to have some cash flow problems. Most of them stem from the fact that there is a delay between delivering your products and actually getting paid for them. This delay can last from 30 days and go up to 90 days and is a common industry practice.

The problem is that few manufacturing companies can wait that long to get paid. They have a number of current expenses that must be paid for – rent, supplies, electricity and salaries. The discrepancy between dollar inflows and outflows can cause major headaches to manufacturing company owners.

Getting clients to pay quickly is one possible way to fix this problem. It seldom works though. Most of your clients actually need to delay payments themselves to keep their cash flow straight. Another alternative is to use business financing to bridge the gap.

Most company owners will try and use a business loan to solve this problem. Although business loans can have several advantages, conventional loans tend to lack the flexibility needed to solve this problem. Furthermore, qualifying for a business loan can be a daunting task that requires weeks or months of work. Your lending institution will likely require that your company been in good financial health, have solid assets and have seasoned executives.

There is another solution that may work better than a small business loan. It’s designed to specifically reduce the gap between outflows and inflows – it’s called invoice factoring. Invoice factoring uses a financial intermediary (a factoring company) to finance your invoices while waiting for your client to pay. This strengthens your cash flow providing the liquidity you need to meet current expenses and tackle new orders.

Since your invoices are a liquid asset, most factoring companies buy your invoices outright. Because of this structure, they make most of their funding decisions based on the creditworthiness of your client. This enables you to leverage the creditworthiness of your clients and use it in your favor. Most small companies whose biggest assets is a roaster of good (but slow)paying clients can usually benefit from factoring.

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Information about factoring in Louisiana

Finding small business financing in the current environment is very difficult. Lending institutions are being very cautious and are only providing business loans to companies that have impeccable financial statements, a long history of growth and substantial assets. Because of this, few small companies can get a business loan or other forms of conventional financing.

Fortunately, not all financial problems need to be solved with a business loan. Many cash flow problems, common to small business, can be solved using factoring.

Most small companies run into cash flow problems because they don’t have an adequate reserve of capital to handle unexpected growth or costs. This situation is worsened by the fact that small companies usually have to give clients 45 to 90 days to pay invoices. This leaves the small company with the hard costs of delivering their product or service while having to wait for payment.

Asking clients to pay their invoices sooner will not work. Most clients, especially large corporations, require 45 to 60 day payment terms. Most will have these payment requirements in their contracts and won’t show flexibility. And unfortunately, if you don’t provide them with payment terms, someone else will.

This is where invoice factoring comes to play. You can get an advance on your invoices using a financial intermediary, called a factoring company. This provides you with the liquidity you need to operate your business. The factoring company holds the unpaid invoice until maturity and then settles the transaction with you when the client pays.

One of the biggest advantages of invoice factoring is that it enables you to leverage your invoices. Factoring companies look at the credit worthiness of the companies paying the invoices as an important components in their funding decision. This means that a small company whose biggest assets is a client list of large credit worthy companies can usually qualify for this form of financing.

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Learn about invoice factoring in Kentucky.

Sooner or later, almost every business will run into cash flow problems. Although ideally you want to prevent these problems, this is not always possible. Part of running a business involves, at times, living a little bit on the edge. Sometimes, you go a little farther than you should have.

One of the more common causes of cash flow problems is slow paying clients. These happen because most commercial sales are not paid immediately, but rather 45 to 90 days after the product or service has been delivered. Few business owners can afford to wait that long to be paid, though. There are constant business expenses that have to be covered.

Common wisdom suggests that companies should keep a cash reserve that is large enough to cover expenses while waiting to get paid. This works beautifully in theory but seldom in practice. The truth is that most small companies keep inadequate reserves.

One way to fix this problem is to complement the cash reserves with business financing. Selecting the right type of business financing to help with this problem is critical. Most business owners will first try to get a business loan. They soon find that business loans have difficult qualification requirements. The business must have a profitable track record and impeccable financial statements. Also, the business and the owners need to have substantial assets. Few will actually be able to get the loan.

However, a business loan is not always the right solution. You can eliminate the cash flow problem from slow paying clients by factoring your invoices. Invoice factoring provides you with a funding advance on your invoices. This enables you to cover business expenses while waiting to get paid. The transaction is facilitated by a factoring company, who buys the invoices from you (at a discount) and hold them until maturity. Since the factoring companies buy invoices, their biggest concern is that the invoice will be paid. Although the factoring company wants to make sure the company selling the invoice has no major problems, they are more interested in the credit worthiness of the company paying the invoices. This makes factoring an ideal solution for small companies who don’t have a lot of credit or a long track record – but have a solid list of clients.

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Learn about invoice factoring in Kansas