A vast majority of companies fail because they were ill-prepared to manage growth and cash flow properly. Either accounts receivable are slow-paying, or funds become tied to excess inventory and a company hasn’t identified funding solutions that can help when finances become tight. Fortunately, there are several ways to improve cash flow for your business, allowing growth to continue as you wait for invoices to be paid. Three funding solutions for businesses are accounts receivable financing, inventory financing, and asset based lending.
Accounts Receivable Financing
Accounts receivable financing is the one of the more common types of funding solutions that companies employ. This allows you to sell your accounts receivable for up to 85% of their value. The funds received can be used to pay suppliers, fund operations, or reinvest in the business. Once your customers pay their invoices, you’ll receive the balance of the contract, less financing fees.
Often companies have too much capital tied up in their inventory. If inventory isn’t turning as quickly as expected, inventory financing is another of the popular funding solutions. There are some set-up costs involved with this sort of funding and the value usually based on forced liquidation value as opposed to the market value of the inventory. Also, most finance companies will only fund about 50% of the liquidation value.
Asset Based Lending
Mid-sized to large companies may wish to consider asset based lending as one of their primary funding solutions. The financing, in this case, is secured by such things as real estate, inventory, receivables, or machinery. Companies that can use this type of funding should have at least $1 million in monthly revenues.
The best funding solutions for your company will vary depending on the size of your business, its financial situation, and its particular needs. Regardless, there will likely be a solution to your cash flow issues available.
Express Capital Financing provides a variety funding solutions to businesses that solve cash flow problems. Contact us to learn about how we can help your business or to schedule a free consultation.