Introduction



The purpose of this article is to familiarize

business owners with a kind of financing that is

unfamiliar to many people, Factoring. I will

explain, in a simple yet comprehensive way, how

to improve your company's cash flow. You may then

decide if using the Factoring approach is a sound

business decision for your particular situation

and needs.

The Life Blood of Every Business

If we were in a room full of small business

owners and asked them all, "What is the one thing

your business needs the most in order to survive

and grow?" we would probably get a variety of

answers: "a needed product or service," "a solid

base of loyal customers," "a well-prepared

business plan to chart your course," "a good

location," or "effective marketing." All true

answers. But in addition to these, there is one

need central to every business - that is the need

for available CASH. This is where factoring or

accounts receivable financing comes into play.

Cash to business is like fuel to a car. You need

to have enough in the tank to start the engine

and you need to maintain enough in the tank to

keep it running. Now the car (your business) will

take you where you want to go. If you run out of

gas - cash on hand - at any point along the way,

well…we all know what will happen.

Where can a business owner obtain the cash he or

she needs? Banks, venture capital, private funds

of the owner, friends, and relatives are the most

common places in turn. However, banks usually

want a minimum of two or three years' worth of

business financials before they'll give a loan.

Venture capitalists want part ownership of the

business. Not being in business long enough or

not being profitable enough to satisfy the banks;

and not wanting to give up any ownership; and

with private resources already tapped, the

business owner may be stuck. "Where can I find

that cash to grow my company? I have a good

business with loyal customers, I'm profitable or

would be with enough cash to fuel the engine; I

just need to get over this hump of not enough

cash flow. What can I do?"

The answer to this question may be right under

your nose and you don't even know it. If you have

accounts receivable with good, solid customers

who are credit-worthy, you have something with

intrinsic value that other business owners are

interested in buying. The cash that can be

obtained for your good receivables can be exactly

what you need to get over a cash flow crisis.

By selling something you own - your receivables -

you're not generating any debt that must be paid

back; and you're improving your credit stature

because you're converting assets (invoices) into

immediate cash. That cash can enable you to save

further by getting volume purchase discounts,

discounts for cash, create market opportunities,

or hire needed staff. And most of all, you can

start new and expanded production without waiting

for earlier invoices (sales) to be paid.

Setting accounts receivable at a discount is a

means of financing called "factoring" or "

accounts receivable financing." It's been around

for centuries and is a billion-dollar industry

for large businesses today. And it is growing

rapidly in popularity with small and medium sized

companies. Factoring not only has saved countless

businesses from going under, it has provided many

more businesses exactly what they need to grow:

cash to fuel the engine.

Further Benefits of Factoring

Selling accounts receivable puts you in control

of your business like no other form of financing.

You control the discount by specifying when the

advance is to be made. You can space the advances

to create a steady flow of cash. If you don't

need cash now, you can wait to receive the

advance and save on the discount (waiting on an

advance creates a line of credit).

What's more important to realize is no debt is

created, you have no loans to pay off, you create

and keep a cleaner financial statement, your

access to cash grows with your business sales,

and there is no need to re-apply. Finally, you

can stop factoring at any time. There are no long

contracts and you only factor the invoices you

want. YOU are in control.

Conclusion

Invoice factoring is filling a tremendous void

that banks have created. Companies accelerate

their profit and thrive whether you are a start

up or established business.

Factoring requires, less paperwork than loans

and no credit or reference checks of your

business and is also faster than tradition bank

loans..

Invoice factoring offers bussinesses tremendous

growth opportunities to assist in the management

of cash flow and delivers working capital for

your business needs.

If you are seeking an invoice factoring company,

then Diversified Financial Services is the smart

choice. Our Financial Consultants are ready to

answer any factoring questions. Call today 800-

954-0012.